The Family Business Bulletin
A Quarterly Report from the Center of Family Enterprise Research
Mississippi State University
Recruiting and Retaining Top Talent
We are excited to present in this issue of The Family Business Bulletin information about attracting and retaining top talent in family firms. Here you’ll find global insights as well as practical advice derived from research and classroom lessons. This information will provide useful insights into 1) improving firm productivity by recruiting top talent, 2) what the content of family firm job postings signals, 3) the benefits of a team-based culture for recruitment and retention, and 4) effective practices for hiring next-generation family members.
INFORMATION – Recruiting Top Talent
How to Improve Family Firm Productivity by Recruiting Top Talent
by James J. Chrisman, Julia Bennett Rouse Endowed Professor of Management
Family firms face many challenges owing to the involvement of family members in their ownership and management. One such challenge is how to attract committed and competent workers from outside the family to improve productivity and performance. My colleagues and I investigated the labor productivity of family and non-family firms and how family firms can improve. The study was based on three key assumptions.
- When the interests of owners and employees are aligned, both are more likely to achieve their objectives because they will be more inclined to cooperate. If employees believe they will benefit from being more productive, then chances are they will be.
- Productivity is dependent upon the abilities and efforts of the individuals in the labor force. Higher-ability workers tend to be more productive than lower-ability workers, given the same effort. This is generally understood. What is not as well recognized is that those with higher ability usually put out more effort because the payoffs are larger for them.
- Firms that provide inducements that are particularly attractive to higher-ability workers will benefit more than those whose inducements are equally attractive to all because they will end up with more higher-ability employees.
Incentives and productivity
We propose that firms that offer incentive compensation will usually experience higher labor productivity than firms that do not. Because family owners often want to keep the firm in the family, non-family managers and employees typically have limited opportunities to buy into the firm, achieve positions of leadership, and/or obtain higher pay. However, because individuals with higher ability are most concerned with those opportunities, incentive pay structures can enhance the productivity of these members.
In addition, family firms are known to offer greater security and a paternalistic atmosphere to employees. However, such inducements do not encourage large numbers of higher-ability individuals to seek employment in family firms. Indeed, family firms that offer, or are thought to offer, a combination of lower opportunities and secure work environments virtually ensure that their employees – particularly at the managerial level – will be less capable and energetic than those found in non-family firms.
Incentives as Signals
Given these assumptions, we propose that providing incentive compensation will result in greater gains in labor productivity for family firms than for non-family firms. This is because it not only rewards higher productivity, but it also signals to potential employees that productivity will be rewarded, the upshot being that the firm will attract, hire, and retain more higher-ability employees. Because family firms tend to favor family employees, this signal is more important for them than for non-family firms.
Keys to Attracting and Retaining
Higher Ability Workers
Align Owner and Employee Interests
Signal to Potential Employees that
Productivity Will Be Rewarded
Use Incentive Pay to
Reward High Performance
Study Summary
We studied approximately 108,000 small and medium-size family firms and 108,000 matched non-family firms drawn from the U.S. Census Survey of Small Business Owners. We found that the productivity of firms that use incentive compensation was 9.3 percent higher than that of firms that did not. Among family firms, the difference was 11.3 percent. We also found that incentive compensation decreased the productivity gap between non-family and family firms by 88 percent.
Providing higher pay and/or better benefits packages (retirement programs, health insurance, and paid holidays) also positively affects the relative productivity gains of family firms. Individuals usually associate higher paying jobs with greater demands for ability and effort, thus discouraging to some extent workers who are less competent and/or industrious. However, the effects were not as strong as they were for incentive compensation, which fits with the idea that inducements that are more accessible to higher-ability than lower-ability workers are more valuable to firms, particularly family firms.
Practical Implications
For family business owners and managers, the obvious implication is that the more powerful the signal that ability and effort are rewarded, the better the quality of the employees attracted. This will lead to better outcomes for both the firm and its employees.
In a broader context, to get the kinds of employees desired it is important to signal what the culture and values of the organization are, what is expected of employees, and what is in it for them. After that, family owners and managers need to follow through on their explicit and implicit promises as well as monitor the behavior of employees to ensure they follow through on theirs. Indeed, monitoring (if not taken to extremes) and the fulfillment of commitments are other potentially effective signaling devices for attracting high-ability workers.
