Leadership, Communication, and Job Satisfaction for Employee Engagement and Sustainability of Family Businesses in Latin America

Abstract

This research focuses on the determinants of employee engagement in family businesses in Peru. The study is based on previous research that showed the importance of organisational culture, leadership, and human resource management practices to achieve effective business performance. The methodological strategy was to conduct a qualitative, quantitative, and documentary analysis research. The study found that participatory and authentic leadership styles, effective communication, and job satisfaction were key factors to retain talent in two family businesses and small to medium-sized enterprises in Peru. These factors can enhance employee engagement, which is critical for the success of family businesses. The results suggest that Peruvian family businesses can improve their sustainability and contribute positively to the economic growth of the country by utilising different measures. They can prioritise leadership, communication, and job satisfaction; offer opportunities for employee development and growth; provide competitive compensation packages; and create a positive work environment. The findings have implications for family businesses in emerging markets as well as for businesses operating in consolidated markets.

1. Introduction

Small and medium-sized enterprises (SMEs), particularly family businesses, face significant challenges in sustaining their businesses and retaining good employees, especially in emerging markets such as Peru (López-Pérez et al. 2018). Family businesses are significant contributors to the Peruvian economy, representing approximately 98% of all companies and 50% of GDP. Emerging economies, with their large populations and high population densities, have significant consumption potential, which makes them attractive for investments and exports (IESE 2016). However, the globalisation effect has also led to unethical and opportunistic projects, which could deceive companies and exploit their employees and consumers (Sanagustín-Fons 2011). The labour market of Peru is characterised by social and economic inequalities. A study conducted in Latin America in 2016 revealed that 60% of Peruvian companies lacked a formal employee engagement strategy (GOintegro 2017).

The present research aimed to analyse the factors that contribute to employee engagement in two Peruvian family businesses. While the literature on employee engagement mainly focuses on large companies, there is limited research on family businesses and SMEs, particularly in Peru. The study focused on two aspects of employee engagement: (a) employee tenure in the organisation, based on previous research that employees with high levels of engagement are less likely to leave the company (Corporate Leadership Council 2004; Glen 2006; Budhwar and Bhatnagar 2007; Kennedy and Daim 2010; Markos and Sridevi 2010; Balakrishnan et al. 2013), and (b) the recommendation that employees make of the company to their family members and friends (Kolk et al. 2016). This aspect considers the “trickle effect” of engaged employees who act as ambassadors for their company, positively impacting their colleagues, family, and friends.

The present study focuses on three factors that potentially influence employee engagement: (1) perception of authentic leadership style, (2) effective communication and interaction with supervisors, and (3) job satisfaction. The hypothesis of this research states that these factors have a positive impact on employee engagement, which also influences employee tenure and the probability of recommending the company to others. The findings have significant implications for family businesses and SMEs in emerging markets. The results explain the drivers of employee engagement and propose effective strategies to retain human talent.

2. Conceptual Framework

The family structure and dynamics of family businesses have a significant impact on their sustainability, with leadership, communication, and job satisfaction playing essential roles in employee engagement. This paper explores the importance of leadership, communication, and job satisfaction in enhancing employee engagement and sustainability in family businesses in Peru. All the arguments presented in this research are based on relevant academic literature. The family business theory suggests that this type of business has special characteristics that nonfamily businesses do not have. These characteristics include family involvement, family values, family ownership, and family succession (Sharma et al. 2020). Thus, family businesses have a strong sense of culture and tradition, which can impact employee engagement. Shortridge (2015) examined the role of diverse leadership styles in sustaining academic excellence at the secondary level. The study found that effective leadership—including transformational, transactional, and laissez-faire styles—promotes communication, job satisfaction, and employee engagement, which are essential for the sustainability of family businesses.

Engagement is a key driver of business success (Swarnalatha and Prasanna 2013) precisely because achieving a high level of engagement in employees involves retaining talent in the organisation. This also results in improvements in the customers or users’ responses, an increase in the quality and quantity of the organisational performance, and the influence of the response of the company on its stakeholders (Reio 2011; Hubbart 2022). The term work engagement can be defined as a state of wellbeing—with an affective or motivational nature—related to work and characterised by high vigour, motivation, and dedication. It can also be seen as the opposite of exhaustion, since most of the studies agree that employees involved tend to have high energy levels and a deep identification with their union activity (Suárez-Albanchez et al. 2022). The present research focused on Kahn’s classic theory of employee engagement (1990), which states that “personal engagement can be understood as the simultaneous employment and expression of the ‘preferred self’ of a person in task behaviours that promote connections with others, the work, the personal presence (physical, cognitive and emotional), and the active full role performances” (p. 700). Employee engagement is also an optimal predictor of organisational success and financial performance (Mascarenhas et al. 2022). The present study considered three important psychological conditions for employee engagement: meaningfulness, safety, and availability. Likewise, it analysed the job demands–resources (JD–R) Theory that states that the availability of physical, social, and psychological job resources enables employee engagement. The job demands–resources model suggests that employee engagement is influenced by the balance between job demands and job resources (Bakker and Demerouti 2017). In family businesses, job demands and resources may be influenced by the culture, values, and dynamics of the families. Saks and Gruman (2020) presented the integrative employee engagement theory that combined the Kahn’s theory of engagement with the JD–R model and the leader–member exchange theory (LMX). The LMX theory also points out that a given superior can establish “leadership” relationships with some members and “supervision” relationships with others (Dansereau et al. 1975). Social exchange theory suggests that employees are likely to engage more when they feel that their contributions are recognised and valued by the organisation (Blau 1964). In family businesses, employees may feel more connected to the organisation because of the strong culture and shared values. Finally, the dual concern theory suggests that employees are likely to engage more when they perceive that the organisation cares about their wellbeing and organisational performance (Blake and Mouton 1964). In family businesses, employees may feel that the family cares for their wellbeing, which can impact their engagement.

