FAMILY FIRMS’ SPECIFIC REQUIREMENTS WHEN RECRUITING NON-FAMILY TOP MANAGEMENT TEAM MEMBERS – THE CASE OF THE CHIEF FINANCIAL OFFICER

Martin R. W. Hiebl Johannes Kepler University Linz, Institute of Controlling and Consulting

SUMMARY Non-family Chief Financial Officers (CFOs) are often the first non-family members on a family firm’s (FF’s) top management team. FFs possess idiosyncratic resources that influence their personnel decisions and the resources they look for when hiring employees. These peculiarities should also affect the requirements FFs look for when hiring non-family CFOs. To analyze these FF-specific requirements when hiring non-family CFOs, this paper takes a qualitative research approach and draws on semi-structured interviews with FF owners, CEOs and non-family CFOs. The findings suggest four crucial groups of CFO requirements: education, functional know-how, career path and personal/social attributes. Compared with non-family firms (NFFs), FFs were found to attach less importance to a non-family CFO’s formal education, while demanding a similar level of functional know-how. The findings further suggest that FF owners actively seek to integrate non-family CFOs with professional NFF experience in order to enrich the FF’s resource set. At the same time, non-family CFOs are required to adapt to the specific characteristics of FF governance. Finally, FFs were identified as valuing the personal/social fit between owners and non-family CFOs higher compared with NFFs.

KEYWORDS Family Firm, Chief Financial Officer, Non-Family Manager

CONTACT DETAILS Martin R. W. Hiebl Johannes Kepler University Linz Institute of Controlling and Consulting Altenberger Straße 69 4040 Linz Austria E-Mail: [email protected]

INTRODUCTION Family firms (FFs) are known to be the backbone of most industrialized countries because they comprise the majority of all firms in these nations (IFERA, 2003). FF research has clearly intensified over the past two decades and has widely discussed the particular advantages and challenges FFs face (Sirmon & Hitt, 2003; Stewart & Miner, 2011; Gedajlovic et al., in press). One such challenge is the proper integration of non-family management personnel into the FF: when FFs increase in size and age, they tend to rely more on non-family managers, as family members can no longer meet the organization’s growing managerial skill requirements or they simply no longer actively work in the FF (Klein & Bell, 2007). At the same time, (growing) FFs share distinct characteristics and resources, which lead to the above-mentioned FF-specific advantages and challenges compared with non-family firms (NFFs) (Habbershon & Williams, 1999; Sirmon & Hitt, 2003). As predicted by the resource-based view (RBV), these specific characteristics are also likely to affect the aspects of human resources FFs look for in non-family management personnel (Castanias & Helfat, 1991; Castanias & Helfat, 2001; Dawson, 2012). This implies that FFs have different or additional requirements when recruiting non-family members for the top management team (TMT) compared with NFFs. For non-family CEOs, FF research has already partly confirmed this hypothesis. For instance, Blumentritt et al. (2007) show that interpersonal skills are crucial for non-family managers in order for the controlling family to build up trust in the non-family manager, which is very important to most families.

However, the Chief Executive Officer (CEO) is rarely the management position that FFs initially recruit non-family personnel into. Instead, the position of the Chief Financial Officer (CFO) is usually the first role in which a controlling family hires a non-family manager because the know-how of a CFO is highly specialized (Filbeck & Lee, 2000; Gurd & Thomas, 2012). In particular, business owners that do not have a university education in the field of business administration often lack financial management knowledge (Seghers et al., 2012), which underpins their need for external management know-how in the field of finance and accounting (Gurd & Thomas, 2012). Previous research in this area has shown that integrated non-family CFOs can help professionalize the FF and mitigate times of financial distress (Lutz & Schraml, 2012). However, despite the importance of both non-family management in general as well as

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specifically non-family CFOs for growing and/or ageing FFs, research into what FFs look for when recruiting these managers is scarce (Klein & Bell, 2007; Lutz & Schraml, 2012; Gurd & Thomas, 2012). Thus, the present paper seeks to partly fill this gap by examining FFs’ specific requirements for non-family CFOs. Specifically, the aim of this paper is to provide first empirical evidence on the requirements for non-family CFOs in FFs, the differences between FFs and NFFs and why FFs have different requirements in place.

The findings derived in this paper indicate four crucial groups of requirements when recruiting CFOs: education, functional know-how, career path and personal/social attributes. FFs emerge from this research as attaching less importance to formal education than NFFs, but valuing higher personal/social fit for non-family CFOs. Moreover, FFs seem to have additional requirements for non-family CFOs, especially when the family and business spheres of the FF are heavily intertwined. Moreover, the paper indicates that FF owners try to strengthen the FF’s human resource set by hiring non-family CFOs, while at the same time trying to retain FFspecific resources. Therefore, the present paper improves our understanding of the requirements for non-family TMT members in FFs. It also contributes to the general CFO literature by examining in-depth the requirements in a certain organization setting, namely FFs, which has been called for in recent research on functional C-suite members (Menz, 2012). This paper also indicates that controlling families in firms that are increasing in size and age are developing an understanding that the cultural fit between non-family managers and the FF is an important prerequisite for non-family managers to unfold their full positive value for FFs.

The paper proceeds with an overview of the relevant literature, which is divided into the extant understanding of non-family CFOs in FFs, general requirements for CFOs discussed in the CFO literature and general requirements for non-family managers in FFs. Then, the RBV and its relevance to analyzing human resources is introduced as the theoretical reference for this research. The paper then moves onto the methods used and findings, and finishes with a discussion of the results and conclusions, as well as an outlook on further research and the paper’s limitations.

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LITERATURE REVIEW Non-family CFOs in FFs Reconsidering the notion that non-family CFOs are usually the first non-family managers recruited into FFs (Filbeck & Lee, 2000), it seems surprising that the literature on this type of manager is very thin. Few previous studies have dealt with some aspects of the non-family CFO’s role in FFs. Some of these studies have investigated how the existence of a non-family CFO in an FF influences firm performance (Gallo & Vilaseca, 1998; Caselli & Di Giuli, 2010; Di Giuli et al., 2011). Whereas for large Spanish FFs, Gallo & Vilaseca (1998) do not identify an impact on the performances of FFs by having a non-family CFO, Caselli & Di Giuli (2010) and Di Giuli et al. (2011) find a positive correlation between the existence of a non-family CFO and FF performance for small and medium-sized Italian FFs. Specifically, in small and medium-sized FFs, the TMT configuration of family CEO and non-family CFO should be beneficial to firm performance (Caselli & Di Giuli, 2010). These results generally correspond with the findings on finance and accounting in FFs, which have shown that especially in smaller FFs, the employment of non-family management personnel can help the FF professionalize its finance and accounting practices (Amat et al., 1994; Giovannoni et al., 2011), which might contribute to explaining performance differences among family-controlled small and medium-sized firms.

