Amongst professionally run businesses, the early stages of a family business might have only family members acting as managers. Upon progression and over the years, members of the family business often decide to step back. They might shift their focus to Strategic Areas and expansion thus needing the addition of non-family professionals to operate the business.
Most of the family businesses prefer the following options while considering non-family professionals for their organization:
Promote Non-Family talents from within the current manpower.
Hunt experienced talents from other successful organizations. At this phase, various types of family businesses seek specialized external services in hiring talents from other successful organizations.
Here, we would like to share some of our observations during our interventions in various types of family businesses (Family Owned and Managed (FOM)) as well as the key points to be focused upon while bringing in professionals of any role (bottom-up or top-down talent sourcing) from external organizations.
In our experience, most of the FOM organizations would like to start with a Business Head. Most organizations start from the top as the family members prefer to concentrate on strategic areas. They prefer experienced Business Heads to run the day-to-day operations.
Detailed below is our 5C guideline to be considered before hiring an external professional for your family business management:
Create an internal harmony amongst the board of directors. Consider everyone’s opinion. If any of the members present have a different opinion, then it should be further probed and resolved, else the new hire will be met with resistance.
Bring in Clarity
Curate a clear job description, compensation package and responsibility matrix. There needs to be clear differentiation of roles and responsibilities between the current family members and the new business head. Limit the duplication of responsibilities. Specify and determine who reports to whom.
Pay is another significant aspect, in conventional businesses, as entrepreneurs typically withdraw the payment through various mediums. However, in the presence of an external business head, they like to have a defined remuneration structure. Another significant point is to regulate a responsibility matrix such as a RACI Matrix (Responsible, Accountable, Consult and Inform) for better facilitation.
Confirm and Re-Confirm
Conduct multiple degrees of discussion with the candidate. Try not to employ in haste without appropriate meetings. In the case of key recruitments, instincts for the most part are not accurate and may lead to failure. The Board members present ought to have both formal and casual meetings with the business head.
Ideally, all the family board members should meet at various times separately and collectively. It would be advised to have all individuals meet the business head before offering the final contract.
Seek assistance from external experts during the negotiation and interview process. Do conduct various recruitment processes such as reference checks and psychometric assessment. These may assist us in finding the right behavioural mix of candidates.
Ensure to pass on an organization-wide communication about the role changes and reporting structure. Establish a positive changing environment through various sets of communication. Make and impart the standard procedures for the employees on when and how to meet the family board members.
Establish a successful interaction to inform the new leaders of the existing culture of the organization. Engaging the services of an experienced Executive Coach will be helpful to support and guide the new leader through their transition.
Ensure that the board members and managing directors have regular meetings with the new leader. Set up a prefixed meeting plan with the whole board and managing director. Lessen the recurrence of the meetings complementing the pace of the transition.
Organizations should seek the support of an Executive Coach or a Family Business Facilitator to handhold both the family and the newly appointed non-family professional during the initial phase. This could be the key to a smooth and hassle-free transition.
GatewaysGlobal has worked with one of the main Family Owned and Managed FMCG Organizations in India, to create a conducive environment for the hiring of a Business Head. The family was successful in running the business but considering the business growth potential, the family members in the business wanted to invest more time on strategic functions. Hence arose the need for a professional to run the business.
Our process started with creating an awareness to have a leader to maintain the business and to accomplish the estimated growth. We had the option to work with the family board of directors and persuaded them regarding the requirement for a single face inside the family to maintain the business. This led to delegating one of the family board individuals as the business head. But soon they felt the requirement for an external Business Head. After various conversations, meetings and considerations, we obtained a total agreement from the board.
The family had identified business head candidates through references and external consultants. With a thorough search, the family narrowed down on their preferred business head after going through their references and interviews.
Upon appointing the new business head, we established an Induction process. We provided them with clarity on their roles & responsibilities for which we had already formulated a clear job description, RACI framework and entitlement structure. We had additionally planned, designed and implemented the setup of a Board – Business head meeting structure. It was also agreed that the current business head (family member) would handhold the new hire. We laid down clear communication rules between the family board of directors and the newly appointed business head along with clear hand-holding plans for the family board members for their everyday activities.
The family ought to collectively agree to employ external professionals: – NO forced fixing.
For sustainable and viable family business management, Start from the top.
Follow 5 Cs to bring in professionalism in family business
Seek the help of external specialists.
Author : M R Rajesh Kumar (Founder and Lead Partner GatewaysGlobal LLP)