Family dynamics, human resource practices and the performance of family firms

Abstract

This study explores the impact of formalizing human resource (HR) practices on the performance of family firms. It also examines how family involvement in ownership and management, along with the presence of family employees, moderates this relationship. Using a socioemotional wealth (SEW) perspective and structural equation modelling, data from 490 medium‐sized Spanish family firms were analyzed. The findings indicate that although formalized HR practices generally enhance firm performance, the effectiveness can be undermined by high levels of family involvement, particularly in ownership, as it may prioritize family‐centric goals over professional HR management. This study highlights the complex interplay between HR strategies, family dynamics and performance outcomes, emphasizing the need for strategic HR management that balances familial and organizational objectives in family businesses.