The findings of Filbeck & Lee (2000) go along with this notion: they find that when FFs employ a non-family CFO, they begin to use more modern financial management techniques. However, the authors also state that the use of modern financial management techniques also heavily depends on firm size, indicating that large FFs mainly use these techniques. Generally, the differences in the organization of finance and accounting practices between FFs and NFFs tend to diminish as firms grow (Gallo et al., 2004; Speckbacher & Wentges, 2012; Hiebl et al., in press). This implies that with growing firm size, FFs more and more resemble NFFs in terms of the organization of financial management and accounting. Nevertheless, the employment of nonfamily CFOs seems to speed up this professionalization process or might in some cases also be seen as the starting point of this process (Lutz et al., 2010).

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Taking the perspective of the controlling family or the family CEO, other studies have investigated what makes families employ a non-family CFO in the first place. It has been found that controlling families who aim to reduce the financial risk positions of their businesses and who aim to enable business succession within the ranks of the family prefer to employ nonfamily CFOs to family CFOs. By contrast, families for which independence and control over the FF is more important avoid hiring a non-family CFO (Lutz & Schraml, 2012). This finding can mainly be explained by the usual goal of controlling families aiming to keep the undivided decision-making power in their hands, which may be endangered when employing non-family TMT personnel (Gedajlovic et al., 2004; Barnett & Kellermanns, 2006; Klein & Bell, 2007).

Accordingly, Gallo & Vilaseca (1998) show that non-family CFOs enjoy less strategic decision-making power than family CFOs. The authors argue that this might be because of the lack of efficient control mechanisms for non-family managers in FFs. However, the goal of independence only seems to be predominant as long as the FF performs well. Lutz et al. (2010) report that FFs in financial distress rather turn to non-family CFOs from outside the FF, as these managers are expected to supply the relevant financial management know-how to overcome the critical situation. Regarding the narrower research focus of this paper – the specific qualifications of nonfamily CFOs in FFs – the existent literature offers few insights. Only the studies of Gurd & Thomas (2012) and Gallo et al. (2004) partly approach this topic. Based on eight interviews with family CEOs of small and medium-sized Australian firms, Gurd & Thomas (2012) show that the non-family CFO’s technical excellence in accounting is very important to family CEOs and that CFOs should have a personality that enables them to get on with the family well. By contrast, based on a survey of large Spanish firms, Gallo et al. (2004) do not identify major differences in the characteristics of non-family CFOs in FFs and NFFs, which further supports the abovementioned thought that large FFs differ little from large NFFs in terms of finance and accounting practices. The authors show that regarding education, hierarchical position in the organization and influence on strategic decision making, CFOs in FFs are similar to CFOs in NFFs. To summarize, despite the importance and potential benefits of non-family CFOs in FFs as well as the recent increase in studies focusing on this topic (Caselli & Di Giuli, 2010; Lutz et al., 2010;

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Gurd & Thomas, 2012; Lutz & Schraml, 2012), knowledge on the role and qualifications of nonfamily CFOs in FFs is still scarce, which further warrants this paper’s research effort.

General Requirements for CFOs Overall, the interest in the role of the CFO in business organizations has significantly increased in the past two decades. One reason for this can be found in CFOs having gained importance and hierarchical power in most businesses over the course of the past half century: whereas in the 1960s fewer than 10 percent of the largest US businesses had installed a CFO position within their TMTs, by the end of the 20th century this number had risen to more than 80 percent (Zorn, 2004). Another reason for the increased interest in the CFO’s role is the postulated role change the CFO position has experienced in recent years. This argument has mainly been put forward by practice-oriented publications, mostly published by large consulting or accounting firms (Bremer, 2010; Lüdtke, 2010). Here, the CFO’s role is often depicted as moving from mere beancounting to a more important and strategic role, letting the CFO position emerge to a second-in-command position in the firm, subordinate only to the CEO (Zorn, 2004). The recent academic discussion of the CFO’s role has focused on the effect of the CFO on accounting systems and practices (for example Dowdell & Krishnan, 2004; Aier et al., 2005; Naranjo-Gil et al., 2009) and on the aftermath of CFO turnover (for example Mian, 2001; Geiger & North, 2006). Few studies have focused on CFO requirements or qualifications (Collier & Wilson, 1994; Baker & Phillips, 1999; Baxter & Chua, 2008). However, following upper echelons theory (Hambrick & Mason, 1984), some of the aforementioned studies investigated the effect of CFO characteristics on accounting practices. Thus, some conclusions about the common requirements for CFOs can be drawn from these studies.

The aspect of CFO qualification most discussed in the literature is educational background. For CFOs, a university degree seems to be a prerequisite, as studies investigating educational background have found that the overwhelming majority of CFOs has an academic education (Collier & Wilson, 1994; Baker & Phillips, 1999). Further, most CFOs have majored in business or a field related to business such as accounting, finance or economics (Collier & Wilson, 1994; Baker & Phillips, 1999; Naranjo-Gil et al., 2009). Common additional qualifications for CFOs

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are professional degrees such as an MBA (Master of Business Administration) or a CPA (Certified Public Accountant) (Aier et al., 2005). These CFO qualifications affect accounting practices and quality: an educational background in a field related to business was found to enable the CFO to introduce more innovative accounting practices (Naranjo-Gil et al., 2009), whereas CFOs holding an MBA or a CPA were found to be less likely to restate earnings, which is often used as a proxy for accounting errors (Aier et al., 2005). The signaling effect of the university education of CFOs might be especially relevant to FFs, as they often demand nonfamily management personnel hired from outside to professionalize the FF and introduce modern management practices (Songini, 2006). Another important aspect of CFO qualifications is the CFO’s work experience, either in the field of finance and accounting or in CFO positions (Baker & Phillips, 1999; Aier et al., 2005; Baxter & Chua, 2008; Naranjo-Gil et al., 2009). Like academic education in the field of business, longer tenure as a CFO seems to positively influence the CFO’s ability to introduce innovative accounting practices and to avoid accounting errors (Aier et al., 2005; Naranjo-Gil et al., 2009). The ways in which CFOs are appointed to their positions have also been analyzed in a few studies. For instance, Mian (2001) finds that CFOs are two to five times more likely to be hired from outside the firm compared with CEOs. Furthermore, Geiger & North (2006) show that in firms that have externally hired their CFOs accounting quality seems to increase. To summarize, the extant CFO literature has not yet dealt in-depth with necessary CFO qualifications. In light of this, Menz (2012) calls for increased research into the required capabilities of functional TMT members (such as CFOs) and how these characteristics are affected by different organizational settings. In this regard, this paper follows this call by analyzing the specific requirements of CFOs in FFs.

