Family-Occupied Executive Layers and Managerial Skill Disincentives
Observational StudyReview
Top executive positions in developing-country firms are routinely reserved for family relatives, creating a promotional glass ceiling for non-family middle managers that reduces their incentives to acquire advanced decision-making skills.
Picture this
In a family company where only the owner's children can ever become vice presidents, ambitious middle managers will not bother staying late or learning complex management software because no amount of hard work will ever earn them a senior promotion.
What the evidence says
Executive layers across developing-country firms are overwhelmingly reserved for owner family members, directly reducing middle managers' motivation to cultivate leadership capabilities and reducing owners' incentives to train outside staff.
- Who was studied
- Cross-country sample of 6,000 medium-sized manufacturing firms (BSVR dataset) and Indian textile manufacturing plants (BEMMR dataset).
- How
- Organizational survey and field observations linking family ownership structure with middle management skill development and promotional practices.
What to do
Create clear, merit-based career advancement pathways for non-family employees to incentivize managerial skill accumulation and performance.
From the source
"A third reason is the promotion opportunities for managers in developing countries are limited because the top managerial layers in almost all firms are filled by family members of the owner because outsiders are not trusted. This reduces the incentives for mid-level managers to develop their decision-making skills, or for firm owners to train them to make important decisions."
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