Edition 80 – Inside or Outside

For most family businesses, the ownership and management structures are similar. The patriarch and matriarch might own and manage the business. Or, they may be the semi- retired shareholders with the next generation stepping into the management shoes in the business.

For some family businesses, they don’t yet have the ability to graduate the next generation into the business. Their children may be too young. Or they may be of age, but ratbags.

For other family businesses, they will never have the ability to bring family into the business. Whether it is a single adult child in the family business or a family business where, unfortunately, there has been a fracture in the family, sometimes there is no one to turn to other than someone outside the family.

It has been very interesting to observe, over the years, the appointment of non-family higher level managers in the family businesses that I have worked with.

Some of those appointments have worked well and generated outstanding results for the business. Others have started out well, then faded for whatever reason – whether they give up or merely become comfortable in the business. Others still have been an unmitigated disaster, ending badly and costing hundreds of thousands of dollars.

Here are some examples of where it goes right.

1. The non-family management appointment who understands the family dynamic at play in the business and works to support it.
2. The non-family general manager who believes strongly in the family they are working with and wants to see it prosper.
3. The general manager that proactively embraces a new product line in a family business believing that it can push the business into a new field of endeavour.

And here are some examples of where it goes wrong:

1. The newly appointed business manager who steps in the door and immediately attempts to solve non-existent problems rather than take the time to get to know the business.
2. Not understanding that large corporate mentality with its layers of management and a hierarchy of orders just won’t cut it in the flat management structure of a family business.
3. Managers that focus on systems and processes to the detriment of looking after the customer. Systems and processes in and of themselves won’t save a business if the customer is completely forgotten.
4. The general manager that attends the interview, accepts the challenges of the role, spends a period of time in that role only to tell the owners that he wants to cherry pick which issues he will tackle, which issues he has no interest in and which issues he has no skill set to focus on.

My biggest observation about non family management in family business is simple – the most effective and successful recruitments are either:

1. From within the business – someone that has grown from the ground up and made their way through the business; or
2. From within a close knit circle of the family – a trusted friend or long standing colleague in another field.

And why is that? Well, here is what I have observed over 30 years of working with family businesses.

1. They get what the family is all about.
2. They know the business of the business.
3. They know the culture of the business.
4. They understand the personalities at play.
5. They’ve accelerated their development by already being in the business – nothing is new and unknown.
6. The owners have a higher level of trust with people they already know.

This Week’s Tip

Take a look at your own family business and think back – which individuals have been the most successful management appointments and why?