Requirements for Non-Family Managers in FFs Large parts of the literature on the inclusion of non-family managers in FFs discuss this topic as an important part of FF professionalization (for instance, Dyer, 1989; Gersick et al., 1997; Songini, 2006; Chittoor & Das, 2007). In these studies, non-family managers are described as adding necessary professional management knowledge to the FF. Thus, it seems natural that

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families are described as primarily evaluating non-family managers based on their formal competence, such as education, training and management, and industry experience (Blumentritt et al., 2007; Hall & Nordqvist, 2008; Classen et al., 2012). Interestingly, the terms “professional managers” and “non-family managers” are often used interchangeably, implying that only nonfamily managers can act “professionally,” a view that has been challenged by recent studies (Hall & Nordqvist, 2008). Nevertheless, based on the (scarce) research on non-family CFOs described above, a main driver for the introduction of non-family CFOs should be found in the need to add professional financial management know-how. However, non-family managers’ formal competence alone has been found to not sufficiently enable such managers to add their full power to FFs. Instead, Hall & Nordqvist (2008) argue that besides formal competence, non-family managers also need cultural competence to successfully manage an FF. According to Hall & Nordqvist (2008, p. 58), cultural competence can be defined as “an understanding of the family’s goals and meanings” and “the values and norms underlying the reasoning for the family to be in business.” Similarly, Blumentritt et al. (2007) argue that business competence might not be enough for non-family managers to succeed in FFs. In addition, non-family managers also need to be aware of the family’s plans and try to “balance business concerns with family dynamics” (Blumentritt et al., 2007, p. 327); they thus rely heavily on interpersonal skills.

Concerning the relevance of the findings by Blumentritt et al. (2007) and Hall & Nordqvist (2008) for this paper, a limitation is that both studies focus on the requirements for non-family CEOs. The importance of the cultural or interpersonal competence for non-family CFOs might not be as high as it is for CEOs, as the former might have less contact with the controlling family than the latter and might rely more on specialized knowledge than CEOs, for whom general and people management skills could be more important. Thus, from the existent literature on the requirements for non-family managers in FFs, it cannot be deduced which skills are essential for non-family CFOs. Moreover, the literature describes the skills needed for non-family managers rather broadly, which obscures deeper insights into the specific skills needed for functional Csuite members.

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THEORETICAL PERSPECTIVE: THE RBV For the analysis of non-family CFO requirements, this paper draws on the RBV as the main theoretical framework. The RBV rests on the central assumption that the competitive advantages of firms rely on the resources available to them and on how well these resources are managed (Barney, 1991; Mahoney, 1995; Barney et al., 2011). Specifically, resources comprise “all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness” (Barney, 1991, p. 101)). In his seminal paper on the RBV, Barney states that to earn a competitive advantage, resources have to be valuable, rare, imperfectly imitable and there should not be substitutes for the specific resource, which are not rare or imperfectly imitable. In this sense, employees can serve as (human) resources to a firm, as they might provide it with a competitive advantage by carrying distinct knowledge and/or capabilities (Toms, 2010; Coff & Kryscinski, 2011; Yang et al., 2011; Patel & Fiet, 2011). As indicated above, the employment of non-family CFOs in FFs might thus be a crucial driver of outperformance and thus imply a competitive advantage (Caselli & Di Giuli, 2010; Di Giuli et al., 2011).

Owing to the diversity of firms, the same human capabilities are not valuable to all kinds of firms. Instead, some or even most human resources may be specific to a certain firm or an industry sector (Castanias & Helfat, 1991; Castanias & Helfat, 2001; Dawson, 2012). In particular, FFs have been found to rely on distinct resources compared with NFFs, which also includes their human resources (Habbershon & Williams, 1999; Frank et al., 2010; Patel & Fiet, 2011). However, the specific characteristics of FFs might lead to both advantages and disadvantages with regard to human resources. On one hand, FFs often enjoy high commitment from long-serving employees and in turn offer a warm and friendly working environment. The longer tenures of employees compared with NFFs (Tsai et al., 2006) also enable employees to develop deep firm-specific knowledge. On the other hand, FFs are often described as experiencing problems when trying to attract and retain highly capable non-family (management) personnel. Furthermore, compared with NFFs, FFs show limitations in wealth transfer and their management personnel might lack professional growth perspectives (Astrachan

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& Kolenko, 1994; Sirmon & Hitt, 2003). Owing to their specific resources, FFs can also be expected to demand special skills and capabilities when hiring non-family financial management personnel (Hiebl, 2012), which also includes non-family CFOs. For instance, as described above, these specific skills and capabilities might include more pronounced (inter)personal or cultural skills. Because of the missing analysis of FFs’ requirements when hiring non-family CFOs, this paper seeks to provide a first overview of which specific human resources FFs look for when hiring non-family CFOs.

METHODOLOGY The review of the existent literature presented in the previous section shows that when FFs judge the suitability of non-family management personnel, the mere consideration of formal competence is insufficient. Only if non-family TMT members also prove to be culturally competent can a successful collaboration between the controlling family and non-family managers be expected (Blumentritt et al., 2007; Hall & Nordqvist, 2008). However, the findings of the extant literature on the specific skills needed rather remains superficial. Although we understand that formal competence includes education, training and experience, it cannot be deduced which skills are essential in FFs for non-family CFOs. Moreover, the FF literature thus far has focused on non-family CEOs and thus the results on the skills needed for non-family CEOs cannot be directly applied to non-family CFOs. Knowledge on the specific skills required by FFs when recruiting non-family CFOs can thus be regarded as scarce.

Therefore, in order to generate the first comprehensive overview of the skills required for non-family CFOs in FFs, this paper draws upon qualitative research methods. Specifically, a multi-case study approach was chosen with semi-structured interviews being the research instrument. The present paper aims not only to list FFs’ specific requirements when recruiting non-family CFOs, but also to provide initial evidence on why some skills may be more relevant to non-family CFOs in FFs than they are to non-family CFOs in NFFs. Multiple case studies are especially suitable to such “why” questions, as they deal with operational links that have to be investigated in depth to be able to generate provisional theories

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about complex social phenomena (Eisenhardt, 1989; Yin, 2009). Moreover, the opinions of corporate executives, who are the main source for this study, are known to be generally rather accessible via qualitative methods such as interviews, as executives are “unlikely to take the time to fill in questionnaires” (Rowley, 2012, p. 262). The newly generated findings presented in this paper are compared with the extant literature in the discussion and conclusions sections (Alvesson & Sköldberg, 2009; Qu & Dumay, 2011).

