Academic journal article Entrepreneurship: Theory and Practice

Are We Family and Are We Treated as Family? Nonfamily Employees' Perceptions of Justice in the Family Firm

Academic journal article Entrepreneurship: Theory and Practice

Are We Family and Are We Treated as Family? Nonfamily Employees' Perceptions of Justice in the Family Firm

Article excerpt

The importance of justice perceptions in fostering positive job attitudes and value-creating behaviors in organizations is well established in the literature. Despite this, only a handful of studies have addressed justice in family firms, and none have presented a theoretical model illustrating how nonfamily employees' justice perceptions may be influenced by family involvement in family firms. Here, we suggest that the level of family influence impacts the justice perceptions of nonfamily employees primarily through its effect on the human resource (HR) practices within family firms. Specifically, we propose that low levels of family influence tend to have little impact on the fairness of HR practices, that moderate levels of family influence tend to have positive effects on the fairness of HR practices, and that high levels of family influence tend to have negative effects on the fairness of HR decision processes and outcomes. Accordingly, we present and provide a conceptual support for a model that outlines the proposed relationships among family influence, family firms' HR practices, and the justice perceptions of nonfamily employees.

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Family businesses are perhaps the dominant form of enterprise worldwide as more than two of every three organizations are family owned and/or managed (Gersick, Davis, Hampton, & Lansberg, 1997). Despite this, the field of management studies has paid insufficient attention to these firms' unique theoretical and practical problems (Dyer, 2003). One of the biggest challenges that these businesses face is the effective management of nonfamily employees, which has been recognized as keenly important to family firms (Chua, Chrisman, & Sharma, 2003). Although family members often hold key executive positions in family businesses, many family firms employ nonfamily managers, and most employ a larger number of nonfamily employees than family members (Deloitte & Touche Study, 1999). Thus, attracting qualified nonfamily employees and fostering value-creating attitudes and behaviors among these employees can be major factors in the success or failure of family firms (Chrisman, Chua, & Litz, 2003; Chua et al., 2003).

Securing the commitment and cooperation of nonfamily employees is likely to be more difficult if they do not perceive that decision outcomes, decision processes, and decision makers are fair or just. (2) Although all employees in both family and nonfamily firms may form perceptions about the fairness of the treatment that they experience within their organizations, family involvement and influence in family firms may have unique effects on the fairness of these firms' human resource (HR) practices as they relate to nonfamily employees. Further, although family firms' HR practices affect both family and nonfamily employees, nonfamily employees may often face a particularly complex and uncertain situation since they are part of the business but not of the family system (Mitchell, Morse, & Sharma, 2003). This may ultimately affect perceptions of justice (or injustice) among these workers. In particular, family firms' HR practices related to issues such as staffing, performance appraisal, promotion, compensation, and discipline may vary based on the level of family influence present in family firms. These HR issues can be important influences on the justice perceptions of employees (e.g., Folger & Cropanzano, 1998; Greenberg, 1993; Lemons & Jones, 2001).

When making judgments about a firm's HR practices, nonfamily employees are likely to form at least three distinct justice perceptions. Distributive justice concerns one's perceptions of the fairness of the outcomes of a decision process relative to referent others (Adams, 1965; Homans, 1961). Procedural justice, conversely, is the perceived fairness of the decision-making processes by which outcomes are determined (Thibaut & Walker, 1975). A third type of justice perception, interactional justice, is defined as the quality of interpersonal treatment received as decision processes are carried out (Bies & Moag, 1986). …

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