Familiness and CEO Selection Process: Case Studies of Malaysian Small Family Businesses

Family business is the most prevalent form of business worldwide and is a significant contributor to the global economy. In the context of family business, familiness is one unique constituent that only exists in this type of business. Familiness is defined as the unique bundle of resources that is derived from the dynamic interactions between family members within a family business system. Literature suggests that familiness can facilitate the achievement of organisational strategic goals, which eventually lead to business continuity. While much discussion on familiness focuses on its contribution to cause-and-effect relationships with business erformance, there is a lack of studies focusing on the role of familiness in one strategic matter in family business, which is CEO selection. Lack of knowledge that links family dimensions of familiness with the CEO election process must be addressed to avoid issues of ineffective passing over the business to the right CEO successor for business continuity over the next generations. Hence, the study aimed to understand the role of familiness in facilitating the CEO selection process within the context of Malaysian small family businesses. The research questions that guided this study were: i) what is the CEO selection process in the family business context? ii) what are the dimensions of familiness that facilitate the CEO selection process in the family business context? and iii) what are the factors that influence the CEO selection process in the family business context? To fulfil purpose of the study, this study utilised qualitative case study methodology, and data were collected through semi-structured interviews with predecessor CEOs, successor CEOs, and relevant family members of five Malaysian small family businesses. The unit of analysis for the study is the successful CEO selection process at the organisational level. The study developed a conceptual framework based
on 4 principles, which is selection process based on human resource management perspective and succession process theory underpinned the conceptualization of CEO selection process, social capital theory helped to conceptualise the three-dimensions of familiness which structural, cognitive, and relational, and the last perspective of three-circle model of family business system helped to conceptualise the factors that influence the CEO selection process. The interview protocol was developed based on the study’s conceptual framework. The study found that CEO selection process involves five main stages which are CEO planning, CEO preparation, CEO appointment, CEO onboarding, and CEO performance monitoring and evaluation. In this process, familiness values and actors’ attributes are the fundamental elements that shaped the process of CEO selection. In addition, the study found that structural, cognitive, and relational are the dimensions of familiness advanced by social capital theory, generated through the involvement and purposeful interactions of family members. The study also identified factors of predecessor and successor as the main factors that influence the CEO selection process. In conclusion, CEO selection is a mutually fitting process involving the predecessor’s expectations and the successor’s ability to fulfil the expectations of the founder predecessor CEO and the family. The primary contribution of the study to the family business body of knowledge is the identification of the main stages, and its distinctive attributes of process, actors, and familiness values, that serve as the foundation for the success of CEO selection. This knowledge could save family businesses from the threats of decline or discontinuity, which would harm social and economic development of the society.