Leadership is a critical component of any successful organisation, and family businesses in Peru are no exception. Leadership sets the tone for the culture and direction of the company, and it is vital for the leader to possess the necessary skills to guide the business through changes and challenges. Avolio et al. (2009) defined authentic leadership as “a pattern of leader behaviour that draws upon and promotes both positive psychological capacities and a positive ethical climate, to foster greater self-awareness, an internalised moral perspective, balanced processing of information, and relational transparency on the part of leaders working with followers, fostering positive self-development” (p. 43). Authentic leadership promotes employee engagement by creating an ethical and trustworthy work environment. When employees trust their leader, they are more likely to engage with the business and contribute to its success. In addition, authentic leaders promote employee development and empowerment, leading to job satisfaction and commitment to the organisation (Avolio et al. 2009). Khassawneh et al. (2022) conducted research on the relationship among leadership, knowledge sharing, and employee creativity. The study aimed to examine whether knowledge sharing mediates the relationship between leadership and employee creativity. The authors collected data from 237 employees from different organisations in Jordan using a survey. Likewise, its findings highlighted the crucial role of leadership in promoting knowledge sharing and employee creativity. Other authors such as Li et al. (2023) examined the relationship between green human resource management practices, spiritual leadership, and employee green in-role behaviour. The study analysed whether spiritual leadership moderates the relationship between green HRM practices and employee green behaviour. Its findings showed that green HRM practices positively influence employee green in-role behaviour, and spiritual leadership moderates this relationship. The study specifically found that spiritual leadership enhances the positive effects of green HRM practices on employee green behaviour.

Thus, the first hypothesis of this research was:

H1a. 

The perception of authentic leadership style by employees positively influences engagement measured by the tenure of employees in the family company.

H1b. 

The perception of authentic leadership style by employees positively influences engagement measured by the probability that the employee would recommend the family company as a good place to work.

Effective communication is crucial for the success of any organisation, and family businesses in Peru are no exception. Communication serves as a bridge between the leader of the organisation and the employees, and guarantee that everyone is aligned and working towards the same goals. Communication can take many forms, including formal meetings, informal conversations, and companywide announcements. Regardless of the form, communication should be transparent, honest, and timely to create a culture of trust and openness. Research has shown that effective communication improves employee engagement, job satisfaction, and organisational commitment (Kim et al. 2017). In family businesses, communication is particularly important because it can help to address issues that may arise from family dynamics. For example, open communication can help to mitigate conflicts between family members and ensure that everyone is aligned with the vision and goals of the company. According to a study by Mutuku and Mathooko (2014), effective communication strategies such as active listening, clear and concise messages, and open communication channels lead to higher levels of job satisfaction and employee engagement. This, in turn, increases productivity, profitability, and overall success in family businesses. Moreover, effective communication also enables leaders to create a positive work culture, build trust and transparency, and promote employee development and growth.

Thus, the second hypothesis was:

H2a. 

Effective communication and interaction with the supervisor positively influence engagement measured by the employee tenure in the family company.

H2b. 

Effective communication and interaction with the supervisor positively influence engagement measured by the probability that the employee would recommend the family company as a good place to work.

Job satisfaction is the level of pleasure or contentment an employee experiences while performing their job. It is a critical component of employee engagement, and it can have a significant impact on the sustainability of an organisation. Satisfied employees are more productive, engaged, and committed to their organisations. In addition, job satisfaction can lead to reduced turnover rates, which can save companies significant amounts of money in recruiting and training costs. Research has shown that job satisfaction is positively associated with employee engagement (Kašpárková et al. 2018). Family businesses can also create a culture of trust and openness, allowing employees to feel comfortable expressing their concerns and ideas.

Thus, the third hypothesis was:

H3a. 

Job satisfaction has a positive impact on engagement measured by the employee tenure in the family company.

H3b. 

Job satisfaction has a positive impact on engagement measured by the probability that the employee would recommend the family company as a good place to work.

