Growing the Family Business – Outsiders or Intergenerational?

517755_metaphoto_21When a small family business finds itself in growth mode, or at least with aspirations of growth, a common mistake is often made that hinders any growth altogether:  the mistake of automatically placing someone in the family lineage in charge of driving the company forward.  It might be the up-and-coming prodigal son who’s been earmarked to take over from the old man on his retirement, or it could be the owner’s mature sister who’s bringing her years of big corporate experience to the family business.  Either way, the best decision isn’t always an automatic family succession.

Succession Planning

In planning for growth and succession, a family at the heart of their business needs a clear vision of where the business is at and, most importantly, where they want to take it.  Some families simply don’t want growth and others have huge ambitions.  The point is, a vision must exist.

The next step is to understand the core capabilities required to achieve that vision.  Generally growth requires some key changes to the nucleus of a family business:  It needs a stronger strategic model from which to base decisions, a more functional internal staff structure and a much greater commitment to investing in the development of people – both those in the family and “outsiders”.    Only when all the capabilities are identified can the task of finding a leader or team of leaders begin – and it’s important the family surname is taken out of the equation.  All potential candidates, whether they are related, existing “outsiders” within the business, or new external candidates, should be assessed objectively against the list of capabilities.

Finding the “Right” Person

For most small businesses, employing people – especially management – is more about finding the right person, not the best person.  Often new staff are hired on their previous work experience alone, without ever having demonstrated any of the core capabilities required.  On paper, they were the “best”.  But in practice they aren’t “right”.  The decision is made based on the candidates resume, not on information uncovered from the interview process – after all, the family business owner isn’t always an expert in interviewing candidates.

So focus the interview and selection process (regardless of whether it’s an outsider or family member!) around the ability of the candidate to demonstrate previous application of the required core capabilities.  This ability to really get under the skin of candidates will result in a much higher chance of appointing the right person for the role.

Having a family vision for the business, not automatically assuming an intergenerational succession plan, identifying the core capabilities required to achieve the vision and not assessing candidates just on their previous work experience but also on their demonstrated application of the core capabilities  – adopt these steps and you are well on your way to having the right people leading your family business in to growth.

Clayton Moulynox – Evolve IT Australia
We fix business problems, not computer problems –  Develop, Solve, Evolve.

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Comments
4 Responses to “Growing the Family Business – Outsiders or Intergenerational?”
  1. I am the author of a book entitled, Every Family’s Business: 12 Common Sense Questions to Protect Your Wealth.

    I enjoyed your piece on Growing the Family Business — Outsiders or Intergenerational. In my book I take the contrarian view that every business must be sold if wealth is to be protected –sold to a family member, sold to a third party but always sold never gifted. Small business owners especially love this message. They have invited family into their business and the book shows them how to get out with their wealth and family relationships in tact.

  2. smallbizexperts says:

    Hi Thomas, thanks for your comment and I’m glad you enjoyed the article. That’s a great point about never gifting the business and certainly makes sense as a way of protecting the wealth. I’m all for giving family members opportunities in the family business – I just think it’s so important to make sure it’s the RIGHT opportunity, not just an assumption they will fulfil the top job. I bet you could share some examples of great people thrust in to the wrong position to the detriment of the business.

    Clayton Moulynox – Evolve IT Australia

  3. Thanks for the wonderful resource. I have often wondered this same question and you have helped me look at the situation in a more objective way. Thanks for the help!

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