Between June and October 2011, 20 semi-structured interviews were conducted with nonfamily CFOs, CEOs and supervisory/advisory board members in 11 Austrian FFs and four Austrian NFFs.1 To increase the comparability of case study firms (Yin, 2009), only firms were invited to participate in the study that had their headquarters in Austria, could be classified as manufacturing firms, had at least 250 employees at the time of the study, had at least 50 million Euro in revenues, were not stock-market listed, and had the legal form of a limited liability company.2 Firms that fit these criteria were identified via publicly available information (e.g., firms’ websites), and then contacted by e-mail and invited to participate in the study. With the invitation e-mail, potential interviewees also received initial information on the goals and design of the study and were ensured absolute anonymity. After participants had declared their willingness to participate, a few days before the actual interview interviewees were sent field manuals for the interviews. These manuals consisted of two parts: a standardized questionnaire on the education, career path and experience of the interviewee and a set of open-ended questions to analyze the skills required for non-family CFOs in-depth.

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To judge the classification of a firm as either FF or NFF, the F-PEC power subscale was used. The F-PEC is a three-dimensional scale to measure the influence of a controlling family on a firm. The three subscales are power (P), experience (E) and culture (C) (Astrachan et al. (2002)). Among these three subscales, in empirical research the power subscale has shown the strongest relationship with organizational structure (Lindow et al. (2010)). Moreover, only the power subscale can be estimated from outside the firm and thus it was used in this study to distinguish FFs from NFFs. The power subscale itself was initially termed “substantial family influence” and is generated by the addition of a family’s share of the firm’s equity, the firm’s supervisory board members and the firm’s executive board members (Klein (2000)). Thus, it can range from 0 (no family influence) to 3 (maximum family influence). If a family holds at least a small share of the firm’s equity and the firm reaches and F-PEC power score of at least 1 (out of 3), the firm can be classified as an FF (Klein (2000)). 2 In Austria, there are mainly two legal forms, which limit the liability of its owners: the “Aktiengesellschaft (AG)” and the “Gesellschaft mit beschränkter Haftung (GmbH)”.

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Table 1 - Descriptive information on case firms and interviewees Firm

Case

Employees

Annual revenue (Euro millions)

A

250-500

50-100

B

250-500

50-100

Interviewee

Year of foundation

FF/NFF

1900-1950

FF

before 1900

FF

Working Working experience experience Education in FFs in NFFs level (years) (years)

Position

Family member

Age (years)

CFO

No

40-55

Master

15-30

none

CEO

Yes

>55

PhD

15-30

<15

Chairman of the supervisory board

Yes

40-55

PhD

15-30

none

CEO

No

>55

PhD

15-30

<15

CFO

No

40-55

Master

<15

<15

C

>1,000

>300

1900-1950

FF

Chairman of the supervisory board

Yes

40-55

Master

15-30

<15

D

501-1,000

101-300

after 1950

FF

CFO

No

<40

Master

<15

<15

E

250-500

50-100

1900-1950

FF

CFO

No

40-55

PhD

15-30

none

CFO

No

>55

Master

15-30

<15

CEO

Yes

40-55

Master

<15

<15

F

501-1,000

101-300 before 1900

FF

G

>1,000

101-300 before 1900

FF

CFO

No

<40

Master

<15

<15

H

501-1,000

50-100

after 1950

FF

CFO

No

40-55

Master

15-30

15-30

I

>1,000

101-300

1900-1950

FF

CFO

No

40-55

Master

15-30

none

J

250-500

50-100

1900-1950

FF

CFO

No

40-55

Master

<15

<15

K

501-1,000

101-300

1900-1950

NFF

CEO

No

40-55

Master

<15

<15

L

>1,000

>300

1900-1950

NFF

CFO

No

40-55

Master

none

<15

CFO

No

>55

no degree

<15

>30

F

M

250-500

50-100

after 1950

NFF

Chairman of the advisory board

No

>55

PhD

>30

<15

N

>1,000

>300

before 1900

FF

CFO

No

40-55

Master

15-30

none

O

>1,000

>300

1900-1950

NFF

CFO

No

40-55

Master

15-30

<15

Interviews lasted between 58 and 207 minutes and all were recorded digitally and fully transcribed, resulting in more than 500 pages of text. Transcripts were sent back to interviewees in order to correct misunderstandings. The approved interview transcripts then were coded using the “general inductive approach” (Thomas, 2006). This approach can be characterized as letting topics emerge from the text without creating a code system before reading and comparing transcripts. When a topic emerged from one transcript, the other transcripts were scanned for the same topic and coded accordingly. Although the actual coding approach is inductive in nature, the focus of interviews was derived in a deductive way by analyzing the relevant literature. This approach thus focuses on processing the text material created via interviews (Thomas, 2006). Using it and the software MAXQDA, approximately 2700 codings were generated.

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The descriptive information on case study firms and interview participants is shown in Table 1. As can be seen in this table, of the 20 interviewees, 13 were CFOs, three were chairmen of supervisory/advisory boards and four were CEOs. Two CEOs and two chairmen of supervisory boards were also (partial) owners of the respective FFs. This variety of interviewees’ professional positions was created to reach a comprehensive view on CFO qualifications that does not stem only from the subjective view of CFOs. Table 1 also shows that of the 20 interviewees, 14 had both FF and NFF work experience, five had only FF experience and one had only NFF experience. Mixed FF and NFF experience turned out to be an important attribute of interview participants, as interviewees with both FF and NFF experience were better able to report on the differences concerning the requirements for non-family CFOs in FFs and NFFs.

FINDINGS Four groups of CFO qualifications emerged from these interviews: education, functional know-how, career path and personal/social attributes. The following subsections summarize the findings on each of these groups of qualifications.

