The role of CFO in family owned businesses: a literature review

This paper is intended to contribute to the debate on the role of professionalization in FBs. It is a positioning paper, whose main aim is to highlight the state of the art of literature and studies about family owned businesses, with regard to the role of professional managers, particularly the CFO. A detailed review of most significant theoretical streams is presented, in order to outline the features, the drivers and the effect of the presence and role of CFO and professionalization, as well the impact on family business performance. In particular, through literature review, this study aims to identify the variables that explain the presence of the CFO in family firms; the impact of the CFO’s personal features, professional experiences, and role on the professionalization of family firms; the relationship between the role of CFO, the professionalization of the firm and its economic performance. The research arises from the evidence of a quite limited diffusion of professionalization processes in the Italian FBs, especially the SMEs. Entrepreneurship, which is considered a point of strength of SMEs, when joins up with a very poor professionalization can become a point of weakness. The significant importance of family-owned SMEs for Italian economy, along with the actual financial and competitive crisis, that has involved these enterprises, asks for more diffused professionalization processes, in terms of both governance and managerial mechanisms (especially strategic planning and management control systems - MCS) and professional managers. Professionalization is a typical problem of SMEs, but it plays a significant role in the company growth processes and in family firms, as a consequence of their peculiarities. We consider the professionalization of family-owned businesses related to the diffusion of the following elements: 1) formal governance mechanisms, such as board of directors, 2) formal strategic planning and management control systems - MCS (budgeting, reporting, and management accounting), and 3) the involvement of non family members in boards and management, often called professional managers (Songini, 2006). Previous studies, based mostly on large and quoted enterprises, demonstrated that in these contexts CFOs are generally in charge of developing and operating the organization’s MCS, and that they are differently opened to stimulate improvements in organizational decision making and performance evaluation. Thus, it could be of interest to analyse the role of CFO in the professionalization of family firms too, and its impact on company performance. Besides, it is noteworthy to point out that the CFO can play a significant role in family firms, due to the fact that he/she represents the alter ego and the confidential manager of the entrepreneur. Actually, the CFO copes with specific aspects relevant for the company and family growth and development, such as drawing up the balance sheets and the annual reports, managing the tax and legal aspects, introducing and coping with the planning and control systems. Notwithstanding the CFO’s relevant role, the main studies on professionalization of family owned businesses coped mainly with governance topics and, when the professional managers were studied, the focus was on the role of CEO and the board of directors’ members.