I’m sure I’m not alone when I say how much I’ve enjoyed watching The Crown, the Netflix series about the life of Queen Elizabeth II. I just wish they would hurry up and make series three and four! The sumptuous sets, star-studded cast and intriguing story lines make for great drama, though what really fascinates me is the running of the ‘family firm’.
JMA has been privileged to serve a good number of successful, family businesses, ranging from those that are still run by a family member more than 50 years after the company was established, to others that are well into their second decade of non-family leadership, where the role of the leading family representative (who typically chairs the family council) is more of a guiding light.
It should come as no surprise when I say that what concerns us most when advising family businesses on CEO transitions is, above all, ensuring a great match in terms of outlook and culture. To my mind, this starts with both the family and the external recruit being willing and prepared to navigate what will inevitably be a challenging period, and entails sharing responsibility for a successful outcome. So, what are our top tips for success?
Tips for Families
First, if you will be passing on the leadership baton to a non-family member for the first time, are all the key stakeholders aligned? Even more importantly, are you really ready? Do you truly understand and have you sufficiently prepared for the inevitable changes in your business and your personal life that will come when you step aside?
If the answers to the above are in the affirmative, in order to maximise the chances of success, it’s imperative to be clear on what you’re looking for in terms of personality, values and softer skills from your new CEO. In order to help potential candidates decide whether your organisation is right for them, be clear on what your company stands for and its guiding lights. Ensure that your purpose and mission are fully bought into by your new CEO. If not, no amount of technical skills or leadership qualities will compensate.
Our experience would suggest that CEOs who succeed in family firms have low egos and high levels of emotional intelligence. They will also be naturally collaborative, pragmatic and self-disciplined. Whether or not you know it yet, you will probably judge the success of your new CEO on their ability to forge alignment with you and the team already in place. Probe how good they are at communicating – informally as well as formally – as family businesses often have what an outsider might view as an unusually broad set of stakeholders to manage.
Don’t leave induction to chance, and give your new CEO ample time to soak in the business. Be realistic in your expectations: for all their brilliance, they are sure to bring with them their own frames of reference. Don’t worry if an attitude or two might have to be un-learned. Furthermore, even if you think you’ve chosen a kindred spirit, don’t expect every aspect of your relationship to be plain sailing from the word go. Expect awkwardness!
Long before you offer your preferred candidate the job, be clear on what you want your own involvement in the organisation to be. One of the most common complaints from CEOs who have been hired into family companies with a mandate for change is that once they arrive they find themselves with fewer decision-making rights than they had been given to expect. Therefore, if you have promised to evolve, innovate or invest, don’t expect your CEO to be entirely happy if you end up wanting to maintain the status quo or keep the purse strings closed. Finally, structure incentivisation in a way that aligns the CEO’s goals with your own.
Tips for CEOs
If you’re an incoming CEO, particularly if you are the first external hire the company has made at your level, above all else understand that this transition will be at least as tough for the leading family member as it will be for you, probably more so. Handing the keys of the kingdom to a new leader, particularly a non-family member, inevitably causes angst, so do everything you can to show you’re on their side and to put the family’s mind at ease.
While the business is of course there to make money and build the family wealth, as strange as it might seem, profit might not actually be the family’s primary driver. Explore the emotional attachment the owner has to their business. Most families I’ve worked with see their businesses as vehicles for a higher social purpose that extends way beyond their family interests. Buying into their world view will make for a good partnership.
However experienced a leader you are, throughout the interview process invest time and effort into understanding whether the culture of the business you’re considering joining will bring out the best in you. Exploring the company culture, the dynamics with the family, and working out how you will successfully onboard and thrive thereafter is a subtle process that might benefit from some external support.
Understand that success will hinge far more on how you go about things than what you do. Work hard to understand the preferred modus operandi of the family when it comes to decision-making and communication. Adapt. Don’t feel that you necessarily need to tread on eggshells when it comes to voicing your opinion – after all, that’s why you were hired! However, do be aware that open dissent and an attempt to change anything before you have shown you fully understand and respect what you walked into and built up a strong, trust-based relationship with the family is foolhardy.
Finally, pay special attention to time horizons and appetite for risk: in family businesses, the former can well be longer and the latter lower than you are used to. Making the right decisions for the long term, as opposed to quick ones for the here and now is critical. Ultimately, if there’s anything you need to take to take to heart, it is that, like the Queen, you’re there to serve, not to rule.