In the hand of the family: Management practices and perceived job quality

Abstract

This paper explores the use and implications of management practices in family-owned firms compared to firms with dispersed ownership. We make use of a longitudinal, representative employer–employee dataset with detailed data on firm-level management practices and family firm management types. The analysis reveals that differences in the adoption of structured management practices are predominantly driven by management type rather than ownership. Family-owned firms led by family members implement significantly fewer formal management practices, whereas those managed by non-family managers adopt more structured practices, though still below the levels observed in firms with dispersed ownership. Yet, employees in family-owned firms, particularly those with non-family managers, rate job quality (e.g., job satisfaction, procedural fairness, leadership quality) similarly or superior despite fewer formal practices. These findings suggest that informal practices and a distinctive firm culture in family-owned firms may foster employee motivation and partially substitute for formal management structures. Importantly, additional heterogeneity analyses reveal that this substitution is only effective for lower-skilled employees and those in non-managerial positions, while formal management practices remain critical for higher-skilled and supervisory roles.