3. Methods

3.1. Sample

Data were collected from the founders–owners, who were the main members of the families analysed. The participants were directors and employees of Arti S.L and Tai Loy, two Peruvian companies with similar profiles. Arti S.L., with 120 employees, has been a leading company during an uninterrupted period of 74 years. Tai Loy is a 57-year-old company with 1000 employees, which has survived over the years in a complex market and today is a strong Peruvian brand. They are considered SMEs and family-owned companies operating in the sector of production and marketing of office products and school supplies. This sector is typically associated with small and medium-sized businesses. Tai Loy has 1000 employees but there are two relevant issues to consider. The first is that not all of its employees are part of the stable structure of the company, they are temporary employees hired for the school and Christmas campaigns. The second is that the number of employees is only one of several criteria used to define SMEs. Other factors, such as turnover, balance sheet total, and ownership structure, may also be taken into account. Yet, Arti S.L and Tai Loy consider themselves SMEs.

The present study started as a qualitative research based on semi-structured interviews with 5 founders-owners and 7 managers from both companies. Then, the study followed a quantitative method that included the administration of a survey to two independent non-probabilistic samples that consisted of 368 employees (Tai Loy) and 75 employees (Arti S.L). Forty-five percent of the sample was composed of men; 35% of the sample was between 18 and 25 years old, 30% was between 26 and 35 years old, 20% was between 36 and 45 years old, and the remaining 15% was 46 years old or older.

3.2. Instruments and Measurements

Data were collected using semi-structured interviews sent to the founder of the company, family members, and managers. In-person surveys were also administered to employees.

4. Results

4.1. Qualitative Analysis

For the qualitative research, a hermeneutic analysis was made in an interpretative-comprehensive effort. Arti S.L. was founded in 1948 by Eva Reck, a German immigrant that came to Peru at the age of 20. It is a manufacturer and distributor of school supplies.

The leadership of this company is marked by a strong female presence, the founder is a woman, and the successor is her daughter. They are both respectful and responsible. They highlight values such as punctuality, order, discipline, honesty, good judgment, and austerity; but also the importance of taking care of their employees.

The main statements obtained from the managers of ARTI—which allowed the interviewers to learn more about leadership style, communication, and job satisfaction—were the following:

(a)

Leadership Style:

Leadership style is reflected in the close, honest, and formal internal communication, where the most important aspect is the example of the leaders who, in this case, are the founder and her daughter–successor.

“The Lutheran philosophy has been important in the company. We always try to help our neighbours, live humbly and provide support to our staff. Our greatest asset is our staff”.

(Arti S.L Founder)

“She is a mother to all the employees, she supports everyone. She teaches by example”.

(Head of Operations)

“The values shared by the founder influence the behaviour of everyone”.

(Sales Manager)

“The main values of the founder are tenacity, integrity and active listening, she opens her heart to the people she works with, and she always shows a lot of strength”.

(Executive Director and daughter of the Arti S.L Founder)

“The leadership style is that of a mother who is demanding but also caring and loving. They (the founder and her daughter) always lead by example, showing austerity, hard work, and ethics”.

(Arti S.L General Manager)

(b)

Communication:

The employees consider the company their second home. They are hard-working and responsible for their daily tasks. There is a strong sense of commitment to and respect for the founder, her daughter–successor, and the family in general.

“The staff is the wealth and the cornerstone of the company”.

(Arti S.L Founder)

“Mrs. Anne is key to the corporate culture”.

(Sales Manager)

“What I admire about Mrs. Eva is her honesty, good judgment and austerity. She created an organisational culture without putting it in writing, but leading by example”.

(Arti S.L Commercial Manager)

(c)

Employee Satisfaction:

Job satisfaction is based on a strong commitment to the company. They feel respect and admiration for the founder and her daughter. They work hard, responsibly, and, following the example of Mrs. Eva., employees feel protected and satisfied working for the company.

“The employees are hard-working, loyal, austere, and committed thanks to values shared by my mother”.

(Executive Director and daughter of Arti S.L Founder)

“Most of the employees think of working hard and financial moderation. Long-tenured employees recognise that they have had the opportunity to develop and make a career line”.

(General Manager of Arti S.L)

“When the employees see how they (the founder and her daughter) support each other, they also see a family that promotes union and a goal-oriented attitude. That support definitely influences the employees’ attitudes and motivate them to work harder”.

(Chief of Operations of Arti S.L)

“The staff is engaged and feel good working at the company”.

(Representative of the retired and long-tenured employees)

“Some employees developed career paths at Arti. Most employees are loyal, they have been working many years at the company and their academic level is medium or low”.

(Commercial Manager)

“They (especially tenured employees) feel affection for the founder and they know they will not leave the company overnight”.

(Sales Manager)

Table 1. Perceptions of managers with regard to the study variables (Arti S.L).