Education As displayed in Table 1, all but one of the interviewed CFOs have university educations. These twelve CFOs have all studied business administration or a field related to business (such as information systems). Concerning the value of this academic education for their current roles, CFOs stressed the ability to solve complex problems with little prior knowledge on the topic in question. Eight CFOs also declared that a basic education in fields such as accounting, management accounting and financial management still helps them in their current positions, as they command a broad array of (at least) basic knowledge in all relevant fields of financial management. Although all 15 interviewees in FFs hold university degrees, only five saw an academic education as an obligatory requirement for a non-family CFO in FFs. By contrast, all five interviewees in NFFs stated that a CFO must have a university education. This lower reliance on formal education in FFs in most cases was explained by the typical career path in

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FFs: it seems as though in FFs, promotion prospects remain intact despite the lack of a university education, as the chairman of the supervisory board in case B explains: “When FFs have hired good employees, they seek to retain them. When an employee shows a good performance, his or her chances of developing into a top management position are higher in FFs. Most probably, our executive in charge of financial management would not have had the same career options in other organizational structures, considering her missing university education and career path.”

For NFFs, most interview participants declared that non-university graduates could also perform a CFO role. However, candidates without a university education are unlikely to be even considered for the CFO position, as an academic education is usually a prerequisite. Thus, in the analyzed NFF cases, potential CFO candidates without a university degree are precluded from reaching the CFO position, which seems to make a university education a more important human resource for non-family CFOs in NFFs than it is for them in FFs. However, four non-family CFOs in FFs compared this hypothesis for growing FFs. They stated that in the FF they work for at the moment, the percentage of university graduates among employees is low compared with NFFs. However, they think that this gap in the percentage of university graduates is likely to diminish in the future: executives without a university education that now hold important management positions have been working for the FF for a long time (in most cases, more than 20 years) and reached their positions when the FF was much smaller in size. After their retirements, the interviewed CFOs predicted that these executives would likely be replaced by university graduates because of the increased size of the FF. In this sense, as FFs grow, they resemble NFFs in terms of the educational level they require from management candidates.

Concerning recommendations on the subject of university studies for CFOs, interviewees in both FFs and NFFs agree that prospective CFOs should study a field related to business and major in fields that are typically in the field of responsibility for CFOs. These fields include financial accounting, management accounting, financial management, tax and law (Horngren et al., 2010). According to interviewees, not all these fields are relevant for positions in the career path before the CFO appointment such as treasurer or controller (Baker & Phillips, 1999), but a basic command of all these fields is necessary for the CFO role. Thus, focusing on these core finance and accounting fields is advisable for prospective CFOs and is also considered by both FFs and NFFs when recruiting new CFOs.

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Functional know-how Besides education, all interviewees mentioned the importance of the CFO’s functional know-how that has been acquired after education, for instance during his or her professional experience. For both FFs and NFFs, the most important component of functional know-how for CFOs that emerged from this study is a sound command of finance and accounting basics. This understanding of financial accounting, management accounting and financial management may be generated via studies, further training or work experience. In this regard, requirements for CFOs do not differ in FFs and NFFs, which makes it clear that a basic command of the relevant finance and accounting functions is equally important in both forms of organizational structure. However, certain specific areas of functional know-how emerged as special to FFs. One such FFspecific area of CFO know-how arises from the overlap between the business and family spheres in FFs (Gersick et al., 1997; Haynes et al., 1999). Both interviewed non-family CFOs as well as family representatives pointed out that a CFO in an FF not only has to concentrate on the business’s development, but also has to consider the impact of his or her decisions and actions on the controlling family and its wealth. For instance, this also includes the private tax, legal and asset management issues of family members. Therefore, in FFs it seems that the non-family CFO also has to have extended knowledge in the areas of law, tax and asset management. A statement of CFO G, who mainly worked for NFFs before his CFO appointment to an FF, illustrates this finding: “What I now notice in the FF is the requirement for the CFO to have to know not only about finance and accounting, but also about tax and legal company structures. The interaction between the firm’s interests and the interests of family shareholders has to be considered at all times. There is always the question of how to display the firm’s results and the results of the private firms of the owners and how to optimize the owners’ private tax planning. I think this interface is typical to FFs.”

Whereas a basic consideration of the effects on the private wealth situation of the controlling family was mentioned in all FF cases, this topic is even more important for nonfamily CFOs that are directly in charge of the family’s private asset management. This situation could be observed in three FF cases. In these cases, the non-family CFO’s area of responsibility also explicitly included the management of the family’s private finances, which increased the importance of his or her functional know-how in asset management. Thus, if the controlling

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family chooses to let the non-family CFO also manage its private assets, the CFO is required to also have a sound understanding of asset management. However, all three non-family CFOs in these FFs expressed their skepticism about the family’s private asset management being part of their area of responsibility. They pointed out that they are ultimately responsible for the financial performance of the FF and that their incentive compensation is based on firm performance and not on their performance in private asset management. Moreover, they reported contradictory goals of the firm and the family, which collided in their positions because of the responsibility for the family’s private asset management. Further, one of these three CFOs explicitly stated that he aimed to reduce the time spent on private asset management and to transfer the role of private asset management to an institution outside the FF.

Another specific role for a non-family CFO in FFs is as overall business advisor to the family. As FFs usually have flatter hierarchies (Dailey et al., 1977; Peters & Buhalis, 2004) and often use resources more frugally compared with NFFs (Dyer, 1989; Carney, 2005), fewer management personnel tend to be employed. In line with this notion, interviewees reported that in FFs the non-family CFO is often required to act as an overall business advisor to the family, not only concerning issues in finance and accounting. Therefore, for non-family CFOs especially in FFs, broad knowledge in a large array of business functions was considered to be an important attribute.

Career path An analysis of the career paths of the CFOs’ participating in this study shows that the majority of CFOs (10 out of 13) has been promoted internally to the CFO position. Only three CFOs were recruited from outside their current firms. Interestingly, all three external recruits could be observed in FFs and none in NFFs. Two of these CFOs were recruited from NFFs and one was hired from a CFO position in an FF. However, this CFO had previously been recruited into the CFO position in an FF directly from an NFF. These descriptive results on the small sample size investigated in this study indicate that NFF experience seems to be important for controlling families when searching for a new CFO. This notion derived from the career path analysis of the interviewed CFOs also receives support from the interviews with family

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representatives in this study. They mostly stated that when hiring non-family management personnel, they actively seek to integrate managers with extensive NFF experience. From this experience, they also expect the non-family CFO to bring new practices and know-how acquired from NFFs to the FF. A statement from the chairman of the board in the FF case B explains this finding: “I quite like it when we get people from a non-family environment. Coming to us from an NFF would absolutely be no obstacle, quite the contrary: I see this as an enrichment to our firm. Especially in the field of finance and accounting, from my point of view, people who have undergone training in a non-family group can give valuable impetus to professionalize or change the finance and accounting functions.”

