A study carried out by researchers from the Universidad Carlos III de Madrid (UC3M, Spain), the LIUC Università Cattaneo (Italy) and the University of Foggia (Italy) indicates that family businesses tend to protect their employees more than non-family businesses, by generally avoiding workforce reduction practices.
According to the authors of this paper, recently published in the Journal of Family Business Strategy, workforce reduction is a key decision that transcends company boundaries and has profound social implications. “Although job cuts affect any organisation in a fundamental way, they may be even more important in the case of family firms who are major global employers”, notes the study.
The study was carried out on a sample of 4,134 companies between 1993 and 2016. “Our results show that family businesses are more reluctant to reduce their number of employees”, states one of the researchers, Maria Jose Sanchez-Bueno, associate professor at the UC3M’s Department of Business Administration and deputy director of the Institute for the Development of Enterprises and Markets (INDEM).
Export and staff reduction
This research also attempts to explain why, under certain circumstances such as a company increasing its international presence through exports, there is a lower likelihood of family businesses reducing their workforce. In particular, higher levels of sales via export to markets that are geographically close to the family firm’s country of origin would further reduce the likelihood of workforce reductions within the business, as such job cuts would have a greater negative impact on the company (e.g.,in terms of loss of reputation and credibility in their home market).
In contrast, when family firms target their exports at countries that are geographically further away from their national market, the adverse impact of workforce reductions on the company lessens. “Our results reveal that the negative effects on family businesses that result from reducing the workforce are less apparent when the company is exporting on a more global level. Specifically, when exports are aimed at markets that are geographically further away”, conclude the authors.
Bibliography: 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