Position	Years at the Company	Main Values of the Company	Leadership Style of the Founder	Description of the Communication	Employee Job Satisfaction	Family Business Success
Founder	70 years	Humbleness, looking after the employees (colleagues).	Responsibility and justice. She considers the employees part of her family.	Fluid and essential.	Family atmosphere.	Effort of all employees.
Representative of the retired and long-tenured employees	40 years	Punctuality, respect, and transparency.	Good leader.	Very important to the company.	Engagement and positive feelings at work.	Discipline and hard work.
Executive director (daughter of the founder)	25 years	Discipline, respect, commitment, and humbleness.	Tenacity, integrity, strength, austerity, active listening, and willingness to open her heart to the people.	Horizontal communication.	Very hardworking, loyal, austere, resilient, and committed.	Research, innovation, and creativity.
Head of operations	14 years	Commitment.	She teaches by example.	Employees are aligned with the objectives of the company.	The employees are motivated and feel valued.	Authentic leadership marked by daily examples.
Commercial manager	13 years	Word of honour, punctuality, commitment, and trust.	The founder Is shares her values with all the company staff and led by example.	A lot of tIust intertwined with discipline and demand. All employees are treated equally.	The loyalty of employees is reflected in a low turnover of personnel.	Good judgment of the employees at work.
General manager	2 years	Discipline, respect, commitment, and humbleness.	The founder is the icon of the company and responsible for the culture.	Formal treatment and maternalism.	The employees easily adapt to the changes of the company, and they are aware that the changes will make a difference.	The discipline, good judgement, and personal capacities of the employees.
Sales manager	2 years	Confidence, word of honour, professionalism.	German culture and disciplined.	It is based on confidence. The word of honour has more value than a document.	They are grateful, 50% of their motivation comes from their emotional salaries.	Good organisation and each employee knows their role.

shows a summary of the answers of the managers in terms of the three study variables and the opinion of the family business success.

The second family-owned company analysed in this study was Tai Loy. This company was founded by Alfonso Koc Fong in 1965. In 1970, after his death, the three sons managed the company. A few years later, the eldest son, Jorge Koc Sun, assumed the leadership of the company. He is now the current general manager.

Mr. Jorge Koc acquired a lot of knowledge of the business in more than 50 years leading the company. He is reliable, humble, approachable, hard-working, and teaches by example.

The main statements obtained from the managers of Tai Loy—which allowed the interviewers to learn more about leadership style, communication, and job satisfaction—were the following:

(d)

Leadership Style:

The son of the founder was able to translate the values of his father into the management of the company. The leadership style of Mr. Koc is disciplined, passionate about work, supportive of his employees, always teaches by example and prioritises good customer service.

“If you want to be a leader, you have to treat others with respect and be an example of dedication and commitment, so everyone aligns to your way of working”. (General Manager of Tai Loy). “The main values of the company are teamwork, commitment, solidarity, dedication and love for what you do. My father has a very strong commitment to move the company forward, run the business with discipline, show love for what he does and have a clear vision of the industry and the business”.

(Grandson of the founder and new Business Manager of Tai Loy)

“The leadership style of Jorge is based on giving priority to people. He always tries to fulfill the promises and lead by example. He always protects his people”.

(Deputy General Manager of Tai Loy)

“My father is a leader who is always close to everyone. He has always been an understanding person. He is detail-oriented. He is dynamic and adapts to the daily rhythm of the operations of the company. He teaches and trains leaders, he guides them like a father in a family. The company has a paternalistic culture, he is always next to the employees”.

(Granddaughter of the founder and Marketing Manager of Tai Loy)

(e)

Communication:

Tai Loy is an organisation that strives to enhance the skills of its employees so they can work motivated to achieve the same goals. The company promotes authentic communication and treats all employees with respect.

“As a family business, we always tried to have a good relationship and communication with our employees. When a business is small, the mission and vision do not require further thought. One of the objectives of the company is the growth of employees in the company”.

(Grandson of the founder and Director of Tai Loy)

(f)

Job Satisfaction:

The employees of the company feel highly motivated and committed. This is evidenced in the good customer service. The managers are aware of the value of the employees.

“The success of the Tai Loy is based on treating employees fairly. If they are motivated, the company goes well. They make an effort to make sure that everything is fine inside”.

(Grandson of the founder and Director of Tai Loy)

Table 2. Perceptions of managers (Tai Loy).

Position	Years in at Company	Main Values of the Company	Leadership Style of General Manager	Description of the Communication	Employee Job Satisfaction	Family Business Success
General manager and son of the founder	50 years	Commitment, ethics, customer focus, innovation, and teamwork.	He is a detailed-oriented person and a good businessman.	Good communication that generates employee commitment to offer the best possible service to the customer.	The employees are honest, very motivated, and committed.	The knowledge of the business of the director and the commitment of employees.
Marketing manager and granddaughter of the founder	6 years	Commitment and focus on details.	Teaches by example and guides his team.	Communication is an important value for the company because it is the people-first approach.	Employees are motivated, cheerful, honest, and hard-working.	He knows the business, has the ability to innovate, cares for the employees and provides good customer service.
Human resources manager	4 years	Appreciation of the work, optimism, and good jobs of the employees.	A leader who knows the business and appreciates his employees.	It is focused on motivating the employees so they can offer the best customer service.	They feel happy, grateful, and motivated.	A leader who teaches by example and cares about his employees.
Deputy general manager	4 years	Commitment, teamwork, ethics, innovation, and good customer service.	The leader cares about the staff and always keeps his word.	It is a people-focused organisation. People are always prioritised.	The employees are committed to the company. They are very loyal.	The commitment of employees and the good customer service.
New business manager, grandson of the Founder	2 years	Teamwork, commitment, solidarity, dedication, and love for what is done.	Leader who teaches by example.	It is focused on ethics and concern for the employees.	Employees are fond of the company. They are honest and proactive.	The value of appreciating details and the good negotiation skills of the director.

shows a synthesis of the main statements obtained from the managers who are part of the Koc family, the managers who are not part of the family, and the opinion of the family on the business success.