However, other interviewees, especially CFOs, stated that previous FF experience is also helpful when taking over a CFO position in an FF because they are already aware of the peculiarities of FFs regarding typical decision-making processes and governance. Hence, from the non-family CFO’s perspective, it seems advisable to have some working experience in an FF environment to be prepared when one reaches a top management position in an FF such as the CFO position. One CFO also stated that typical governance characteristics in FFs, such as a high degree of owner orientation in decision making (Astrachan, 2010; Moog et al., 2011), only become relevant to non-family employees when they reach top management positions. Thus, previous work experience in FFs (including at lower levels of the corporate hierarchy) may be valuable for potential CFO candidates.

Another requirement for non-family CFO candidates in FFs mentioned in the interviews was industry experience. However, this requirement was only stated by FF owners and not by NFF interviewees. FF owners stressed this point, stating that when a non-family top management member has sufficient experience in the industry, he or she needs less time to become familiar with the firm and industry, as CEO F explains: “Experience in the same industry as ours is certainly helpful for the CFO. Then, the CFO already knows about the characteristics of cost accounting and financial accounting systems in our industry.”

Interestingly, NFF respondents stated that the CFO position would not require industry experience, as finance and accounting processes differ little compared with other corporate functions such as sales or operations.

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Besides FF/NFF and industry experience, most participants in the study stressed the importance of operational experience in finance and accounting functions as well as in functions outside the finance and accounting area. The required experience in finance and accounting corresponds with the requirement for functional know-how mentioned above. According to interviewees, extensive work experience seems to be the main source for functional know-how. Surprisingly, six interviewees also mentioned that experience outside the finance and accounting area would be highly useful to CFOs. This point was mainly explained by the changing role of CFOs. In line with the literature on CFO role change discussed earlier, interviewees explained that for CFOs today it is not enough to concentrate on the finance and accounting functions and deliver correct reports and accounting. By contrast, a CFO today also has to communicate extensively with other corporate functions and push and challenge other functional managers in the firm. This more agile CFO role is easier to perform if the CFO has operational experience in these functions and therefore better understands their needs and challenges. In this regard, no differences could be detected for non-family CFOs in FFs or in NFFs.

Personal/social attributes In the requirements for non-family CFOs summarized here under “personal/social,” the largest differences between FFs and NFFs among the four groups of CFO requirements could be detected. However, some requirements emerged as important for non-family CFOs in both FFs and NFFs. The overwhelmingly most important requirement in this regard (mentioned by 14 interviewees) is the ability to communicate effectively. This ability is clearly important for communication inside the firm with the supervisory/advisory board, management team members, employees or trade unionists. However, for communication with external stakeholders such as banks or other creditors, the CFO is also required to be able to communicate the state, goals and developments of the firm accordingly. The statement of CFO J exemplifies this requirement: “I think, in this regard, there has clearly been a change to the CFO skill set. In the past, to become a CFO, one had to be the best administrator. Then, the CFO knew about everything in connection with numbers. Now, a CFO also needs to “sell” his or her numbers. […] Today a CFO must be able to market and communicate his or her reports and numbers. […] Regardless of the industry he or she

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works in, a CFO who only sits in his or her ivory tower and produces the best of the best reports is no longer relevant.”

Further skills that were found to be necessary and important for non-family CFOs in both FFs and NFFs were integrity and honesty, leadership skills, a certain intuition for numbers and the ability to integrate quickly into new firms. Especially in light of the accounting scandals in the early 2000s (Benston & Hartgraves, 2002), both CFOs and firm owners emphasized the need for the CFO to act honestly and with integrity, as stated by CFO C: “For every CFO, loyalty, honesty and transparency are crucial. As soon as a CFO starts to lie to the firm and to him-/herself, the firm is lost, as the scandal at Enron and other cases of accounting fraud have shown.”

The ability to integrate quickly into new firms was exclusively mentioned by the chairmen of the supervisory/advisory boards and CEOs, but not by CFOs. It seems as though firm owners mainly care about “the CFO hitting the ground running” by focusing on this specific requirement. The motivation for examining this ability can again (similar to same industry experience) be found in the hope of business owners that CFOs who integrate quickly need less time to create value for the firm.

The specific requirements for non-family CFOs in FFs all deal with the integration of the controlling family into the FF. In this line, the case study analysis found that these specific FF requirements for CFOs are especially applicable for firms with an intensive integration of the controlling family into the FF and are less applicable for FFs with a less intensive integration of the family. The most often mentioned demand for non-family CFOs in FFs in the personal/social dimension is the CFO’s sensitivity to family interests. CFOs with both FF and NFF experience stressed this point and highlighted the serious differences for non-family CFOs in FFs and NFFs. To show his or her sensitivity to family interests, a CFO should acknowledge the consequences on the business and on the family of all decisions and developments, as the chairman of the advisory board in case C explains: “A CFO in an FF must not do something that, on one hand, is in accordance with the firm’s interests, but which on the other hand harms the controlling family. This must not happen. Therefore, he or she has to have an eye on both spheres. He or she is well advised to consult me about critical topics and to find a common solution that benefits both spheres. For instance, a tax decision that helps the firm but that results in family members paying higher income tax is not tolerable in an FF.”

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Owing to the long-term orientation of FFs and their focus on sustaining the business (Chrisman et al., 2005; Mahto et al., 2010; Lumpkin & Brigham, 2011; Patel & Fiet, 2011), a valuable feature of a non-family CFO in an FF can also be found in a CFO’s intrinsic long-term orientation. However, this requirement stands in contrast to the often observable short-term orientation of CFOs in NFFs, as CFO D explains: “When judging the suitability of a CFO, a family-controlled firm looks at other features compared with an NFF, for instance, whether the CFO is long-term oriented. […] FFs rather look for reliability, for someone who will stay in the firm for a longer period of time. […] An NFF rather seeks CFOs who are more aggressive and drive shareholder value in the short-term. NFFs tend to say ‘I hire a CFO and after three years, if he or she has brought the firm forward but then leaves again, that’s also fine. Then I hire someone new, who again brings new impetus to the firm.’”

CFO interviewees who have moved from an NFF to an FF often reported a “culture shock” when arriving in the FF. They often connected this shock with the concentration of the decisionmaking power in FFs. From their NFF experiences, they were used to fact-based and rational decision making. By contrast, in FFs they more often found emotional and non-fact-based decision making by the controlling family to be the case. Thus, these CFOs recommended that prospective CFOs in FFs should be able to cope with and accept the controlling family’s decision-making power. This requirement also corresponds with the previous FF experience mentioned above. If a CFO candidate already has FF experience, he or she might better understand the decision-making centralism in FFs. In connection with this point, CFO interviewees also mentioned that in FFs it is important for the CFO to tolerate frustration. This is necessary because in FFs non-family CFOs frequently make recommendations based on facts and rational reasoning that the controlling family rejects. In these situations, CFOs must cope with the family’s decision-making power. However, according to CFO interviewees, CFOs should not stop challenging or questioning the family’s decision, as it is their role to act as a critical counterpart to the family. Nevertheless, keeping up this behavior requires a high degree of frustration tolerance.

