A family business is more than just a commercial concern – it’s usually viewed as the ultimate family asset – one to be protected and nurtured at all costs. While the initial founders’ drive and passion would have been key to making the business flourish at the outset, the introduction of new generations can often bring about challenges with regard to the future direction of the company.
Often the decision-making process demands a different set of skills or experience that the family simply does not have. This is why it’s always wise to consider external leadership in a family business to offer a fresh perspective and a certain level of impartiality.
But what are the benefits of integrating non-familial personnel into a management structure? And how do you go about finding the right candidate – one that will mirror the existing ethos of a long-standing family business whilst also driving effective change?
Why hire external leadership?
As family-owned businesses mature, it’s likely that a variety of complications will arise. These challenges include common business issues such as industry shifts, lost opportunities, or mismanagement, as well as family-specific issues like internal discord, waning interest in the enterprise, and aversion to risk. However, it is essential for such businesses to overcome these hurdles to avoid the risks of decline or failure.
Bringing in experienced outside experts may be the key to jump-starting transformations, effectively stimulating change, facilitating growth, enhancing overall quality, reducing expenses, and significantly increasing profitability.
Recruiting external leadership can be a strategic move for several critical reasons. It may be due to the current ownership reaching retirement age without a succession plan or a lack of internal talent to take over. Alternatively, if the owners plan to attract private equity, an external hire might signal operational rigor and demonstrate the company’s commitment to growth.
Furthermore, businesses that have outgrown their current leadership capabilities may benefit from the fresh perspective an external leader could bring. An outsider can also serve as a neutral mediator during family conflicts, safeguarding the business’s growth and progress.
The challenges
Recruiting an external leader brings a unique set of challenges for both privately owned and equity-backed family businesses.
Resistance to sharing information with outsiders is common, even when intentions are good. Additionally, family-owned companies often lack access to top industry talent and must rely on recruiters who may not fully understand their culture or operations.
For an equity-backed business, although they may have more options for outside leadership, the ultimate decision requires input from both investors and family members. It’s important for families to prioritise the business’s needs over personal preferences to ensure the best outcome for all stakeholders. This may mean selecting a candidate who isn’t the family’s top pick but who is the best fit for the company.
How to choose the right candidate
When it comes to recruiting, three personality trait categories reign supreme: intellectual scope, inner strength, and outer reach. These encompass qualities such as curiosity, insight, perseverance, resilience, flexibility, and strong people and relationship skills.
However, it’s not enough for candidates just to have the necessary skills and experience. They must also share the company’s values and cultural perspective and be ready to commit to the legacy established by the founders.
The ideal candidate should possess both relevant business qualifications and strong emotional intelligence. This is a paradigm shift that requires a high level of awareness and sensitivity. Transparency and the willingness to share information are also crucial in facilitating a smooth transition.
The right executive must be willing to create a partnership and understand what is at stake. Only by embracing these qualities can an external leader truly excel in a family business environment.
They will need to be strong and effective, possessing self-discipline as well as the ability to determine which battles are worth fighting. In order to succeed, flexibility is key, along with a readiness to adjust priorities when necessary. Creating a collaborative environment is also essential for long-term success.
As every family business is unique, there is no one solution that fits all. This is especially evident in the interactions between newly hired external leaders and the family. While some leaders remain strictly professional, others develop a close relationship with the family. The nature of this relationship is primarily determined by company dynamics and family values. For instance, founding members and previous generations may resist changes to established processes and objectives. A competent external leader will recognise these nuances and respond with empathy.
Effective integration of external leadership is a crucial aspect of organisational development, offering numerous benefits when executed properly.
With outside leaders involved, family businesses appear more appealing to investors seeking confirmation of alignment between business objectives and family interests.
Additionally, a company that incorporates external leadership offers a more desirable environment for future talent, as candidates are attracted to employers that are free of “glass ceilings” for non-family members.
By selecting the ideal candidate and implementing a comprehensive onboarding process, opportunities to gain fresh perspectives, identify weaknesses, question the status quo, and introduce positive, lasting change will emerge, ultimately resulting in catalytic transformation within the family-owned organisation.
Integrating external leadership requires exceptional self-awareness and trust from all parties involved. The founders of the business will have established it with the primary motive of creating a sustainable and long-lasting legacy of wealth that would pass down to future generations. However, introducing outside leadership means that the inheritance is now entrusted to someone else entirely. Someone who won’t seek to inherit or benefit directly, and who probably won’t have the same emotional attachment.
Nonetheless, with cooperation and precise direction, external leaders can undoubtedly ensure that this precious legacy not only endures but thrives, for many generations to come.