Adapted from: Chrisman, J.J., Devaraj, S., and Patel, P.C. (2017). The impact of incentive compensation on labor productivity in family and nonfamily firms. Family Business Review, 30, 119-136.
INFORMATION & TIPS – Content of Job Postings
Attracting Non-Family Employees to Family Firms
by Dr. Michele Medina-Craven, Assistant Professor of Management
The basics of the hiring process – attracting applicants, reviewing applicants, interviewing, deciding whom to hire – are often similar in family and non-family firms. The process of attracting qualified applicants can be a challenge for any company. However, family firms have an extra consideration: Do they disclose their status as a family firm in their job postings? This question opens a host of subsequent “what if” questions: What if we don’t get enough applicants? What if we don’t get enough qualified applicants? What if disclosing our family firm status hurts our chances of finding an employee? All of these are valid concerns.
A recent study by my colleagues and me provided insights for family firms to attract non-family employees. Our study focused on how the content of job postings on platforms like LinkedIn shapes the perceptions of prospective job applicants. Here are some practical takeaways:
1) Highlighting your corporate social responsibility activities
- Corporate social responsibility (CSR) initiatives, including community involvement, charitable giving, and environmental sustainability, significantly increase a family firm’s reputation with job applicants and increase their willingness to join the company.
- Here’s how: Feature CSR activities in job postings and recruitment materials; showcase community involvement, charitable work, and environmental initiatives; emphasize how the company treats all stakeholders, as applicants use this to infer how they’ll be treated as employees.
2) Emphasizing a long-term orientation
- Communicating the family firm’s long-term orientation (think job security, succession planning, multi-generational ownership, and commitment to sustainability) helps to increase applicants’ perceptions of job success and their willingness to join.
- Here’s how: Include succession plans and transgenerational continuity in job advertisements; highlight the company’s longevity and commitment to sustained operations and continued employment; emphasize stable employment practices and conservative financial management.
- Simply stating that your company is a family business may have limited impact on attracting applicants who differ in their view of what it means to work for a family firm. Rather, signaling specific characteristics, like corporate social responsibility and long-term orientation, are what matter because they signal that a firm values giving back and providing job security.
- Here’s how: Mention family firm identity with concrete signals about how the family firm operates differently – average employee tenure, lack of layoffs, etc. – to showcase what your company does best for its employees.
- Family firms can be constrained in offering higher salaries or top positions, making corporate social responsibility and long-term orientation effective alternative recruitment strategies that align with noneconomic family objectives like keeping the firm in the family for years to come.
- Here’s how: Lead with what family firms do better – stability, values alignment, and total long-term value. Quantify these advantages and highlight them in all your recruitment materials. For example, in job postings, include total compensation comparisons (not just base salary) and feature stability metrics on your careers page (i.e., average tenure, years without layoffs, leadership longevity).
- Corporate social responsibility and long-term orientation can counterbalance concerns that non-family applicants may have about working for a family firm, such as nepotism, lower compensation, and fewer training or promotion opportunities.
- Here’s how: Proactively tackle nepotism, compensation, and development concerns with concrete data before applicants ask. Show non-family employee success stories, transparent promotion metrics, and total compensation comparisons that reframe perceived weaknesses as strategic strengths.
In all, the findings from this research study suggest that simply disclosing that a position is in a family firm may not be sufficient to shape applicant perceptions. However, the intentional signaling of the family firm’s values and practices, especially those related to social responsibility and long-term stability, is meaningful to applicants and offers a potential edge when recruiting in a competitive labor market.
Source: Kim, T., Medina-Craven, M. N., Marler, L. E., Long, R. G., & Fugate, M. (2025). Attracting nonfamily applicants to the family firm: A signaling theory approach. Journal of Small Business Management, 63(3), 1268–1296. https://doi.org/10.1080/00472778.2024.2378906
FAMILY ENTERPRISE SPOTLIGHT
Altex Tube
Where the Team Makes the Place
by Laura Marler, Jim and Pat Coggin Endowed Professor of Management
Turning into the Altex Tube parking lot, I saw a pristine building. Upon entry, an open lobby and open floor plan were very welcoming. Walking through the office space, I had the feeling that offices with glass windows and open glass doors were no mistake. From the breakroom to the factory floor, every detail of design reflects the company culture: open doors indicating open communication; modern workspaces created with valued employees in mind; safe inventory stacking, contributing to the number of days without injury; magnetized cranes epitomizing efficiency through continuous improvement.