Finally, it emerged from the interview analysis that a non-family CFO often also acts as a moderator in cases of conflict between family members (Kellermanns & Eddleston, 2004). Thus, the CFO needs mediation ability to reach consensus among family members despite initial

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disputes or conflicts. Non-family CFOs stated that this is especially true for FFs with more than one family member operationally involved in the FF’s TMT. In these cases, the non-family CFO is often the only non-family TMT member and thus acts as a kind of independent referee.

DISCUSSION Education Although all FF CFO interviewees in this study hold university degrees, the notion emerged from the interviews that an academic education is less important for non-family CFOs in FFs than it is for those in NFFs. In this sense, the present study also confirms for the CFO position that FFs attach less importance to a university education (Fiegener et al., 1996; García Pérez de Lema & Duréndez, 2007). By contrast, FFs seem to rely on management competence acquired from longer tenures in the FF, which in turn seems to be a more important resource for FFs compared with formal education.

However, the findings presented in this study show that the lower reliance of FFs on formal education when judging CFO candidates might not hold up during the FF’s further development. Interviewees pointed out that growing firms might also consider university graduates for the CFO position in the future. In this sense, the present study shows that for predicting the requirements of FFs for non-family TMT members, contextual factors such as growing size seem to have an important impact on the recruiting habits of FFs and therefore should be included in future research on non-family TMT members in FFs. This paper’s findings might thus be interpreted as further evidence that when FFs grow in size, they resemble more and more NFFs (Gersick et al., 1997; Kellermanns, 2005), as for NFFs this study shows that a university degree seems to be a prerequisite for CFO candidates. Nevertheless, owing to longer tenures in large FFs, when comparing equally large FFs and NFFs (Tsai et al., 2006), a university education should still be less important for prospective CFOs in FFs than it is for those in NFFs.

Regarding the concrete field of education, this paper found no differences between FFs and NFFs. Both the FFs and NFFs investigated in this study prefer CFO candidates to be educated in

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core finance and accounting fields. However, in light of the proposed recent development of the CFO position into a more strategic role (Bremer, 2010; Lüdtke, 2010), it seems interesting that an education in finance and accounting is still seen as the basis for a successful CFO career and not a broader education in management or strategy. Thus, when recruiting CFOs, the human resource of proficiency in finance and accounting seems to be a central component that firms seek.

Functional know-how The FFs depicted in this paper seemed to be equally eager to hire non-family CFOs who are experts in the field of financial management compared with the sampled NFFs. Both FF and NFF CEOs and owners, therefore, seem to have similar requirements when it comes to common functional know-how for CFOs. Nonetheless, the FFs in this study demand additional requirements for their non-family CFOs. These additional requirements seem to become effective if there is an intensive intermingling of the family and business spheres in an FF. This study therefore extends the findings by Chrisman et al., 2012, who suggested that higher involvement of the family in the FF fosters the adoption of family-centered non-economic goals, by showing that the degree of family involvement also strongly affects the tasks of non-family managers. Three FF cases in this study showed that for non-family CFOs, this intermingling of family and business spheres might result in the CFO also being responsible for the family’s private asset management. If that is the case, the controlling family seeks additional resources in a non-family CFO, namely an extended knowledge of tax, law and wealth management. This requirement can also be interpreted as an attempt by the controlling family to maintain FFspecific resources (e.g., the high commitment of family members because of the strong intermingling of the family and business spheres) despite adding a non-family manager to the FF. In such cases, to be eligible for the CFO position, non-family managers have to adapt to the controlling family’s needs: specifically, they have to account for the family’s private asset management, even if they do not favor doing so (which all non-family CFOs in this study did not).

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Another consequence of intermingling the family and business spheres in FFs found in this study is the non-family CFO being expected to also serve as a private counselor to family members besides asset management. The non-family CFO is “used” not only as a resource of proficiency in the business issues of the FF, but also as a resource of knowledge to family members in private matters. In this respect, the employment of a non-family CFO in an FF might serve not only as a competitive advantage to the FF, but also as a cost advantage for family members, as they can avoid fees for professional financial advice. However, the non-family CFO’s role as an advisor in private affairs seems to come into effect only after employment and is not mentioned by FF owners as a factor in the recruiting process. Therefore, although nonfamily CFO candidates might not be judged on their abilities to consult family members in tax or legal issues, after they have been recruited they might encounter a demand to do so. Still, among a broader choice of suitable non-family CFO candidates, a CFO candidate’s experience as a tax consultant or asset manager is likely to be a decisive factor in the recruiting process of FFs with closely connected family and business spheres.

Career Path Depending on the interviewees’ positions in the case firms, different recommendations on the non-family CFO’s career path emerged. While FF owners stressed the importance of NFF experience and same industry experience for non-family CFOs, CFOs rather noted the value of previous FF experience. On one hand, FF owners aim to add additional resources to the FF by hiring non-family CFOs with extensive NFF experience. On the other hand, they seek to integrate a new non-family CFO into the FF as smoothly as possible by demanding same industry experience, which they hope will reduce the time the newly appointed CFO needs to adapt to the FF. According to CFO interviewees, previous FF experience should also help reduce this integration time. From a non-family CFO’s previous NFF experience, FF owners mainly expect positive effects on the professionalization of the FF. This indicates that they feel a need to professionalize the FF. Moreover, it seems as though they consider the management of NFFs to generally be more professional than FF management and thus they expect the NFF experience of the non-

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family CFO to provide more professional management techniques and processes to the FF. In this sense, they aim to increase professionalism (among other measures) by adding the external human resource of a non-family CFO. Thus, in line with the findings of Hall & Nordqvist (2008), this study confirms that non-family managers with NFF experience tend to be regarded as professional in FFs in contrast to family managers or non-managers with pure FF backgrounds.

Nevertheless, controlling families also aim to retain FF-specific characteristics such as quick decision making (Ward, 1997; Braun & Latham, 2009, as CFO interviewees stressed that previous FF experience was helpful for non-family CFOs to adapt to the peculiarities of FFs. This experience is only helpful, however, if FF owners aim to maintain these characteristics despite widening the influence of non-family managers through the integration of a non-family CFO. Therefore, from an RBV perspective, when hiring non-family CFOs controlling families, on one hand, try to add extra resources to the FF but, on the other, aim to keep existing FFspecific resources by demanding the non-family CFO adapt to the specifics of FF governance.