4.2. Quantitative Analysis

A factor analysis of the main components was conducted to find measures for (a) leadership (variable created from items listed in

Table 3. Measurement constructs.

	Value	Loading Factor	Average	Standard Deviation
Leadership
The company is sustainable because of the authentic leadership of the son of the founder.		0.72	4.13	0.80
I feel that the son of the founder is close to me and understands the needs of the organisation.		0.65	3.83	1.00
I think the company cares about the communication and what is going on in the organisation.		0.67	3.86	0.86
Supervisors care about their employees.		0.79	3.87	0.88
The company is sustainable because of the good culture of the company.		0.75	3.96	0.85
Alpha	0.84
Kaiser–Meyer–Olkin (KMO) test	0.81
Average variance extracted (AVE)	0.56
Composite reliability (CR)	0.90
Communication
I feel that I can talk closely to the managers.		0.80	4.10	0.86
I think I have enough confidence in my direct supervisor to discuss different topics with him/her.		0.78	4.10	0.92
I am pleased with the interaction with the supervisors.		0.68	3.91	0.89
Alpha	0.82
Kaiser–Meyer–Olkin (KMO) test	0.70
Average variance extracted (AVE)	0.65
Composite reliability (CR)	0.85
Satisfaction
Satisfaction with the working hours		0.66	3.60	1.02
Satisfaction with the rules and regulations		0.80	3.92	0.78
Satisfaction with the benefits for me as an employee		0.83	3.61	0.95
Satisfaction with the benefits for my family		0.83	3.49	0.98
Satisfaction with the uniform I wear every day		0.64	3.69	1.03
Satisfaction with the facilities and offices		0.66	3.98	0.91
Satisfaction with the salary received		0.72	3.32	1.04
Alpha	0.89
Kaiser–Meyer–Olkin (KMO) test	0.87
Average variance extracted (AVE)	0.58
Composite reliability (CR)	0.87

), (b) communication and interaction with the supervisor (3 items), and (c) employee satisfaction (7 items). These measures assumed the value of 0 and the standard deviation of 1; higher values were associated with better ratings given by the participants.

In order to explore their relationships with the employee engagement, the following model was proposed with the three measures obtained from the factor analysis:

Engagement_i = β_0 + β_1 Leadership + β_2 Communication + β_3 Satisfaction_i + β_x controls_i + ϵ_i

(1)

At the beginning, this model was evaluated by measuring the engagement based on the number of years of the employee in the company. This variable was classified into five response options: less than 1 year, 1 to 5 years, 6 to 15 years, 16 to 20 years, and 21 years or more.

Then, the results of estimating the same model were presented with the difference that the engagement was measured by the degree to which the employee recommends working in his or her company (five-point Likert scale that ranges from strongly disagree to strongly agree).

The estimation was made with an ordered logit model, since the dependent variable, in its two dimensions is categorical and orderly. This made it possible to verify and/or reject each of the hypotheses.

It should be noted that the results for both models do not include the independent variables in their quadratic form, since they were not significant in the estimation.

The main hypothesis expects positive values for β_1, β_2 and β_3. In the model, the gender of the participants, their ages, and a fixed effect of the company where they work were monitored.

Table 4. Regression results.

yi: Employee Tenure at the Company (Media = 2.114)	(1) Leadership	(2) Leadership and Communication	(3) Leadership, Communication, and Satisfaction
Leadership	0.235 **	0.545 ***	0.717 ***
	(0.115)	(0.166)	(0.221)
Communication		−0.429 ***	−0.413 **
		(0.164)	(0.163)
Satisfaction			−0.223
			(0.153)
Dummy age 1	1.554 ***	1.583 ***	1.614 ***
(26 to 35 years old)	(0.229)	(0.228)	(0.294)
Dummy age 2	2.424 ***	2.420 ***	2.430 ***
(36 to 45 years old)	(0.284)	(0.0286)	(0.284)
Dummy age 3	4.220 ***	4.189 ***	4.166 ***
(46 years and older)	(0.425)	(0.419)	(0.422)
Sex (man = 1)	−0.137	−0.139	−0.130
	(0.194)	(0.193)	(0.192)
Company (Tai Loy-1)	−0.892 ***	−0.870 ***	−0.851 ***
	(0.282)	(0.284)	(0.288)
Remarks	443	443	443
Pseudo R2	0.1935	0.2001	0.202
Wald Chi 2	152.87	150.2	147.92

