The need to recruit at a senior level within family businesses arises for various reasons, such as filling a gap in succession, boosting sales, enhancing production, introducing new products or services, or expanding into new territories. Bringing in a non-family executive promises fresh perspectives, new ideas, and valuable expertise. Nonetheless, such appointments carry significant risks. This article sheds light on four primary pitfalls in recruiting non-family executives and proposes strategies to evade them.
1. Unrealistic Expectations
Regardless of the rationale behind the decision, the board identifies a skill gap and harbours expectations for the outcomes that the appointment will bring. It is vital to acknowledge that professional managers, while skilled, are not magicians. Appointing a non-family executive entails a substantial investment, necessitating realistic expectations regarding their objectives and timelines to justify this investment.
Often, results take longer to materialise than anticipated, prompting family businesses to reassess the sustainability of their investment if the expected timeline extends.
Sadly, I've witnessed family businesses part ways with new executives just before the attainment of the desired results, due to straining the business financially. Notably, engaging an experienced professional may unearth additional complexities, elongating the timeframe for achieving desired outcomes.
Clear, realistic, and time-bound objectives, agreed upon by all stakeholders and the executive pre-appointment, are indispensable, alongside a robust mechanism for ongoing evaluation and adjustment if necessary.
2. Hazy Or Inadequate Remuneration Strategies
Many family business owners excel in negotiation, often striving to secure favourable deals for the family. However, this prowess sometimes spills over into remuneration negotiations with non-family executives, resulting in oversold dreams to secure their services at reduced rates. Such short-term victories often culminate in disastrous consequences down the line.
To mitigate this risk, families should benchmark executive pay to ensure competitiveness and longevity in the role, even amid initial challenges or misalignments of expectations.
Additionally, families should devise comprehensive remuneration packages that go beyond basic salary levels, incorporating incentives like phantom share options, long-term incentive plans, profit-sharing, and performance bonuses. While equity may not be feasible, non-cash benefits unique to the family enterprise can be considered alongside traditional benefits like pensions and healthcare. Addressing potential disparities in remuneration levels before commencing the recruitment process is prudent, as it could impact profitability and dividend payouts, necessitating transparent communication with family shareholders.
3. Insufficient Integration Efforts
Transitioning into an established family business presents non-family executives with a plethora of information to assimilate. Beyond their role and responsibilities, they must familiarise themselves with the company's history, vision, and family dynamics. Dumping heaps of reading material on their desk on day one is insufficient.
Structured integration plans, encompassing orientation sessions, stakeholder introductions, and candid discussions on family dynamics, are imperative for expediting the executive's acclimatisation.
Furthermore, appointing transition coaches to support incoming executives in navigating initial challenges can prove beneficial. A clear plan outlining how the executive will integrate into the firm and ongoing performance evaluation is essential for seamless integration, particularly if they are the first non-family member in such a position.
4. Reluctance to Cede Control
Despite the best intentions, family business owners often struggle to relinquish control, hindering the incoming executive's ability to perform effectively. This reluctance manifests in allowing staff to bypass the executive and seek decisions from family members, undermining the executive's credibility and leadership efficacy.
While understandable given their deep-rooted involvement in the business, this reluctance stifles innovation and impedes progress. Cultivating a culture of trust and empowerment, coupled with a willingness to embrace new methodologies, is crucial for fostering the executive's autonomy. Failure to do so may lead to their departure or termination, thwarting the organisation's growth prospects.
Summary
Recruiting non-family executives presents both risks and opportunities for family businesses. Establishing clear, realistic expectations and designing equitable remuneration packages, agreed upon by all stakeholders beforehand, are essential.
Likewise, crafting a comprehensive integration plan and providing ongoing support are vital for maximizing the executive's potential and ensuring their success in the role. By navigating these pitfalls adeptly, and by allowing the executive the freedom to fulfil the role they have been hired to do, family businesses can leverage external expertise to drive sustained growth and prosperity.
About the Author - David Twiddle is the founder and Managing Partner of TWYD & Co, an Executive Search and Advisory firm built differently for thriving business families, entrepreneurs and ultra-high net worth individuals, around the world. Find out more at www.twyd.co