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Business Observer Wednesday, Aug. 3, 2022 4 days ago

Leading a family business — when you’re not part of the family

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The arrangement can be both high risk and high reward.
by: Denise Federer Contributor

Not all family businesses are led by members of the family. There are a variety of reasons for this. In some cases, the business leader is an entrepreneur who prefers to focus on the big picture and needs someone else capable to manage the day-to-day operations. In others, a business owner may be ready to exit but there are either no family members to succeed them, or the family members in the business aren’t ready to do so — even if they are part of a succession plan.

Whatever the reason may be for having a non-family leader in a family business, the arrangement can be both challenging and rewarding for the leader and the family.

 

The risks and rewards for family businesses

Most family businesses like to keep leadership duties “in the family” — and for good reason. Family businesses are not run like a traditional corporation. The family dynamic is always at play, and as much as family businesses would like to operate like a typical business, it’s just not realistic. Often, a good deal of business gets done around the dinner table, and if you have a non-family leader in the business, they likely aren’t at that dinner table. These decisions can sometimes undercut the leader’s authority — especially if they aren’t communicated to them in a timely fashion.

Appointing a non-family member as the business leader can also cause consternation in the family. Some family members who may have been gunning for the big chair may be upset.

But there are a variety of benefits to bringing in someone outside of the family. For one, it may be a necessity. If the eventual family leaders are too young or too inexperienced or don’t want to take over, family business owners have no other choice. But in other cases, bringing in a non-family member can be a boon to the business. The leader can help mentor a family member who may eventually take over. The leader can also bring a new perspective to the business that helps boost profitability. And best of all, the non-family member can operate (mostly) outside the family politics and concentrate on the business itself.

 

The risks and rewards for non-family leaders

Becoming a leader at any type of business is a fantastic career achievement. The rewards are obvious — good pay, control over your own destiny and the opportunity to create magic in the business. But for non-family business leaders, there can be a minefield of obstacles to overcome to become both successful and emotionally satisfied.

In a family business, you might have a seat at the table in the boardroom, but what about the dinner table, where many family business decisions are debated? For this reason and others, your career growth probably won’t go any further than the current position. You also may find yourself frustrated by the lack of decision-making ability. In many cases, major decisions still must go through the matriarch or patriarch of the business. There may also be expectations of non-family leaders to work hours that reflect not just their commitment — but as if they are owners of the business, which may feel burdensome at times. Additionally, you may end up as the supervisor of family members, which can be tricky to say the least. But none of these issues are preordained — you can have a wonderful and rewarding experience as a non-family leader of a family business. Here’s how.

 

How to make the arrangement work for both parties

Making the non-family business leader in a family business dynamic work boils down to one thing: trust.

Leaders must be able to enter the “circle of trust” within the family. Establishing trust takes time, but without it, the arrangement is doomed. Both the family and the leader have a responsibility to establish trust. But it’s essential for the non-family leader to drive this process.

Before you accept a leadership position with a family business, it’s a good idea to interview the family about the business and how the family operates within the business. Is the business a “business-first,” “family-first” or “family enterprise” model? How does the family think about the business?

The way a family business operates its company will provide you with important insights into whether you’ll be able to do your job successfully. You’ll also want to learn about the family hierarchy, where you fit and how to respect the hierarchy — and make it part of your considerations in business decisions. Above all though, to be successful as a non-family member leading a family business, you’ll need to practice patience and acceptance. Learn to be patient with the sometimes inefficient flow of information and the decision making style, and learn to accept that family businesses aren’t corporations, and don’t operate as such.

If you do your research on the business, get to know the family and how they operate and go into the job with a clear view of the realities of how things work, a non-family leader can be incredibly successful and happy working at a family business.

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