Robust standard errors in brackets. All regressions are controlled by age, sex, and fixed effects of the company. *** p < 0.01, ** p < 0.05, * p < 0.1. Note: Table 4 shows regression results in three different steps. The first only includes the leadership variable, the second includes leadership and communication variables, while the third, the three variables (leadership, communication, and satisfaction). The regression coefficients indicate the level of change in the tenure variable, given a change in the predictor variable. A negative coefficient indicates an inverse relationship between tenure and the predictor variable. The presence of asterisks next to these coefficients indicates that the predictor variable is significant when predicting the employee tenure. The values between brackets show the standard error.

shows the results of estimating Equation (1) using employee tenure as a measure of employee engagement. As the coefficients are expressed on a log-probability scale, their understanding is complicated; thus, attention should only be directed to the signs and significance of these coefficients.

The leadership measurement showed a coefficient with a positive sign. An increase in the leadership of company executives was associated with an increase in the level of employee engagement. Thus, Hypothesis H1a was validated.

The models showed coefficients with negative signs in the case of the communication measurement. A raise in the communication rate increased the likelihood of having less years working at the institution (engagement). This relationship was different from the one expected; thus, Hypothesis H2a was rejected.

The satisfaction rate did not have a significant relationship (p > 0.1) with the engagement measurement, so there was no evidence that supported the relationship between employee satisfaction and the level of employee engagement. Therefore, Hypothesis H3a was rejected.

The coefficients related to the control variables created for the age and the company where they work were always significant (p < 0.001).

In order to have a better interpretation of the extent of the explanatory variables on employee tenure (employee engagement),

Table 5. Marginal effects on the dependent variables.

yi: Employee Tenure at the Company	(1) Leadership	(2) Leadership and Communication	(3) Leadership, Communication, and Satisfaction
Leadership
Pr(Service = less than 1 year)	−0.037 **	−0.083 ***	−0.109 ***
	(0.018)	(0.024)	(0.031)
Pr(Service = from 1 to 5 years)	0.006	0.012 **	0.016 **
	(0.003)	(0.006)	(0.008)
Pr(Service = from 6 to 15 years)	0.014 **	0.033 ***	0.042 ***
	(0.007)	(0.010)	(0.013)
Pr(Service = from 16 to 20 years)	0.007 *	0.017 ***	0.022 ***
	(0.004)	(0.006)	(0.007)
Pr(Service = 21 years or more)	0.009 *	0.022 ***	0.029 ***
	(0.005)	(0.007)	(0.009)
Communication
Pr(Service = less than 1 year)		0.065 ***	0.063 ***
		(0.024)	(0.024)
Pr(Service = from 1 to 5 years)		−0.010 *	−0.009 *
		(0.005)	(0.005)
Pr(Service = from 6 to 15 years)		−0.026	−0.024 **
		(0.010)	(0.010)
Pr(Service = from 16 to 20 years)		−0.013 **	−0.012 **
		(0.005)	(0.005)
Pr(Service = 21 years or more)		−0.017 **	−0.016 **
		(0.007)	(0.007)
Satisfaction
Pr(Service = less than 1 year)			0.034
			(0.023)
Pr(Service = from 1 to 5 years)			−0.005
			(0.004)
Pr(Service = from 6 to 15 years)			−0.013
			(0.009)
Pr(Service = from 16 to 20 years)			−0.007
			(0.0059
Pr(Service = 21 years or more)			−0.009
			(0.006)
Remarks	443	443	443
Pseudo R2	0.1935	0.2001	0.202
Wald Chi 2	152.87	150.2	147.92

Robust standard errors in brackets. All regressions are controlled by age, sex, and fixed effects of the company. *** p < 0.01, ** p < 0.05, * p < 0.1. Notes: Table 5 shows the marginal effects of each regression, which represent the difference in the effect of a predictor variable (independent variable) on a dependent variable (employee tenure) when all the other variables are mean variables. A higher value shows a higher effect on the employee tenure. The presence of asterisks next to these coefficients indicates that the predictor variable is significant when predicting the employee tenure. Finally, the values between brackets show the standard error.

shows the marginal effects related to the presented coefficients. This shows the effect of a marginal change in the explanatory variable on the probability of working in the company less than one year. In the full model (registered in column 3), an additional one-point increase in the leadership index reduced the probability that the employee would stay at the company less than 1 year by 11 percentage points.

The results suggest a positive relationship between the perception of leadership in the company and the employee engagement measured by employee tenure (positive coefficients of marginal effects). This is new evidence that validated Hypothesis H1a. New evidence also confirmed that the communication index had a negative relationship (negative coefficients related to most of the ranges of years working at the company) with the employee engagement. The satisfaction index seemed to not be relevant for explaining employee tenure at the company. Thus, the other two hypotheses, H2a and H3a, were rejected.

However, engagement can also be measured through a second variable included in the survey: recommendation to work in the company.

