Problems Of Professionalizing A Family Firm

It is argued that founders and professional managers analyze problems differently, occupy different positions of authority, and relate to others in very different ways. For example, founders of family businesses tend to be driven by their particular vision of their product or service. They tend to be intuitive in their decision-making, their power is based on ownership, and they motivate their followers through their charismatic behaviour.

Conversely, those trained as professional managers generally derive their power not from ownership but from positions of authority. They tend to make decisions based more on logic and rational analysis than on intuition. Furthermore, these managers tend to be rather impersonal in their interactions with others, in contrast to the more personal style of the founder.

Differing World Views

While not all founders and professional managers differ dramatically along these dimensions, numerous case studies of professional managers entering a family business generally support this proposition. Professional managers often have world views and assumptions that differ from the leaders of family-owned firms. Moreover, the organizational systems and methods of operation that are preferred by professional managers are often antithetical to those of family leaders, who are accustomed to a more informal management style.

The reasons for the differences between professional managers and those without such training who work in family businesses can often be traced to organizational and occupational socialization experiences. Those “growing up” in the family business learn skills and practices that tend to be idiosyncratic to that organization and generally have had little or no experience in other types of organizations. These employees learn the importance of the family’s values and the role of the family and the firm in the community and recognize how to accommodate the needs of the family and top management. Their training is often informal, individual, and technical (not managerial) and is idiosyncratic to the particular work they perform.

In contrast, professional managers are typically socialized collectively in the classroom, where the training is formal, and generic skills are taught as though they could be applied to most, if not all, organizations. The case method, which is an integral part of most management training classes, is generally biased toward the analysis of large, bureaucratic organizations, having well-defined systems and processes. Much of management training is value-free, despite recent attempts to integrate the study of ethics into the curriculum of business schools. After graduation, many professionals go to work in large companies. They also tend to change jobs frequently and thus gain a broad range of organizational experiences.

Conclusion

Thus, having highlighted the differing world views of the founder and the professional manager, these differences are closely related to the issue that the family has a set of expectations regarding the function and role of professional management that often do not correspond with those of professionally managers. Conflict often ensues, resulting in uncertainty and confusion of company employees. Decision making is slowed down, priorities and goals become unclear, and new ideas and projects are delayed as a result. In many cases, the firm begins to lose its competitive edge, and profitability declines.

Related articles:

Professional Management and Family Firms
Alternatives for Integrating Professional Management into the Family Firm


This article has been extracted and modified from Gibb Dyer, W. (1996). Integrating Professional Management into a Family Owned Business. The Best of Family Business Review (FBR): A Celebration. Family Firm Institute, Inc. Boston, USA.

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