According to the authors of this paper, recently published in the Journal of Family Business Strategy, workforce reduction is a crucial decision that transcends the boundaries of the company and has profound social implications. “While staff cuts have a key impact on any organization, their importance may be even greater in the specific case of family businesses, which are large employers worldwide,” the study notes.
For the analysis, they relied on a sample of companies composed of 4,134 companies during the period between 1993 and 2016. “Our results highlight that family businesses are more reluctant to carry out reductions in the number of employees,” says one of the researchers, María José Sánchez Bueno, professor of the Department of Business Economics at UC3M and deputy director of the Institute for the Development of Companies and Markets (INDEM).
Export and job reduction
This research also suggests indications that under certain circumstances, such as a greater international presence on the part of the company via export, the lower propensity of family businesses towards staff reductions would have to be qualified. Specifically, a higher level of sales through exports to areas geographically close to the country of origin of the family business would further reduce its propensity towards staff cuts, as the negative consequences for the company of such cuts would intensify (for example, in terms of loss of reputation and credibility in the market of origin).
On the contrary, when the family business directs its exports to countries geographically further away from its national scope, the adverse impact of staff reduction practices for the firm is weaker. “Our results reveal that the negative effects for the family business derived from staff reductions are less apparent when the scope of the company’s exports can be more global, specifically, when exports are directed towards geographically more distant markets,” the authors conclude.
Bibliographic reference: Cirillo, A,. Muñoz-Bullón, F.,Sanchez-Bueno, M.J.,Sciascia, S. (2020). Employee downsizing and sales internationalization strategy in family firms. Journal of Family Business Strategy, 100354. https://doi.org/10.1016/j.jfbs.2020.100354
