Professionalizing the Family Business
The culture and structure of a family business is organically unique. Most family-owned companies reflect their founder’s ambitions and personal values. Successive generations preserve and cement these values as part of the organization’s culture. However, to grow and evolve, families need to step beyond the clan. Recruiting, retaining and developing external talent is a key element for any family-owned company that aims to professionalize operations.
Harvard Business School professor Boris Groysberg describes the process of hiring external talent as buying expansion rather than developing it from within. In his book Chasing Stars: The Myth of Talent and the Portability of Performance, Professor Groysberg says cultural fit is the most important factor. While absorbing external talent, consulting firm EY suggests a training plan for each recruit that helps them adopt the cultural values of the family. The firm suggests expanding this training to cover more than just the culture and encouraging family members to participate in the training sessions too, based on their experience working with Spanish food processing firm Grupo Calvo.
Conflict resolution is another critical element of external hiring. Mintz attorney Jen Rubin says families could risk magnifying existing conflicts when hiring external talent. In an article published in Bloomberg Law, Rubin suggests making reporting structures as clear as possible and adopting a systematic approach to recruitment to avoid the pitfalls of hiring people beyond the clan.
Some of the largest and most successful family businesses are managed by external professionals. Walmart, Volkswagen Group and Phillips 66 are just a few examples of multi-billion dollar businesses managed by external professionals but owned or controlled by the founder’s family and descendents. Spanish banking giant Banco Santander is, perhaps, the best example of a family business professionalizing beyond the founding family. While a fourth-generation family member, Ana Patricia Botín, serves as the group’s executive chairwoman, the family retains just a minority stake in the publicly-listed firm.