This post is Part II in a three-part series summarizing and exploring Transitions in the Family Business: A Conversation with Family Business Owners and Leaders, a recent event for family-owned-business leaders that Bradley’s Family Business Advocates team co-hosted with Warren Averett. The event consisted of three panel discussions: Transitioning to the Next Generation, Transitioning to Nonfamily Executive Management, and Transitioning to a New Owner. See Part I of this series on Transitioning to the Next Generation.
This post highlights the second panel’s discussion on Transitioning to Nonfamily Executive Management. In our second panel, each of our speakers had a role in a family-owned business that successfully transitioned to nonfamily management.
An initial challenge these businesses face is to identify a manager the family trusts to write their business’ next chapter while maintaining the family’s legacy. Some families feel most comfortable looking to their existing relationships with employees and service providers when transitioning to new leadership. One of our panelists discussed his business’ transition of managerial control to a long-time outside advisor. In this case, the family’s business was placed on a firm foundation with an advisor who had worked for decades with the family in connection with their business and personal affairs. Here, the “trusted advisor” became the trusted leader.
Another panelist discussed his family’s nationwide search for a new manager that involved interviewing numerous candidates and resulted in the business hiring a true outsider as its chief financial officer. This solution uniquely addressed the family’s need for a fresh perspective while also adding a veteran administrator with significant industry experience to help manage the business’ rapid growth. Ultimately, the family was able to rely not only on the candidate’s proven track record at a large public company but also on the confidence the family gained from an extended search and interview process.
After gaining the family’s trust, nonfamily members face unique challenges in being integrated into the day-to-day operations of a family-owned business. One panelist cautioned new managers from immediately implementing disruptive changes to the business. In a closely held family business, new managers must balance the benefits of such changes with the risk of alienating existing employees (and, perhaps, the family owners).
On the other hand, new managers must establish their authority. There is no one way to maintain this delicate balance, but consistent communication and engagement by the family, the new management and other stakeholders is crucial. New managers need both the unambiguous support of the family and the latitude to manage the business.
Stay tuned for our next post addressing the third panel’s discussion on Transitioning the Family Business to a New Owner.