The Correlation of Leadership Practices of First and Second Generation Family Business Owners to Business Performance

Abstract

Family firms are a major contributor to many economies. However, very few of these businesses will continue to exist after the first generation due to succession failure. Family business leaders need to learn how to manage the factors that affect the succession process. Researchers in family business literature acknowledge that leadership is vital to the success and survival of the firm, although the high failure rate of family businesses in the second and later generations indicates that the succeeding generations might not have developed sufficient leadership practices to sustain business performance. The aim of this research study was to investigate whether there is a correlation between leadership practices and business performance amongst first and second generation owners of family firms. A self administered, quantitative survey questionnaire, measuring leadership practices and business performance was distributed via means of a non-probability, snowball sampling method to 197 first and second generation family business owners in the Sedibeng region of South Africa. The findings indicate that positive significant correlations exist between the occurrence of leadership practices and business performance for first generation leaders of the selected family businesses, but limited correlations exist between the variables for the second generation leaders. These results illuminate the potential differences in the ways that first and second generation leaders lead family businesses. To this end, propositions are offered to assist founders in training future leaders.

DOI: 10.5901/mjss.2014.v5n21p27