Exploring leadership style, organizational culture, and financial performance in family firms

It has been suggested by some researchers that family firms possess advantages when compared to nonfamily firms in areas of focus on strategic vision, increased firm value, and reduced prospects for opportunistic behavior. Although some effort has been made to study the leadership styles of family firm owners, little has been done to determine the effects of these styles on financial performance. In addition, little attention has been given to family firm culture both as it regards the embedding of the culture by family firm leaders or the effects of that culture on financial performance.;This quantitative case study explored the effects of leadership style and organizational culture on financial performance in family firms. The owners, managers, and members of five Western Washington family firms participated. Five owners and 13 managers completed the Life Styles Inventory (LSI). Seventy-one family firm members completed the Organizational Culture Inventory (OCI) and a Personal Demographic Questionnaire. Each owner also provided company and financial information.;The intent of this study was to provide information regarding family firm effectiveness that is relevant and comparable to both family and nonfamily firms. Overall, the results of this study indicated a constructive orientation toward leadership among the five family firm owners that was compatible with the constructive orientation of the profile of 952 male and female key-level managers provided by Human Synergistics International. All of the family firms in this study indicated a predominantly constructive organizational culture. The constructive culture is compatible with the ideal profile of a successful service organization provided by Human Synergistics International. Three of the five firms in this study indicated levels of constructive thinking and behavior that were comparable to those found in the ideal profile. Two of these three firms indicated the highest levels of financial performance. All five of the family firms indicated predominantly constructive behaviors compatible with successful companies in general.;This study makes an important contribution to the field of family firm research. The results suggest that family firm owners with a constructive orientation embed thinking and behavior among managers and employees that has a positive effect on financial performance. In particular, the affiliative and achievement thinking and behavioral styles indicated a significant positive association with financial performance.