The influence of family dynamics on business performance: does effective leadership matter?

Abstract

PurposeFamily businesses have a dual objective of profit making and providing opportunities for family members. This duality leads to a conflict that may bring poor team work and communication, which is difficult to reconcile. Thus, the study looked into how the performance of family enterprises is affected by family dynamics. Additionally, it examines the relationship's ability to be mediated by effective leadership.Design/methodology/approachThe study adopted a quantitative, explanatory research approach. The study population was family-owned enterprises in KwaZulu-Natal's South Durban Basin, of which 236 were chosen using a snowball and convenience sampling technique. Data was analysed using various descriptive and inferential statistical techniques, namely, multiple regression and the standard deviation.FindingsThe finding of the study shows that family dynamics significantly influenced business performance both directly and indirectly through effective leadership. Besides, the family firms with larger employee sizes have better effective leadership that positively contributes to the business performance.Research limitations/implicationsThe study recommends that family businesses should train their members to ensure leadership effectiveness.Originality/valueThis study is unique in that it was conducted in Black Townships and focusses mainly on businesses owned by families of Indian descent that need to prepare for leadership/ownership. It also contributes to academic literature on family dynamics and will encourage families to recognise the importance of strong leadership in controlling family dynamics to improve business success.