Alternatives For Integrating Professional Management Into The Family Firm

There are three basic options available to those leaders of family firms who wish to bring professional management skills into their organizations:

• professionalize members of the owning family;
• professionalize nonfamily employees currently working in the business, or;
• bring in outside professional management talent.

The first two options typically respresent evolutionary and incremental changes in methods of doing business, that is, changes will occur rather slowly over a number of years. Moreover, the company culture will probably not change dramatically. The third option generally reflects a more revolutionary type of change effort, where significant changes in both methods of operation and company culture can occur rather quickly.

Professionalizing the Family

This option is viable when the following four conditions exist: First, there must be family members who are willing and able to gain the necessary management skills and who want to work in the family business. Second, the family must feel that the cultural values established by the family need to be perpetuated and that the family is best able to ensure the continuity of those values. Third, the family must wish to continue to both own and manage the business. Fourth, the strategic focus of the business should not be likely to change in the near future, that is, there must be a relatively good fit between the organization’s strategy and its environment.

Professionalizing Non-family Employees

A second option is to give nonfamily employees the training and skills that will be needed by the organization in the future. This option makes sense if

1. there are few, if any, family members who are interested in working in the family firm;
2. nonfamily employees appear to have the necessary motivation and ability to improve their performance as managers;
3. the trust level between family and nonfamily employees is relatively high; and
4. the family wants to perpetuate family values as well as continue the strategic focus of the business.

These employees are often an overlooked and underutilized resource, often understanding the business better than the family realizes. These employees can play a significant role in developing the business if given the opportunity.

Bringing in Outside Professionals

The first two options are appropriate if the family wishes to continue its present strategy and wants to maintain traditional family values. The third option, bringing in professional managers from outside, is generally deemed necessary where

1. there is little or no expertise, ability, or interest on the part of the family and nonfamily employees to manage the business, and
2. there may also be a need to change business strategy or family values.

Those family businesses that have failed to maintain a competitive advantage in the marketplace or that have been unable to effectively organize and coordinate the activities of the organization are often in need of an overhaul. Without outside and new ideas, such changes could not take place; thus, there is a need for new management expertise.

Conclusion

The issue of professionalizing a family business is one that most, if not all, leaders of growing family firms must grapple with at some point. How this issue is handled can often determine whether or not the family firm will continue to function harmoniously and to grow and succeed. Three options for professionalizing the family business have been outlined. They are not mutually exclusive and can be used in tandem. The key point, however, is that the family must choose a strategy that makes sense, given its current situation.


Related articles:

Professional Management and Family Firms
Problems of Professionalizing a 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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