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Italian family businesses reluctant to expand

The size of family business workforces is comparatively static to non-family companies even as revenues fluctuate, according to a new study.
Professor Alfredo De Massis

The size of family business workforces is comparatively static to non-family companies even as revenues fluctuate, according to a new study.

Sales and employment changes in entrepreneurial ventures with family ownership,published in the Journal of Small Business Management, found technology-based family businesses in Italy were equally resistant to hiring new staff in times of growth as they were to laying of staff in troubled times.

Article co-author Professor Alfredo De Massis said family businesses were often reluctant to expand operations because they feared it threatened family control, as more non-family managers came on board.

Conversely, because of fears over their perceived lack of attractiveness as an employer, family businesses profiled in the study were reluctant to lay off staff when sales were down. 

Family businesses often battle a negative perception among job seekers who can view them as unprofessional, prone to nepotism, and lacking in career opportunities.

While the study looked at a sample of wealthy Italian technology entrepreneurs, De Massis said the sample was large and he believed the findings could be applied on a global scale.

“Family firms are more reluctant to increasing the number of employees than non-family counterparts, because doing so would threaten the social and emotional value offered by the firm,” De Massis said.

The knock on effect, De Massis said, is that family businesses could grow at a slower rate than their non-family counterparts. 

“Non-family managers have a more distant and transitory relationship with the firm, and are likely to consider economic goals more important than preserving the aims of the family,” De Massis said.

De Massis hopes that the study will help shed light on the hiring and firing practices of family businesses and may improve the way they respond to market fluctuations in future.

“Only limited attention has been paid to understanding how the nature of family might affect the relationship between sales and growth,” De Massis said, “which is bad if we consider how ubiquitous family firms are around the globe.”

De Massis believes these problems can be overcome by creating opportunities for career progression and by realigning goals to maximise profits. 

The article was based on figures from 2006, to avoid the confounding effects of the global financial downturn.

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