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Female successors can improve family firm profits 8%

Female successors taking over from male CEOs have the potential to increase family business profitability, according to new research out of Italy, but their power is diminished – and may even have a negative impact on a company’s performance – in male-dominated workplaces.

The paper, called Gender interactions within the family firm, which examined Italian family businesses with revenues over €50 million, found women chief executives – if they were supported by a gender-diverse board – were likely to increase profitability between 6.5 to 7.6%.

When the board consisted of only men, female chief executives were shown on average to have a negative impact on company performance and their effectiveness was diminished further when they lived in a region of Italy that had more rigid views of gender roles.

Only 11% of the 10,000 succession cases examined in the study involved a female chief executive, and the average proportion of female directors across companies surveyed was 17%. The paper examined leadership transitions that took place between 2000 and 2010.

The performance of women chief executives was strongest when female board members were not family members, something the paper said could be because families typically share the same values and so gender is less likely to influence CEO-board interactions when the chief executive is related to directors on the board.

Kathyann Kessler Overbeke, a US-based family business adviser who is an expert in gender interactions, explains while gender bias exists across ownership models, the dynamics are different for a family-owned firm.

“In family businesses the actors are the same in both the family and the workplace. That means the attitudes about men and women that are perceived at home are going to be the same in the workplace, there’s no difference,” Overbeke says.

She explains that if daughters are encouraged to be subservient to an authoritarian father in the home, then in the family business they are going to continue that same role, which will make them less effective. “You don’t get that if you’re working in a company that isn’t owned by your family, you can have different identities in the home and the workplace.”

She says men, particularly from families that have rigid gender stereotypes, are regularly encouraged to take on less subservient attributes that will make them more effective in the family business.

Overbeke says the findings are important because they demonstrate daughters are effective leaders in family business, and also how “second generation bias” – subtle and sometimes unintended sexism – can impact a company’s performance.

“People tend to gravitate to people like themselves, so since there are more men in the upper echelons of organisations they tend to take men under their wing and mentor them. They learn all these behind-the-scenes practices from their male superiors, whereas women are left out of the loop,” Overbeke says.

Explaining why female board members are important to a female chief executive’s performance, Overbeke says women board members are more likely to understand the gender issues the woman is facing.

She also cautions that gender roles cannot only be barriers to daughters but sons too, saying many male next gens are expected by society to take over the business. “When they’ve imagined themselves in this one role only for all their lives that’s a barrier – they haven’t really thought about what they can do aside from being a successor,” Overbeke says.

The paper, published in Management Science, was written by Mario Daniele Amore and Alessandro Minichilli, of Bocconi University, and Orsola Garofalo, of Universitat Autonoma de Barcelona.

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