In a commoditized industry, Altex Tube is quickly growing its reputation as an agile steel tube producer committed to meeting customer needs. The company founder, MSU management alumnus Zach Smith, makes being both an entrepreneur and a leader seem effortless. However, hearing about his journey quickly lets you know that hard work built Altex Tube from the ground up and that it has been years in the making.
In an established industry, Altex Tube stands out as a modern workplace. Zach was proud to show the company kitchen and breakroom for employees. Although quartz countertops are not the norm in the steel industry, Zach emphasized that Altex Tube is committed to creating a good environment including top notch facilities for every worker. He has found that the effort is reciprocated in the commitment of company team members.
Zach grew up in a family embedded in the steel industry. His father and uncle, both role models, founded a steel business later purchased by Nucor; dad Alan is now Altex’s Chief Commercial Officer. During his college days and early career outside Mississippi, Zach established a relationship with a steel manufacturer in the state’s Golden Triangle area. Building on that relationship, he returned years later in 2020 to found Altex Tube, breaking ground in 2022 on property adjacent to the steel mill. Today, Altex purchases the rolled steel made next door and forms it into tubes. Having spent considerable time growing up in Alabama and starting his career in Texas, Zach chose his company name in homage to two states that gave root to his becoming a business leader and an entrepreneur.
The notion of home is as central to the company’s culture as its name. Altex Tube has figured out the key to attracting and retaining team members who treat the place like it’s their home: Employees are team members not only in name, but also in their roles. This is unsurprising given that Zach’s leadership paradigm is team-focused. They say there is no “I” in team, and in our conversation, there was no “I” in Zach’s language. Rather, there was a noticeable use of “us,” “we,” and “our.” When asked about the success of Altex Tube, Zach emphasized the importance of every single team member having a shared vision and seeing opportunity ahead. “Pulling the rope in the same direction” is a must for every team member, according to Zach.
In an industry where the market can determine your fate, Zach knows how to work within the narrow margins of efficiency to meet the nuanced needs of customers. Altex Tube has achieved differentiation by creating a team-based culture built on a shared vision and values, commitment to each team member, and empowerment that brings forth input from employees.
Zach noted, “Every good idea offered up by a team member contributes to Altex Tube’s success. In fact, the best ideas have been from team members.”
Success at Altex Tube lies at the intersection of a team mentality coupled with a clear vision for the future and a commitment to continuous improvement in production.
On the subject of continuous improvement, my visit to the plant happened to coincide with the inaugural run of steel on a newly constructed mill. Zach’s enthusiasm and vision were apparent when he shared that this second line has increased the capacity of Altex Tube and enabled them to adapt to customer needs for small runs of specific products. Perhaps even more telling was the pride in a team member’s eyes when he told Zach the new mill was up and running. Zach paused our tour to speak to the team member, taking time to acknowledge a job well done.
The value placed on selecting, training, and motivating team members translates to business outcomes. Altex Tube has had no turnover in the past year. In terms of recruitment, employee referrals have been very effective for the company. Altex Tube employees experience living out a first class vision each day as trusted team members in an environment where positive energy permeates every level of the company. The suggestions of empowered employees translate into next steps for the company. It is not surprising that employees are eager to have friends and family join in their work environment. After all, Altex Tube is a company defined by teamwork.
Learn more at Altex Tube’s WEBSITE.
INFORMATION – Hiring Family
Hiring the Next Gen After Graduation
by Chelsea Sherlock, Assistant Professor of Management
One important tool that can help to alleviate these concerns is a family constitution. Created by the family, a constitution is a written document to communicate family and next-gen expectations, especially for employment. By outlining clear hiring criteria for all family members (e.g., required degrees, years of external work experience, performance standards, etc.), the constitution can reduce role ambiguity by ensuring that every next-gen family member joins the business under the same merit-based guidelines. Families can also refer to the constitution when questions arise about who qualifies for which roles and under what conditions. The use of a constitution in recruitment helps to maintain fairness and keeps family relationships from spilling into business decisions. Ultimately, effective recruitment in family firms should balance tradition with professionalism, to ensure that the business persists across generations.
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Mississippi State University is an equal opportunity institution.
Editor: Dr. Laura Marler
Head, Department of Management & Information Systems & Jim and Pat Coggin Endowed Professor of Management