Looking Outside the Family for New Corporate Leaders by Harvey Wigder When executive members of a family-owned business decide that the time has come to hire an executive from outside the family, the reason for doing so is usually precipitated by a significant disruptive event such as increased marketplace competition, a changing business model, a financial crisis, foundering leadership within the family ranks, lack of a succession plan, lack of vision or strategic direction, or simply the need for new blood and a new way of doing business. It’s one thing, however, to arrive at this decision, it’s quite another to have the will and courage to execute what will inevitably become one of the most profound decisions in the history of the family’s business. For this reason, it is critical that the family executives take the time to understand the implications and ramifications of making this decision. Below are important issues that should be addressed before the family business owners set the hiring process in motion. Put Business Matters Before Family Relations Unlike other types of businesses, a family business is a complex, dual system that consists of two distinct and often contradictory parts: the family and the business. Thus, before a family business owner can set out to hire, he or she must come to terms with the fact that a new hire will fundamentally change both the family and business dynamics. In effect, the decision to hire outside the family suggests that the business owner has already made a conscious decision to not only separate business goals from family relations, but also to put the goals of the business first and foremost. In other words, with this decision, the overarching goal to maintain family harmony or at least family order has shifted to promoting the business, knowing the risk of disrupting or altering the family dynamics. At this point, some family stakeholders may object and try to thwart the hiring process. One way of dealing with a family crisis is to bring in a family business therapist who has experience dealing with just this type of situation and who is able to provide useful third-party perspective to avoid long-term family dysfunction while still meeting the business needs. Step Back and Reassess the Situation Before Proceeding Not rushing into the hiring process is the first rule of thumb. While hiring mistakes are costly for any business in terms of time and resources spent, a bad hire in a family-owned business comes with an emotional cost, and it takes doubly the time for a family-owned business to regroup and begin the process again. Thus, time and care should be taken upfront to analyze the business operations, the business objectives, and goals to ascertain what skills, experience, and expertise are needed to bring the family business to the next level. Come Face-to-Face with Your Blind Spots Also at this stage, it’s important that the family business owners be aware that they may have professional and personal blind spots that they must address in order to understand the kind of executive capabilities that will be required to move the family business forward. For example, while the family business owners may know the mechanics of their trade, they may not have a good understanding of how to run a business, especially a business that is on the cusp of change. Even though the business has been operating in a certain way for a period of time and has achieved a certain level of success, the operations may need to be re-examined and overhauled to make way for the new talent who will be brought in to implement new processes and systems. Obviously, the best and probably the only way to come to terms with one’s blind spots is through the help of an outside expert who can work with you to determine how the new hire will compensate for your shortcomings. Understand That Executive Power Comes with the New Position The decision to hire an outside executive must also come with the realization and an acceptance that the new position has to have a level of executive power that is unprecedented in the history of the family business. For this to happen, the business owners must be willing to relinquish the reins of authority to the new executive. Without this willingness, the case to hire an outside executive will be closed. What executive would be willing to come into an organization without the authority to make decisions that would effect change in the business operations? This is, by far, the most difficult decision that family-owned business members will have to face when making the decision to hire outside the family. Accept That a New Executive Hire Will Change the Organizational and Personnel Dynamics Family business owners must understand and accept that when a new executive is brought on board, the organizational structure, from day-to-day operations to personnel, will undergo fundamental changes. In particular, the business owners must realize that their existing relationships with their employees, including family and non-family employees, are not sacrosanct. The new executive will invariably form his or her opinion on how competent and effective the staff is and make adjustments accordingly, which will surely result in staff restructurings. Making a successful executive hire in any business is a challenge under the best of circumstances. But for a family-owned business, the challenge is even greater: The hiring decision is compounded by the fact that the executive not only understand the business, but he or she must also mesh with the family dynamics. At the end of the day, what’s most required when making the decision to hire outside the family is the courage to do what is best for the business’s long-term success. It all begins and ends courage to act.