Table 6. Regression results of the recommendation variable.

yi: Recommendation (Media = 3.828)	(1) Leadership	(2) Leadership and Communication	(3) Leadership, Communication, and Satisfaction
Leadership	1.854 ***	1.170 ***	0.612 ***
	(0.153)	(0.186)	(0.201)
Communication		1.150 ***	1.000 ***
		(0.186)	(0.200)
Satisfaction			0.930 ***
			(0.219)
Dummy age 1	−0.205	−0.217	−0.309
(26 to 35 years old)	(0.229)	(0.233)	(0.240)
Dummy age 2	−0.243	−0.217	−0.165
(36 to 45 years old)	(0.263)	(0.257)	(0.262)
Dummy age 3	−0.732	−0.620	−0.430
(46 years and older)	(0.329)	(0.332)	(0.207)
Sex (Man = 1)	0.226	−0.251	−0.290
	(0.239)	(0.193)	(0.193)
Company (Tai Loy-1)	1.655 ***	1.588 ***	1.562 ***
	(0.259)	(0.262)	(0.341)
Remarks	443	443	443
Pseudo R2	0.227	0.2703	0.2964
Wald Chi 2	182.09	205.3	224.58

Robust standard errors in brackets. All regressions were controlled by age, sex, and fixed effects of the company. *** p < 0.01, ** p < 0.05, * p < 0.1.

shows the regression coefficients estimated by Equation (1) using this variable as the dependent variable.

In the second approach, leadership, communication, and satisfaction measures, showed repeatedly significant coefficients (p < 0.001) with a positive sign. An increase in any of these three measures implied an increase in the level of employee engagement. All relationships were expected, so Hypotheses H1b, H2b, and H3b were validated.

In this case, only the coefficient associated with the control variable, created for the company where they work, was always significant (p < 0.001). This indicates that only this aspect helps to understand the existing differences in the level of employee engagement. Neither age nor gender should not have any relationship with the level of the dependent variable (p > 0.1).

Table 7. Marginal effects on recommendation.

${\mathbf{y}}_{\mathbf{i}}: \mathbf{Recommendation}$	(1) Leadership	(2) Leadership and Communication	(3) Leadership, Communication, and Satisfaction
Leadership
Pr(Score = 1 “strongly disagree”)	−0.029 ***	−0.015 ***	−0.008 **
	(0.008)	(0.005)	(0.003)
Pr(Score = 2 “disagree”)	−0.083 ***	−0.051 ***	−0.024 ***
	(0.012)	(0.011)	(0.009)
Pr(Score = 3 “moderately agree”)	−0.141 ***	−0.080 ***	−0.040 ***
	(0.014)	(0.014)	(0.013)
Pr(Score = 4 “agree”)	0.009	0.002	0.001
	(0.012)	(0.006)	(0.003)
Pr(Score = 5 “strongly agree”)	0.244 ***	0.145 ***	0.072 ***
	(0.014)	(0.021)	(0.023)
Communication
Pr(Score = 1 “strongly disagree”)		−0.015 ***	−0.013 ***
		(0.005)	(0.005)
Pr(Score = 2 “disagree”)		−0.050 ***	−0.040 ***
		(0.010)	(0.009)
Pr(Score = 3 “moderately agree”)		−0.079 ***	−0.065 ***
		(0.013)	(0.013)
Pr(Score = 4 “agree”)		0.002	0.001
		(0.006)	(0.005)
Pr(Score = 5 “strongly agree”)		0.143 ***	0.118 ***
		(0.022)	(0.024)
Satisfaction
Pr(Score = 1 “strongly disagree”)			−0.013 ***
			(0.004)
Pr(Score = 2 “disagree”)			−0.038 ***
			(0.010)
Pr(Score = 3 “moderately agree”)			−0.061 ***
			(0.015)
Pr(Score = 4 “agree”)			0.001
			(0.005)
Pr(Score = 5 “strongly agree”)			0.110 ***
			(0.024)
Remarks	443	443	443
Pseudo R2	0.227	0.2703	0.2964
Wald Chi 2	182.09	205.3	224.58

Robust standard errors in brackets. All regressions are controlled by age, sex, and fixed effects of the company. *** p < 0.01, ** p < 0.05, * p < 0.1. Notes: Table 7 shows the marginal effects in each regression, which are the difference in the effect of a predictor variable (independent variable) on a dependent variable (recommendation to work= recommendation) when all other variables are mean variables. A higher value shows a higher effect on the employee recommendation to work in the company. The presence of asterisks next to these coefficients indicated that the predictor variable is significant when predicting the employee recommendation. The values between brackets show the standard error.

shows the marginal effects on recommendation.

Based on the marginal effects, an increase in the leadership index increases the probability that the employee will recommend the company to an acquaintance or family member (by 7 percentage points). Therefore, Hypothesis H1b was validated again.

A marginal increase in the communication index increased the probability that the participant assigned the highest score to the recommendation variable, and that the probability of recommending the company—as a good place to work—was higher the more satisfied the employee was with different aspects included in the satisfaction index. Thus, Hypotheses H2b and H3b were validated.

