How to build successful relationships with non-family directors
Tuesday, 17th January 2017
As many family-owned businesses grow and become more successful, they often need to start thinking about bringing in senior people from outside the family, to help add to the skills base and take the business to a new level.
This may be because a family member wants to retire, or because the current directors recognise that they do not have certain skills or experience which the business needs.
The possibility of bringing in a senior person from outside can create conflict within the family, as it can be hard to think about giving up control of even part of your business to someone who has not grown up with it.
This means that the first step to take is to have a frank and open discussion within the family about what bringing in a new person will mean, in terms of:
- Changing roles;
- Sharing responsibilities and decision-making, at least at the operational level;
- Commitment; and
- How the family members will make sure that the relationship with the new manager or director will work.
Some family members will understandably feel very uncomfortable about bringing in an outsider to help run the family business, so it is best to deal with those concerns well in advance of the new person coming in.
From our experience of helping family-owned businesses bring in external people - and of helping untangle relationships when they go wrong - we recommend that you need to:
- Have a clearly-defined role for the new manager. This may mean re-shaping and clarifying the roles of family members in the business, and making sure that people do not step into other people's areas of responsibility;
- Negotiate a detailed Employment Contract for the new manager, which sets out their pay and benefits package, and a clear Job Description. It is also a great time to put Contracts in place for other family employees, to make sure that the new manager does not feel that they are being treated differently from family members at the same level within the business;
- Arrange regular Board/Management meetings, with proper Agendas and Minutes, which are focussed entirely on the business, and do not stray into other family issues; and
- Think carefully about how you will integrate the new manager into the business - and how you will keep them motivated. Your plans will need to recognise that the new manager will find it hard to be the only non-family member of the management team. This means that they will not have the shared history of the other members of the team (both inside and outside the business), and may not immediately understand the family dynamics. You must also make sure that they do not feel that they are being left out of any decision-making process in which they should be involved.
Brining in someone from outside the family to help run the business has pitfalls for all concerned, and can be very expensive if it goes wrong - but careful planning and preparation should help mean that the relationship works.
The dynamics of the business will change, and management will inevitably become more formal, as roles are clarified and decisions are documented - but that all should help contribute to the continuing success of the business, whether it is to be kept within the family, or prepared for sale in the future.