The role of CEO is a tough, demanding position and is loaded with the highest of highs and lowest of lows. Being a family business CEO entails another set of challenges and opportunities that requires a combination of business discipline and family dynamics.
The family business CEO is not only responsible for leading a profitable business but assumed to also understand family dynamics in and out of the workplace. Working with family members — especially if you're not one — creates an unusual set of circumstances stemming from the emotions of the family and the needs of the business.
Leading a successful, multigenerational family business requires the CEO to establish practices that lead to better communication and harmony. Here are five steps:
The conflict that originates in many family businesses often arises from family members having unclear or differing expectations about their roles and responsibilities.
The most effective family business CEOs ensure that family members, inside and outside the business, understand their roles and responsibilities to the company, to each other and to the larger family group.
Establishing some formal governance, such as a family council, is a great way to establish goals and objectives of the family and meet to discuss progress.
There's a clear tendency to separate and protect the business from the family. For example, family members typically aren't invited to collaborate with other business executives to develop a vision for the company, unless those family members are in senior positions in the company.
This makes sense, as these family members aren't in the trench and battling the market every day. However, they still want to know what is going on.
Successful family business CEOs understand the need for regular meetings with the larger family, separate and apart from business meetings. These meetings serve as a communication channel to share information about the company and its performance, as well as set expectations in key areas such as dividends, reinvestment, growth and liquidity.
These meetings are not a forum to get in the weeds of the business. That is the executive team's job.
Another benefit of special family meetings is to build relationships and unity among family members and to strengthen family values. Again, a family council is an excellent mechanism for this.
Eighty-five percent of family business CEOs say establishing an independent board was the most important business decision they ever made.
Having a board of directors provides a sounding board and, in some cases, specific expertise for the CEO about strategic and operational issues. They also can act as an objective group of business professionals to give feedback on the performance and advancement of family members.
The most effective family business boards include some family members and some outside members, along with the CEO.
It is a big hurdle for a family business, but it will be invaluable.
Many successor CEOs who take over from their parents get caught in the trap of trying to lead like their parents. This is encouraged by others around them who constantly compare them to their parents.
Effective successor CEOs respect what their parents have done but establish their own vision for what the company needs moving forward. This requires the senior generation to let go.
As the late management consultant Peter Drucker said, “The final test of greatness in a CEO is how well he chooses a successor and whether he can step aside and let the successor run the company.”
Running a family business is dynamic, challenging and ever-changing. Success in leading a family business takes commitment. Small steps, every day, make you better.
These simple steps, such as reading, planning, journaling, exercise, engaging a coach, family time, seem like they don't really affect your life, but they do. You don't notice the next day or the next week, or maybe even the next year, but like compound interest, over time, they deliver results.
Meanwhile, the knife cuts both ways. Simple steps in the wrong direction (or no steps) eventually deliver results that lead to failure.
Leading a family business has two areas of focus. It involves managing the business strategy and operations while attending to the emotions and dynamics of the family.
A successful family business CEO will work to establish a vision for the future, engage the family, formalize family governance and business governance, set clear expectations for both the employees and the family and maintain a philosophy of lifelong learning.
Tom Garrity is managing partner of Compass Point Consulting LLC in Hanover Township, Northampton County. He is a certified coach with Gazelles International and a certified exit planning adviser with the Exit Planning Institute. Compass Point provides growth and business transition consulting to small- and medium-sized businesses. He can be reached at 610-336-0514 or firstname.lastname@example.org.