Human Resource Management Practices in Family Business: Reflecting on the Agency and Stewardship Theory

Abstract

Research studies in family business have witnessed a steady rise in all forms of intellectual discourses. The enterprising families in which each generation adds a layer of entrepreneurial contribution are found across the globe. These firms are widely diverse ranging from small mom and pop shops to large privately held conglomerates. The family firms are considered as two overlapping institutions where the family play a significant role over the business and it directly influences the policies and practices governing the business which best satisfy the holding family’s economic and non-economic interests. In the context of privately held family businesses the HRM practices and its implementation varies significantly considering the development stages of a family business and the level of influence of the family. This can possess unique challenges in both the process and outcomes related to selection, performance assessment, career advancement, compensation of the employees engaged in family business. The discrepancy may impact the attraction and retention of talented employees and can negatively affect the business. The paper attempts to provide an integrative framework in the discussion of the HRM practices in the family business grounded on two prominent theories i.e. the agency and stewardship theory. By doing so it attempts to extend the scope of the theory and describe its implications on the HRM practices inside privately held family firms. The paper will draw insights by reviewing existing literature on family business with special attention to HRM practices.