Family firm human resource practices: Investigating the effects of professionalization and bifurcation bias on performance

Although human resource (HR) professionalization can increase family firm performance through the reduction of moral hazard and adverse selection agency problems, it may introduce a unique agency problem into the family firm: the perception of organizational injustice. As such, our research suggests that the success of HR professionalization is contingent upon how family and nonfamily employees are treated within the firm. Specifically, when bifurcation bias-the asymmetric treatment of family and nonfamily employees-exists, the financial benefits of HR professionalization diminish due to a perceived inequity of treatment within the family firm. Primary survey data collected from CEOs of 123 family firms support the positive relationship between HR professionalization and financial performance. Results further demonstrate that bifurcated monitoring of family and nonfamily employees restricts the professionalization-performance relationship, while equal monitoring strengthens the relationship. The findings illuminate HR professionalization and bifurcation bias as unique sources of heterogeneity in family firms.