I am looking for information to help us determine the best way to bring a son into our family-owned business. There is an established management team (non-family). The son is seasoned with Fortune 500 experience and capable of running the company, once he learns the business. The concern is that there will be resistance from the established management team, making it difficult for the son to successfully integrate and eventually take over. Thank you in advance for advice on the risks and options to consider.
Experts’ replies:
In a family business system, every action creates a reaction, so bringing in your son over top-performing managers will demoralize many in the company and may trigger an exodus of more than one competent leader. Displacing people who expect—and have earned—promotions will not earn him support and can undermine his leadership potential for years to come. Some careful groundwork will need to be laid, especially since there were evidently no expectations that your son was the heir apparent.
Social psychologists report that people are most likely to support a decision—even if they disagree with it—if they feel they have had some say about it. Step 1 may be to communicate with management team members one by one, asking them which competencies they believe the company needs to take it to the next level. You may luck out and discover that your son fits their criteria quite well!
Another step is to provide top managers with his résumé and ask them to interview him and offer their candid feedback. After all, you still want to protect the “Golden Goose” that supports your whole family, as well as many other families. They may uncover issues that you don’t want to see. You can then work with him to develop a growth plan to overcome any shortcomings that are identified, perhaps with further objective assessments, professional coaching or a non-family mentor.
It is most likely that your son will have to prove himself over time. If there is a failing department or challenging assignment in your company, you may want to offer him that mountain to climb, so he earns his stripes the old-fashioned way, not because of his birthright.
Developing a new niche or role that doesn’t displace loyal employees will be critical. If he is new to your industry, it may take three to five years for him to gain the respect of his peers, even if he carries your name and possesses reasonable brain wattage. If he is as good as you say he is, your whole company will benefit from the care you take now to help him enter a complicated family business system successfully.
If your son is willing to make the commitment, I would also build in an exit plan from the beginning, so he can leave gracefully at the end of a year. If the business is not a good fit for him, he will need to know more than ever that he still belongs within the love and support of the family circle.
— Ellen Frankenberg, Ph.D.
Frankenberg is a Cincinnati-based family business consultant who facilitates family meetings and coaches executives and successors (ellen@frankenberggroup.com).
Family business ownership with non-family executive management succeeds when owners and managers agree on goals and strategies and the family is willing to let the management team do its job without undue interference. But all parties must recognize that the family often has a special relationship to the business that overlays its operations and performance.
Family owners who don’t manage their business still retain certain decision-making prerogatives, including the right to bring in family members who will eventually take over senior management and ownership of the company. In this case, the owners don’t want to jeopardize their relationship with a team that’s running the company well and profitably. So they should exercise that right thoughtfully, one step at a time.
The first step here is to confirm the son’s intentions. If he’s not fully committed to joining the company and sticking with it, there’s no need to take any further steps.
The family should be certain of their intentions for the future. They should draw up a written plan with a timeline for their son’s integration into the business and have it vetted by an attorney to reduce litigation risk. They should also anticipate the management team’s reaction. Has the subject already been raised with them and met with objections? If not, why the concern that the managers will resist the family’s wishes? Maybe there’s a contract issue. In any case, the family should be braced to lose employees who won’t accept a new management configuration.
Then it will be time for the family to sit down with the management team for a frank but friendly discussion, with the goal of bringing the managers into the planning process as partners, not adversaries. The family should be clear that while they’re pleased with the team’s performance, they’re now looking ahead to future generations of family ownership and management of the business. They’re confident that their son is a qualified successor with a solid track record who can learn from the team and build on their accomplishments. The family should be upfront about how his joining the company will affect the non-family managers’ positions and compensation.
It’s important that the family show respect but also firmness about their plan, the reasoning behind it and their intention to see it through. This is a statement to the managers of a strategic decision that the owners have the right to make, not an invitation to debate.
At that point the son must pick up the ball. He’ll need the ability and the will to establish himself in the company. And he should be ready to make a 110% effort to earn the respect of the management team and the other employees by showing that he’s not just along for a free ride.
Maintaining good relations between family members and non-family employees is a challenge faced by most family businesses. Mutual respect, honesty and a long-term view are keys to meeting that challenge.
— James Lea, Ph.D.
Lea, a professor at the University of North Carolina at Chapel Hill, is a family business speaker and adviser (james.lea@yourfamilybusiness.net).