Personal/social attributes In line with previous studies of non-family CEOs in FFs (Blumentritt et al., 2007; Klein & Bell, 2007; Hall & Nordqvist, 2008), this study also found for non-family CFOs that cultural or personal/social competence is a highly and probably more important requirement for successful non-family managers in FFs than it is for those in NFFs. Thus, this requirement should generally be relevant for non-family TMT members in FFs and not only for CEOs who might have closer contact with the controlling family compared with functional TMT members such as the CFO. Specifically, for the non-family CFO in FFs, this results in the requirement to accept the controlling family’s decision-making power and less formalized and rational decision making in FFs, to bring along an intrinsic long-term orientation and to demand the non-family CFO act as a moderator in times of family conflict.

Not only CFO interviewees but also most FF owners pointed out the need for a personal/social fit between the controlling family and the non-family CFO. FF owners also stated

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that they would strongly include cultural fit in their decisions when weighing up potential CFO candidates. Thus, it can be concluded that they are aware of the importance of the personal/social skills of non-family managers being in line with the FF’s values. This finding stands in contrast to Hall & Nordqvist’s (2008) result that FF owners underestimate cultural fit when hiring nonfamily managers. A possible explanation for this discrepancy might be found in the FF’s generation and size. Whereas Hall & Nordqvist (2008) focus on smaller FFs with a maximum of 130 employees, this study analyzed FFs and NFFs with at least 250 employees. Moreover, Hall & Nordqvist (2008) examine mainly first- and second-generation FFs, whereas the 11 FFs investigated in this study are mostly in their third or fourth generations. Generally, larger and older FFs tend to employ more non-family managers (Klein & Bell, 2007). Owing to the larger sizes and higher generations of FFs in this study compared with those analyzed by Hall & Nordqvist (2008), this study’s FFs mostly have substantial experience of the employment of nonfamily managers. Therefore, they build upon this experience and strongly include cultural fit in their hiring decisions on non-family managers. Stated differently, when first hiring a non-family TMT member, FFs might underestimate the importance of cultural fit. However, when they do so continuously, they obviously learn to integrate this factor into their decisions.

CONCLUSIONS The aim of this study was to investigate whether FFs have different or additional requirements when hiring non-family CFOs compared with NFFs. From an analysis of 15 case study firms and 20 problem-centered interviews, there emerged four pillars of CFO requirements: education, functional know-how, career path and personal/social attributes. This paper’s findings indicate that the resource of formal education is of less value to non-family CFOs in FFs than it is for those in NFFs. However, when it comes to functional know-how, FFs and NFFs have similar requirements for non-family CFO candidates. Only in FFs that strongly intermingle the family and business spheres does the CFO need additional know-how. In general, FF owners aim to add additional and professional human resources to the FF by hiring nonfamily CFOs. However, at the same time, they demand non-family CFOs accept FF peculiarities. Thus, FF owners aim to defend the competitive advantages based around FF peculiarities while strengthening the human capital resource set of the FF. This also results in a higher importance

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for a personal/social fit between the firm’s owners and the non-family CFO in FFs compared with in NFFs. Finally, this paper also suggests that controlling families that are used to hiring non-family managers already integrate the cultural fit with non-family management candidates into their personnel decisions.

This study adds to the literature in several ways. First, it is the first to investigate in-depth an aspect of the employment of non-family CFOs in FFs, namely the specific requirements FFs demand when hiring non-family CFOs. Second, it contributes to the general literature on nonfamily managers in FFs by examining the requirements for these managers in a finer-grained way. This detailed analysis is necessary, as functional C-suite members such as the CFO pose substantially different requirements compared with CEOs (Menz, 2012), who have been the focus of the extant literature on non-family management in FFs. Third, this paper offers a potential explanation for the underestimation of cultural fit in FFs when hiring non-family managers. It suggests that larger and older FFs with more experience of hiring non-family managers develop a better understanding of the success factors when hiring non-family managers and therefore strongly integrate cultural fit into these decisions. Fourth, this paper also delivers a detailed analysis of the relevant requirements for CFOs in general. It shows that the proposed role change of the CFO position has already resulted in a changing skill set for CFOs (e.g., the importance of communication skills), whereas in other parts of CFO qualifications there remains more traditional qualification needs (for instance, functional know-how in finance and accounting).

The findings of this study should also be of relevance to FF owners, non-family CFOs in FFs and FF advisors. Based on the results of this paper, FF owners that are pondering hiring a non-family CFO for the first time might better estimate which requirements should be integrated into this personnel decision. Thus, they could probably limit failures in this process and unsuccessful relationships with non-family CFOs, which in turn could benefit FF performance, as less time and fewer resources would be spent on the integration of inappropriate non-family CFOs. Furthermore, CFOs and financial management professionals who might want to develop into a CFO role can use the results of this paper as a guide of the skills they are yet to acquire to be appointed to a CFO position or which skills are specifically relevant to FFs. In particular,

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CFOs who currently work for NFFs and who are contemplating whether to switch to an FF might also receive insights into which requirements are expected in FFs and how their roles might change. Finally, FF advisors might find these results useful when advising FFs what to look for when searching for and integrating non-family managers (and specifically CFOs) into the FF.

Future research might test the inductively generated results of this study for significance in quantitative research settings. Further studies of the requirements for other functional C-suite members in FFs might be valuable to both practice and academia. Although this study has created a first overview of the requirements of FFs for non-family CFOs, the specific role of the non-family CFO in FFs deserves further investigation. For instance, future research could investigate in more detail the organizational role non-family CFOs play in FFs. Further, longitudinal studies of the development of non-family CFOs in FFs might show how these important non-family managers are hired, how they develop their roles and how they establish a trusted relationship with the controlling family.

This study has some limitations. It draws on qualitative research methods and thus the findings generated using a relatively small sample cannot readily be generalized. Moreover, to increase the comparability of the cases analyzed, this study narrows down case firms to Austrian industrial firms that have at least 250 employees, 50 million Euro in sales, have the legal form a limited liability company and are not stock-market listed. Obviously, an investigation of firms with other characteristics might create different results. Thus, a replication of this study in different cultural settings or with a focus on smaller firms might be useful. Lastly, from this study it cannot be concluded whether FFs that thoroughly select non-family CFOs ultimately perform better than FFs that do not do so. Thus, the implications on FF performance of a high person–organization fit between an FF and a non-family CFO must be left to future research.

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