Are All Non‐Family Managers (NFMs) Equal? The Impact of NFM Characteristics and Diversity on Family Firm Performance

• Author: Enzo Peruffo,Martina Binacci,Raffaele Oriani,Alessandro Minichilli
• Date: 01 November 2016
• Published date: 01 November 2016
• DOI: http://doi.org/10.1111/corg.12130

Are All Non-Family Managers (NFMs) Equal? The

Impact of NFM Characteristics and Diversity on

Family Firm Performance

Martina Binacci*, Enzo Peruffo, Raffaele Oriani and

Alessandro Minichilli

ABSTRACT

Manuscript Type: Empirical

Research Question/Issue: Although non-family managers (NFMs) can be expected to inf‌luence f‌irm performance, this issue is

largely under-investigated. In this study, we examine how diversity inside the non-family component of the top management

team (non-familyteam, or NFT) inf‌luences familyf‌irm performance. More specif‌ically,we investigate the performanceeffects of

three specif‌ic sources of NFT diversity (NFT size; NFT tenure diversity; and NFT dominant functional diversity).

Research Findings/Insights: The analysis of 584 survey responses by top managers representing 97 complete NFTs (and the

related top management teams, TMTs) out of the top 500 family-controlled f‌irms in the Italian furniture industryindicates that

(1) NFT-dominant functional diversity improves f‌irm performance; (2) a U-shaped relationship exists between NFT tenure di-

versity and family f‌irm performance; (3) an inverted U-shaped relationship exists between NFT size and family f‌irm perfor-

mance. Additionally, we show that the relation between non-family manager characteristics and f‌irm performance is

moderated by family dominance in the entire TMT, that is, the proportion of family to non-family managers.

Theoretical/Academic Implications: Our results call for further explorationregarding the demographic characteristics of non-

family managers and their effect on the performance of family f‌irms. In this way, theyhave several implications for the family

business literature, contributing to the growingdebate on the socio-emotionalwealth (SEW) perspective offamily f‌irms’behav-

iors. Moreover, our results highlight the importance of better contextualizing research on strategic leadership and strategic

leaders.

Practitioner/Policy Implications: Our study suggests thatthe choice of outsiders should take intoaccount not only their “mar-

ket value”andreputation, but also the attributesof other NFMs among the company’sexecutives, providingguidance to family

owners in their decisions about professionalization.

Keywords: Corporate Governance, Top Management Team, Non-Family Team, Family Dominance

INTRODUCTION

“When one of our companies has the concrete opportunity to

grow, […] its governance is often impenetrable tooutsiders. Dif-

fused ownershipstructure is not exclusivelyan Italian character-

istic; what is peculiar, however, is the fact that management

remains within the close boundaries of the family.”

Mario Draghi, Farewell Speech as Governor of the Bank of

Italy, Rome, May 31, 2011.

Family business literature has consistently investigated the

impact of family involvement in ownership (Anderson

& Reeb, 2003; Maury, 2006; Miller, Le Breton-Miller, Lester, &

Cannella, 2007) and management (Kowalewski, Talavera,

& Stetsyuk, 2010; Lee, 2006; Miller, Minichilli, & Corbetta,

2013; Villalonga & Amit, 2006) on f‌irm performance. The

importance of investigating family as well as non-family

representationat different governance levels has been echoed

in recent contributions on family f‌irms (Sharma, Chrisman, &

Gersick, 2012; Stewart & Hitt, 2012; Yu, Lumpkin, Sorenson,

& Brigham, 2012). Despite this growing attention to the

presenceand mix of family and non-family actors in the upper

echelons of family f‌irms, extantresearch still suffers from two

major limitations.

First, while recent studies have started an in-depth investi-

gation into the effects of family CEOs on the f‌inancial perfor-

mance of family f‌irms of diverse size and ownership (Miller

*Addressfor correspondence: MartinaBinacci, Department of Business& Management,

LUISS Guido Ca rli, Via Salvini, 2, 00197 Rome, Italy. Tel: +3906852254 35; E-mail:

mbinacci@luiss.it

© 2015 JohnWiley & Sons Ltd

doi:10.1111/corg.12130

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Corporate Governance: An International Review, 2016, 24(6):569–583