Reducing agency costs through recruitment: staffing referrals and family business success
Journal of Family Business Management
ISSN: 2043-6238
Article publication date: 25 July 2023
Issue publication date: 20 February 2024
Abstract
Purpose
The role of family business staffing practices in their ultimate success remains largely unknown. The purpose of this paper is to test the notion that firms with greater family essence manifest their commitment by leveraging referrals as a recruitment source, which in turn is associated with higher performance. The hypothesized model posits that reduced agency costs from hiring through owner referral utilization (ORU) provide high-family essence firms with stronger performance.
Design/methodology/approach
The study draws upon a sample of 194 small and medium-sized family business owners.
Findings
Findings from OLS regression and the PROCESS model in SPSS support the hypothesis that recruiting nonfamily employees from referrals helps lessen agency conflicts and serves as an intervening mechanism in the relationship between family firm essence and firm performance.
Originality/value
This study draws on agency theory to shed light on how family firms successfully bring nonfamily employees into the fold despite their human resource limitations. The results extend theory on family businesses by demonstrating that those with higher degrees of family essence are more likely to attract applicants via ORU. Leveraging this recruiting practice allows family businesses to hire nonfamily employees who share the values and goals of the family firm, thus lowering agency costs and fostering higher performance. More broadly, the findings offer insight into the role of staffing practices in family firm success.
Keywords
Acknowledgements
The authors are grateful to Jim Chrisman and Laura Marler for feedback on prior drafts of the manuscript.
Citation
Vardaman, J.M., Tabor, W.E., Hargrove, D.C. and Zhou, F. (2024), "Reducing agency costs through recruitment: staffing referrals and family business success", Journal of Family Business Management, Vol. 14 No. 1, pp. 103-119. https://doi.org/10.1108/JFBM-05-2023-0063
Publisher
:Emerald Publishing Limited
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