Victor Posateri first contacted me in May 2004 with a family situation that required an outside perspective. His son and his two nephews were not interested in joining the family business. Victor (a pseudonym) and his three sisters, who were stockholders but not actively involved in the company’s day-to-day operations, recognized that some changes were needed. Either the company would have to be sold or they would have to appoint a non-family member as Victor’s successor. For the first time in more than 75 years, there would no longer be a Posateri heading the company.
After some heated discussions and soul-searching, Victor and his sisters agreed that selling the company was not a viable option. “This was Dad’s life,” they reasoned. “It belongs in the family. It’s a part of our family history and who we are!” One sister, who had a flair for the dramatic, emotionally summed up the will of the rest of the family: “Do it; find someone to run the show!”
The Posateri family seemed to agree on their vision for the future of the company. My first question was whether they could turn the reins of their company over to an outsider. By playing the devil’s advocate and through role playing that focused on the pros and cons of bringing in an outside “manager” (at this point, they were not totally committed to calling this individual the president/CEO), we all were fairly comfortable as to the sincerity of their commitment to recruit an outsider. What follows are the steps that made their long-term vision a reality.
Step 1: The position description
If the company leaders cannot reduce to writing specifically what they are looking for, usually the search is destined for failure. A well-thought-out position description is the first step. This is a working document that outlines in detail specific duties of the position; technical, educational and experience requirements; the job-holder’s relationships with colleagues inside and outside the company; and desired personality traits.
Step 2: List of target companies
Develop a list of companies where individuals who are capable of moving your company to the next level may currently be working. They don’t necessarily have to be companies within your own industry. Often a qualified individual in a managerial position outside your industry may bring a fresh new approach to accomplishing multidimensional tasks and is the catalyst your company needs for long-term future growth and profitability. It is generally a good idea to compare qualified candidates from within as well as outside your industry.
You may want to identify companies that are currently experiencing “downsizing” as well as those located in areas with a high cost of living, high crime rate, extreme climate changes, poor schools, and on and on.
Once your search committee has approved the position description and the list of target companies, you can let your search firm do what it does best: find the candidate with superior credentials whose personality meshes well with your family members, employees and customers.
Step 3: The search process
A search consultant can be thought of as a “corporate pirate.” These professionals don’t represent candidates who are actively seeking employment; they represent client companies, scoping out qualified individuals who currently are happily employed and not considering changing positions. If you have first identified some target companies, a search organization with a resourceful research team can easily identify key individuals in those companies who do exactly what you are looking for —even if you are located in rural Tennessee and trying to recruit candidates from major cities like San Francisco, Dallas and New York.
It is therefore important that you focus on the positive aspects of the following:
The position: This is perhaps the easiest area to focus upon. If the position description is clearly defined, in most instances a qualified candidate will respond enthusiastically. (“This sounds exactly like me!”) Thus you have quickly succeeded in raising the candidate’s interest level.
The company: Start by addressing in detail your company’s history, current status in your market niche and future growth opportunities, and why the position is open. You then need to address what you can offer someone who is currently happily working at a Fortune 1000 company.
Impossible? Only if you and your search firm do not believe in the positive attributes of your company and the benefits it can offer someone outside the family hierarchy. You must be your own cheerleader. Consider why a contented individual responded to your search firm’s initial contact. Such early interest usually revolves around the following:
• Curiosity as to how their name surfaced.
• Curiosity about what other positions are out there.
• An outsider’s evaluation of their potential worth to another employer.
• A deep-seated frustration with their existing position that is heightened as a result of contact with an outside search professional.
Now that the candidate’s interest in the position has been established, it is time to focus on the positive aspects of leaving the so-called security of a public company for that of a family-owned enterprise.
• Does your position offer a promotion, title-wise? A position title serves as a signal of a person’s overall success to the general public as well as industry peers. In most instances, the chance of becoming the president/CEO of a publicly traded company is practically nil. Becoming president of a family company can represent the fulfillment of a lifelong goal. In the interview, as the spokesperson for your family, stress that you all recognize the need to enlist the expertise of an outsider and, as a result, you are deeply committed to ensuring the candidate’s future success.
• Explain that decision making is streamlined in a family company. In the candidate’s current position, is he or she swamped with meetings, “task forces” and a barrage of daily e-mails? Is the candidate’s decision-making ability greatly curtailed within the confines of a bureaucracy? Wouldn’t it be refreshing to be able to turn on a dime? How often must managers take a short-term approach to a long-term problem because of the ever-present need to satisfy “the Street” and the financial expectations of outside shareholders? How much access do they currently have to members of their company’s board of directors or senior executive team?
Compensation: Base compensation must be within the range of what is currently considered fair market value for a company of comparable size. You can refer to various sources for this information, such as the Internet, your trade association or wage and salary resource organizations. These sources, however, fail to take into consideration that in most instances, you are attempting to recruit someone who is currently happily employed. You therefore may have to boost the candidate’s salary by up to 25% to create interest. But don’t rely strictly on base compensation to attract your “white knight.” A hiring bonus, “phantom stock” or equity potential can work to your advantage not only in finding the right hire, but also in getting that individual to view your family business as his own. That will go a long way toward developing a solid program for retention once you have completed the hiring process.
Location: Find out which issues are most important to the candidate. Is it housing, quality of education, accessibility to shopping and cultural events, climate or proximity to parents (close is not always better)? Be able to discuss cost-of-living statistics, SAT scores and even the availability of a Suzuki violin instructor, if applicable. (This was key in my ability to attract a highly desirable candidate from New England to a family company in Minnesota.) By doing your homework on each individual candidate and focusing on that person’s needs, you increase your chances of being able to concentrate on what truly will attract them to your company. To the amazement of many, it is not always dollars.
Luring a top candidate
The Posateris were pleasantly surprised that after a four-month search, they were able to attract and hire a senior vice president from a Fortune 500 corporation. The successful candidate had spent 16 years in various key management roles and had believed that at best, he was destined to end his career within the next 15 years as the No. 3 person in an $800 million company division. To obtain the career fulfillment that only a smaller company could provide, he was willing to take a cut in base pay of approximately 10% in return for the following:
• An opportunity to assume the key company leadership role.
• A work environment that would allow him to execute his ideas quickly.
• A well-positioned company that he could take to greater heights both financially and through increased market share.
• Potential ownership.
• Financial rewards tied to the attainment of predetermined goals and objectives.
Working closely with the family’s attorney and accountant, we helped orchestrate a contract that satisfied the needs of both the family and the candidate:
• The position title: president/CEO.
• Reporting: directly to the board of directors. He would become a board member after 13 months of employment.
• Phantom stock: He would receive a substantial amount upon joining the company with additional blocks tendered annually based on company profitability, totally vesting in five years.
• An opportunity to purchase up to 40% of company Class A stock at a predetermined price after completion of five years of employment.
• Yearly performance bonus of up to 35% of base salary.
Nearly three years since the execution of the employment agreement, the company under its new leadership had exceeded all of the Posateri family’s expectations. Victor Posateri is looking forward to fully retiring within the next seven years. He and the other members of his family are enjoying the fruits of a successful family endeavor.
To lure a candidate to your company, concentrate on the tangible and intangible benefits that can be obtained only by joining ranks with your family. You should be prepared to admit that being a part of a family company is not for everyone—it takes an entrepreneurial spirit and a passion to succeed beyond the ordinary. These individuals do exist; convincing them to become a part of your family company could be your most important business challenge to date.
Stan Weinstein is the principal of S.E. Weinstein Co., an executive search firm in Rock Island, Ill. (www.seweinstein.com).