Writing a job description for CEOs of family companies can be a pretty elusive exercise, because so many of the chief executive’s responsibilities are intangible yet critical. Basically, the CEO has two jobs: leading the business and managing the family’s ownership. Let’s look at the business side first. The CEO has overall responsibility for accomplishing three things:
- Produce revenue, products, services, and operating earnings; maintain a good competitive position; serve various constituencies; and create wealth.
- Conserve the resources invested in, or developed by, the business.
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- Change the business when necessary to adjust to the world around it.
There are tens of thousands of family firms in which CEOs roll up their sleeves and do everything from sales and service to signing the checks. Only in the smallest firms do they have to personally produce results, however. The output of the firm is usually a “today” kind of activity that involves orders, shipments, service calls, merchandising events, and other repetitive activities. The CEO sees to it that these tasks are reduced to a routine and held to some tight measures of quality, cost, time, or customer satisfaction. This makes the work easier for the leader to plan, repeat, measure, and eventually delegate.
Everyone in the organization has some responsibility for conserving the assets of the business. Some people spend full time on this—auditors, preventive-maintenance employees, security guards. They produce nothing that the firm can sell but prevent serious losses of tangible resources. Managers and executives tend to be more involved in conserving intangible resources: company image or reputation; relationships with customers, suppliers, or regulators; and employee or shareholder morale.
Some of this cannot be delegated. In certain areas, the CEO’s presence or paw print is a must. When he or she achieves something in one of these areas, something intangible has been retained or restored to a level of acceptance or satisfaction. Things can also blow up unexpectedly. Some CEO time must be reserved for such conservation activity.
Another major item in the CEO’s job description is strategic thinking, which may gradually—or suddenly—lead to projects or plans to change the business. The chief and his directors, advisers, and key employees may decide to seek more or different customers; revamp the product line in response to changing market conditions; alter the firm’s pattern of distribution; shed a floundering business unit, and so forth.
The CEO has to be involved in the planning and decisions. These responsibilities require special talents, particularly the ability to deal with ambiguity, uncertainty, and plenty of risk. The data are of poorer quality than average. The decisions usually rely on forecasts rather than history; assumptions rather than facts; new, shifting alliances instead of well-known, stable, and trusted colleagues.
Worse, the CEO must have enough self-insight to understand the emotions often stirred up by these decisions. The leader’s hopes and fears can cloud his or her judgment; an egotistical need to act before a rival or to prove a point to someone; the normal fear of failure magnified into a bet-the-company mixture of hubris and sheer panic. No wonder so many CEOs retreat into everyday operational details. Still, avoidance doesn’t change the fact that this is a crucial part of the job. This is why the king or queen draws the big bucks and best perks.
Managing ownership
CEOs who are founders also tend to be the active heads of their families, or a partner to the titular or hereditary head of the family. Whatever the arrangement, the same responsibilities exist as in the company CEO’s job: produce, conserve, and change.
The CEO’s job description as leader of the family includes supervising decisions on services to the family and distribution of resources—for example, policies on stock ownership, dividend programs, stock-transfer activities, scholarships for development of the next generation. These ongoing, repetitive matters are easily delegated to others after policy has been set.
Conserving the resources includes managing stock-redemption decisions; family education and communication; overseeing events of all types to strengthen family relationships; dealing with outbreaks of “capital sin” (greed, lust, envy) that could adversely affect the business; and resolving highly visible people problems involving family members and the company.
What the CEO thinks of the shareholders obviously has a great influence on how he or she behaves toward them. For founders, who usually rule both the company and the family, ownership of shares by other family members is a paperwork exercise. Nearly all the shareholders have received their shares as gifts, so the CEO may be convinced they understand little about finance or corporate matters and can be ignored with impunity.
If the founder wants the firm to continue under family ownership, however, he or she will have to make a commitment to developing this group. Some (a small number) take on this task and do it well. Others try it, find it burdensome, and delegate the job to other family members or outsiders. They recognize that the CEO’s job is to see that this is done, not necessarily to do it personally.
Unfortunately, the majority often make half-hearted stabs at this part of their job. They just avoid it. In such cases, a little candid self-examination is in order. To do this job well, the CEO has to have some heart in it. It rarely works to just go through the motions dutifully. If that’s the CEO’s approach, better to delegate these tasks.
A strategic vision of what the family should become (as owners) is a much better approach than reacting to problems only when they become too big to ignore. To develop this as a shared vision takes a lot of time and the patience to listen carefully to people who may be ignorant, immature, unrealistic, greedy, or just plain unpleasant.
Developing a group of shareholders willing to keep their wealth locked up in a closely held company takes as much trouble as assembling a well-trained, smoothly functioning employee team. In both situations, there is risk and reward. The investment of time, money, energy, and ego in shareholders can result in enhanced family commitment and a more supportive, stable environment for the business.
It is the job of CEOs to manage the family’s ownership of the business. Again, they don’t have to do it themselves if they do not personally enjoy that kind of activity. Their responsibility is to see that it gets done. Somehow.
James E. Barrett heads the family business practice of Cresheim Consultants in Philadelphia.