From the information provided, it appears that your vision of the future is to continue your business with your son as leader. It is also apparent that you have developed a management team that has helped you run your organization while your son is obtaining his experience outside of the family business. Integration works best when everyone understands the vision of the future and is fully aware of his or her role in that future.
Addressing the following questions should help you navigate through the transition ahead:
1. Have you clearly articulated your vision for the future and shared it with your managers and heir apparent?
2. Do current managers see your successor as a threat to their jobs or as a future partner with whom they will collaborate?
3. Have you defined the competencies of a future leader of your business (vs. the currently needed competencies), or are you assuming that any halfway intelligent person can do that job?
4. Have you created incentives for your managers to serve as your son’s mentors?
5. How have you prepared your son to understand your business as it exists today and as it will be in the future?
6. Have you created a successor-development plan whereby your son learns the ropes before he must take over and demonstrate his capability to lead?
7. Do you have a board of directors with independent board members who can help you look objectively at the likelihood that your son can succeed as your successor and who can support him in that role?
Resistance often arises when people feel that their dignity is at risk and that the changes proposed will not be good for them. If managers see that the designated successor values them and that there is a position that continues to be rewarding for them with your firm, then there is less likelihood of destructive resistance. Further, if compensation is structured to demonstrate your long-term commitment to managers as well as the success of the heir, you will lower the risks.
Even though your son has had experience at a large firm, this does not guarantee that he is qualified to lead your firm. He may find that he prefers “corporate life” to life “back on the farm.” It is important that he have the opportunity to learn the business and determine if it’s for him. He will earn more respect and be accepted more readily if he pays his dues within your firm. In other words, he needs to work his way up the ladder, rather than start at the top. This gives him time to get to know the business and form relationships throughout your company and for all parties to assess if this is a fit.
And alas, just because he has the right last name doesn’t mean your son is capable of leading your firm. You must ensure that your financial future is secure, as well. There have been many retiring leaders who have found that they could not pass the baton successfully and either had to come back and rescue the company or watch it die a painful death—often because of a lack of realistic assessment of their offspring as successors.
— Leslie Dashew
Dashew is president of Human Side of Enterprise in Scottsdale, Ariz., and a member of the Aspen Family Business Group (ldashew@aol.com).
I believe the key to a successful integration is twofold. First, begin communication among family members regarding leadership qualities anticipated by the company, the timeline for the son to establish himself, the role he takes on and the learning curve. The other key communications component is that the current family owners prepare the current management team for the transition, as well as the son in aligning himself in a most positive way with the executive team already established.
From these communications, one major benefit could be the development of a succession plan for the family and all the stakeholders in the company. Part of this has to do with the son’s leadership abilities as well as his interpersonal skills in joining an existing team and making that team his own. The other part of it relates to the fair evaluation of the existing management team. I would look at the organizational chart to determine the best position to start your son’s growth with the company. Too often an owner’s child is brought in as an appendage rather than in a position that is meaningful to the heir and the company over time. Before entering the company, he should be reading all relevant materials to become knowledgeable about the industry. He should be meeting with outside advisers (CPAs, attorneys, etc.) to hear all the issues, both positive and negative, concerning the company and its future.
The company should have him attend management meetings and/or advisory board meetings, in order to further his education and get a good overview of the business’s strengths, weaknesses, opportunities and threats. He should work together with fellow executives in writing a thorough business plan that includes his development as a successor. This will allow him to immediately become a member of the management team while learning and adding value. Without a doubt, he will need to spend time in each department, learning the role of each employee as well as gaining an understanding of the issues and problems that face the company as a whole.
This will also help him learn the products, production issues, logistics, etc., as well as the customers’ profiles. Third parties should also know and respect your son as a CEO-in-training. For him to succeed with the current management team, he will have to demonstrate his passion, talent, knowledge, standards and values. To the extent there may be some individuals with inappropriate agendas or those who resist change, your son will be able to deal with this because he possesses leadership abilities and has earned the respect of the management team. He should also spend time meeting with customers and vendors and attending trade shows in order to brand himself as that CEO-in-training. He will also be branding the company as one with an up-and-coming, aggressive, hardworking management team that has a real place in the industry.
— Paul Rich
Rich is a principal with the Rothstein Kass Business Consulting Group in New York. He specializes in assisting closely held and family-owned businesses (www.rkco.com).