We analysed 175 studies to understand when having a family CEO pays off.
From Hermes to Smuckers to the fictional Waystar Royco of HBO’s “Succession,” family businesses often choose their CEOs from the ranks of kin. But is this a good business decision? As researchers who study entrepreneurship and management, we wanted to know whether keeping leadership in the family pays off for businesses. So we reviewed 175 studies on the topic to see whether family CEOs really are the best choice for family businesses. We found that the answer is yes – sometimes.
Does that mean that family CEOs are bad for business? Not at all. When looking directly at economic outcomes, we found mixed results – some studies showed that family CEOs had positive effects, and others showed negative ones. Based on our understanding of the literature, my colleagues and I think it all depends on the goals that family companies themselves pursue.
Nearly 90% of US businesses are considered family operated, according to the US Census Bureau, as are about 1 in every 3 Fortune 500 companies. Some of the most famous businesses in the world are family companies, such as Nike, Dell Technologies and LVMH. The leadership decisions at these businesses have ripple effects across the entire economy.
We believe that one of the most important things a family company can do is to understand its own goals and priorities. While that’s easier said than done, if a business has ill-defined goals, that can set a new CEO up for failure – whether they’re in the family or not. That’s because they’re likely to pursue strategies that the family, the company or the company’s shareholders don’t really want.
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