Professor Eva Lutz and of the Center and Stephanie Schraml, a management board member of Schraml GmbH, a family firm, conducted a survey of 195 small-and medium-sized privately held German family companies. They found that while family firm owners often "do not seem to trust non-family CFOs to act in line with their goal of enterprise value growth," it is those families with a focus on lowering financial risk that are most likely to look outside to fill their top finance post.

"Despite the loss of control, family firm owners also see that a non-family CFO can reduce their risk by adding valuable additional resources to the firm," they write. These resources "Can include industry-specific experience from working with other players in the same industry or function-specific experience" through work at financial institutions. "Family firms with a management team consisting only of family members may therefore be able to create value through hiring an external manager."

Of course, incentives can differ greatly between the typical outside CFO and family members who have the goal of handing over the company to the next generation. Also, these family members may be focused on dividend payouts to provide them with liquidity, whereas an external manager may be inclined to reinvest cash into the company, the paper states.

These are potential hurdles that can be overcome. "It can be helpful to establish trust prior to the employment," the professors say, noting that this can be done through "prior personal and professional ties to the candidate" and by the establishment of incentives to "align the objectives of external managers with their own interest of a long-term company development."

The role of external managers in family firms can be seen "both negatively and positively," they conclude. "Candidates for the role of an external CFO can use our results to anticipate relevant decision factors for the family in the recruiting process."