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04/20/2022

More Enthusiasm through Employment at Family Businesses

How family CEOs ensure positive emotions and lower staff turnover

Nadine Kammerlander - April 20, 2022

Tips for practitioners

Without a doubt, every employer wants to see enthusiasm and dedication in their employees. Such emotions are, however, not always easy to elicit. A new study shows that CEOs related to the owningfamily (i.e., “family CEOs”) have an easier time passing their own drive and enthusiasm, which become almost infectious, to their employees—despite the supposed disadvantages that employees in family businesses face. This ability often distinguishes these CEOs from those who have no familial ties within their respective companies.

The employees of a family business experience certain difficulties…

One of the chief problems faced by employees of a family business is that they are, on average, paidworse compared to their counterparts at other types of companies. Even when it comes to employee education, family businesses are often tightfisted, offering fewer, more restricted opportunities to learn. Additionally, the chances of moving upward in the companies are slimmer, as leadership positions are often filled by members of the family. Another shortcoming is the pursuit of non-financial, family-related goals that are not always in line with those of the business.

Even if these notions appear antiquated and uncompetitive, they often reflect the reality of the employees working at family businesses today. Given this fact, it may surprise one to learn that family CEOs routinely receive better reviews from their employees than do external CEOs—and that family businesses are still able to find qualified staff and retain them for a long period of time.

…and benefit from certain advantages

It appears that employees do not exclusively place value on salary and career advancement opportunities; job satisfaction and their own well-being are also significant factors. The results of the study show that these factors are influenced by the CEO’s behavior and whether said CEO is related to the family that owns the business. Interactions at a family business are more influenced by emotions compared to those at other companies, and family CEOs have an easier time spreading their almost infectious enthusiasm. They often know their staff on a personal level (up to a certain company size), and exchanges are less formal. The leaders at the top become more approachable to the employees through their speeches or the personal conversations they have in work groups or during meetings, thus facilitating the transmission of their enthusiasm and dedication. Such feelings could even spread from employee to employee, even if they themselves had no direct contact with the CEO.

Family CEOs have to wear two hats: that of the family member and that of the company director. They tend to communicate positive feelings more often and more openly. The high degree of identification with their own company is therefore transferred to their employees. Similarly, they tend to hide negative feelings and, in comparison to external CEOs, express them publicly less often. This baseline of positivity, born of such a mentality, influences the atmosphere throughout the whole company. This, in turn, means that the positive emotions among the employees can become even stronger.

Family CEOs are also more likely to seek out direct contact with their employees, an act that leads to stable, long-lasting relationships. Employees can more easily identify with a family CEO, whose emotions are more easily transferrable to them. Consequently, they are less likely to seek employment elsewhere, meaning that staff turnover is low. For these reasons, employees are more likely to harbor positive emotions toward their work when they are led by a family CEO—and by a significant margin over their counterparts in other businesses.

How the size and structure of a company influences emotionality

Positive emotions among employees are generated through the CEO’s approachability and enthusiasm for their company. This emotionality, and its ability to permeate throughout the staff, can vary depending on three company attributes: size, level of centralization, and level of formalization.

Company size is a deciding factor because an overall positive atmosphere is contingent on social interaction. The larger and more anonymous the company, the more uncommon and less intensive the interactions and encounters between the family CEO and the employees. In a smaller company, by comparison, the CEO is better able to transfer their positive emotions, which spread more easily throughout the staff.

The strong centralization of a family business is also helpful in sending these emotions down the line. CEOs in this hierarchy are recognized as leaders and, thanks to a predominantly vertical communication flow, have numerous opportunities to extensively “transport” their positivity.

Finally, a high degree of formalization leads to a decreased prevalence of emotion. Formalization serves the unambiguity and reliability of rules and process and directly contradicts the impulsivity of emotion. Strongly formalized companies (where communication is regulated and rarely spontaneous) leave little room for unplanned exchanges and, to that same effect, the transfer of positive emotions from the family CEO to the staff. If the CEO manages to transfer their positive energy to the employees, then there will be a significant decrease in staff turnover—and that is the trump card that family businesses hold in their hand.

Tips for practitioners

  • When naming a successor within the company, consider carefully whether the future CEO should be recruited from within the family or externally. Remember that a family CEO is more likely to create a positive atmosphere among the staff and keep fluctuations to a minimum.
  • If you are the family CEO of a rather large and highly formalized company, think of ways to instill a familial spirit and sense of positivity in your employees. By doing so, you will be able to benefit from all the advantages that this brings. The CEO should be visible and approachable to the staff.
  • When recruiting new employees, make use of the advantages that come along with a family business. Advertise in such a way that feelings of positivity and appreciation are evident, thereby compensating for any potential disadvantages as compared to a non-family-run business.
  • If you are the manager or CEO of a non-family-run business, look out for creative ways to install a “family system” in your everyday work life. In doing so, you will be creating positive emotions and enthusiasm among your employees.

Literature reference and methodology

For “How family CEOs affect employees’ feelings and behaviors: A study on positive emotions,” datasets were collected from 41,200 employees and 2,246 CEOs across 497 companies (with or without a family CEO). The data was then analyzed to determine whether family CEOs are better able than others to inspire or confer positive emotions on their employees.

  • Kammerlander, N./Menges, J./Herhausen, D./Kipfelsberger, P./Bruch, H. (2022): How family CEOs affect employees’ feelings and behaviors: A study on positive emotions. Long Range Planning, accepted for publication. https://doi.org/10.1016/j.lrp.2022.102209

Author

Professor Nadine Kammerlander

Nadine Kammerlander holds the chair of Family Business at WHU – Otto Beisheim School of Management. Her research focuses on innovation, employees, and governance in family businesses and offices. Her academic contributions are routinely published in international journals and have won several renowned awards.

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