One of the biggest challenges facing family-run businesses today is high turnover of non-family employees, especially in executive positions. Often I hear from frustrated owners, “I interviewed them, and they answered all the questions right. How come they aren’t working out?” or “I really thought he/she had more of a backbone.”
My response is, “Did you structure the business to encourage non-family members to hold key positions?”
When a non-family member holds an executive position, it is important to establish a philosophy of family members working together, rather than running a family business. Such a structure will allow non-family executives to fully participate in leading the business to success.
The structure should include a selection process that places everyone, including family members, in positions they are qualified to hold. The environment also needs to truly encourage executives to contribute and offer solutions that are best for the business, not what the family wants to happen. Finally, communication is key; families tend to struggle with fully disclosing information to non-family members.
When there’s a problem in any of these areas, executives may feel they cannot be successful and leave the company. To avoid that, consider some of the following strategies:
The selection process
The primary goal of the selection process should be to recruit, attract and retain the most qualified person for a position. That may sound easy, but when you are looking at your child(ren), it is sometimes difficult to keep that goal in mind. It is common for them to end up in positions based on a parent’s personal set of rules such as gender, birth order, or longevity at the company.
Decisions need to be based on each individual’s talent, skills, behaviors, experience, abilities and desires. If family members do not possess the key skills to perform the functions of their positions, you could be hurting their ability to succeed and jeopardizing the future of the business. In addition, non-family members will not have the confidence, respect or trust they need to have in them.
It is also important to engage the child(ren) in the process of determining their fit within the business. Let them demonstrate what skills, behaviors and abilities they have to fulfill the requirements of the position under consideration. This will help them become committed to their success, because they will have earned their position.
If they cannot fulfill the requirements of the position, you should coach them on what will be needed for them to assume the role in the future. Or work with them to determine where their skills would best fit.
Developing a strategy for placing your child(ren) in the business will also guide you tremendously in creating a succession plan. You may find, for example, that your firstborn isn’t a good successor, but your daughter has the real leadership skills.
Non-family executives
Sometimes a family-owned business decides to place non-family members in key executive roles. Diversifying the executive management team is done for several reasons: A chief financial officer may be hired because no one in the family can fulfill that role, or a president may be hired to eliminate emotional decisions and be more objective with the business.
When deciding to place a non-family member in a key role, it is important that the family adopt a management strategy to respect all ideas, decisions and comments made by any member of the management team and to implement business decisions based on what is best for the business, not only what is best for the family. Ensure that you are ready to let a non-family executive really be in control. If key executives feel their position is not respected, they are not likely to stay with the company.
Finally, full disclosure goes a long way in retention. Non-family member executives need access to financial, historical and proprietary information and access to all vendors and clients. Failure to provide critical information hinders the executive from making the right decisions, and it will make him or her feel undervalued.
Carrie Beers manages the Human Resources Consultant Group at USI New England and has more than 20 years’ experience in HR management. She can be reached at carrie.beers@usi.biz.
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