5. Discussion

The present study aimed to analyse the impact of authentic leadership style, effective communication and interaction with the supervisor, as well as job satisfaction on employee engagement in family businesses in Peru. The main hypothesis of this study was that the perception of authentic leadership style, effective communication and interaction with the supervisor, and job satisfaction positively influence engagement measured by the employee’s tenure in a family company and the probability that the employee would recommend the family company as a good place to work.

The results of this study are consistent with previous research. For instance, Zehir et al. (2011) found that strong organisational culture and effective leadership contribute to business performance in multinational companies in Turkey. AlAnazi et al. (2016) studied the connection between organisational culture, leadership styles, human resource management practices, and organisational performance in 256 private firms in Saudi Arabia. The findings of Khassawneh et al. (2022) suggested that institutional complexity moderates the relationship between participative leadership and organisational performance and loyalty in EUA companies. Mahmood et al. (2019) revealed that transformational leadership has a significant impact on the creative process engagement of employees. Li et al. (2018) showed that leadership styles significantly influenced the psychological capital and work engagement of employees.

The present study identified authentic and participatory leadership, effective communication and interaction with the supervisor, and job satisfaction as essential factors to retain talent in family businesses. The findings revealed that employees who worked in an organisation for more years had a better perception of the actions of the leaders and greater overall satisfaction with the different variables analysed. The data were consistent with previous studies that showed a negative relationship between the perception of a department manager about the transformational leadership of the store manager and the intention of that department manager to leave the job. The findings of Mohammad et al. (2021) had implications for family businesses in Peru, where HRM practices are critical for employee engagement.

This study also found a positive relationship between the likelihood of recommending the company to a friend/family member and the leadership, communication, and satisfaction measurements. The results suggest that these three variables are important for employees when they have to decide if they will continue working at the company or recommend someone else to work in the company. An increase in the leadership index positively affects the employee tenure in the company, which is similar to the study of Zhang and Li (2020), who showed that visionary and organic paradigms are likely to enhance employee engagement. The results also support the hypothesis that greater valuations of leadership, communication, and satisfaction are related to a higher probability that the employee recommends the company as a good place to work, consistent with the study of Messmer (2005), Merry (2013), and Bedarkar and Pandita (2014).

The two Peruvian companies analysed showed that ethical leadership, communication, and job satisfaction are key factors for the sustainability of medium-sized companies. They also determined that ethical leadership—which includes closeness, honesty, and respect—should communicate the culture of the company, which should be focused on valuing its employees. Moreover, the results showed that job satisfaction was achieved when employees felt motivated and their work was recognised.

Therefore, the present study provided empirical evidence of the positive impact of authentic leadership style, effective communication and interaction with the supervisor, and job satisfaction on employee engagement in family businesses in Peru (Figure 1). The findings contribute to the understanding of the importance of HRM practices in family businesses and their potential implications for employee engagement and the performance of organisations. The results suggest that family businesses in Peru can create a positive work environment, promote employee engagement, and contribute to the economic growth of the country by prioritizing HRM practices such as leadership, communication, and job satisfaction.

6. Conclusions

The theoretical contribution of the present research shows that employee engagement is an important factor in the success of family businesses. This type of business has unique characteristics that can impact employee engagement, such as family involvement, family values, family ownership, and family succession. Authentic leadership promotes employee engagement by creating a culture of trust and empowerment, while effective communication ensures that everyone is aligned and working towards the same goals. Job satisfaction is positively associated with employee engagement, and family businesses in Peru can enhance it by offering opportunities for employee development and growth, providing competitive compensation packages, and creating a positive work environment. If family businesses in Peru prioritise these factors, they can improve their sustainability and contribute to the economic growth of the country.

Authentic leadership and the perception of it are specifically relevant aspects for employees to stay in family businesses and SMEs because they are some of the factors that influence employee engagement. On the empirical part of this research, all these aspects were shown in the two sustainable Peruvian companies that achieved success in the long term. The analysis of the two Peruvian companies revealed that when the engagement was measured in a weak way, that is, with the variable of recommendation to work in the company, the three variables analysed (leadership, communication, and job satisfaction) had a significant impact. For business management, it is important to consider the role of the leader and the importance of the organisational culture, including ethics and transparency as a basis and result of the employee engagement. Likewise, the present research showed—in a theoretical and empirical manner—that in the Peruvian market, an emerging economy, family businesses with ethical and employee-oriented leadership are more likely to have a strong sense of ownership. It also showed that employee engagement is a function of the perception of ethical leadership and that other relevant aspects—such as authentic communication and high satisfaction of the needs of employees—are present in the management of these companies.

The present research focused on a specific type of company, so the results cannot be generalised. However, the findings demonstrated that ethical leadership and a strong organisational culture can create an environment that leads to high employee engagement, even if the environment is complex, uncertain, and challenging. Further research is needed to understand the complex dynamics of employee engagement in family businesses in emerging economies.