Is It Time to Take the 'Family' Out of Family Business?

Family businesses that operate in an industry that values cutting-edge innovation would best be served by looking outside the family for company leaders, according to research from Concordia University's John Molson School of Business.

While family members make good CEOs of family businesses that are part of a traditional industry built on quality and reputation, such as food producers, service providers or wine makers, the study found that in industries that prioritize pushing boundaries over preserving tradition, like the information technology sector, cellular communications or pharmaceuticals, an aggressive attitude in the marketplace is necessary to lead.

"Because family CEOs tend to focus more on family values, while non-family CEOs seek to innovate, that means a CEO from outside the family circle might be a better choice," said Peter Jaskiewicz, the study's lead author and associate professor at Concordia.

Jaskiewicz said in traditional industries, it's all about preserving tradition.

"But that doesn't work in newer industries where it's all about constant innovation in rapidly changing environments," he said.

In order for family CEOs to succeed in more innovative industries, they need to be held to a standard that's at least as high as the industry average, Jaskiewicz said.

"They also have to make sure the CEOs are competent enough to handle industry pressures and to balance family advice with outsider feedback and industry savvy," he said.

While hiring someone from outside the family circle might not go over very well with customers and employees in certain collectivistic cultures, such as those found in Asia, South America and southern Europe, Jaskiewicz doesn't think it would be a big issue in the U.S.

"In North America, where success, wealth and independence are the priority, the origins of the CEO shouldn't be as significant," he said.

The study, co-authored by University of Alberta assistant professor Andrew Luchak, was recently published in the journal Entrepreneurship Theory and Practice.

Originally published on Business News Daily.