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An Open Letter to the Non-Family Executive

By Craig E. Aronoff, Ph.D. and John L. Ward, Ph.D.

If you’re a new non-family executive in a family company, or if you’re thinking about accepting a management position in a family firm, you may be wondering how to make the experience a successful one. It’s a wise thing to think about, because family firms pose many challenges to executives that they don’t encounter in other companies.

Based on our years of experience working with hundreds of family-owned businesses, we offer the following observations:

--The opportunity for ownership is probably not on the table. Only about 3 percent of family businesses in this country give equity to non-family managers. There are some solid reasons why it’s not a good idea for family firms to offer equity. Doing so dilutes the family’s ownership and, over time, can dilute its control. Families recognize that someday, stock has to be bought back, and often, this can come at the wrong time and put a strain on the business. It’s also difficult to decide who should and who should not receive equity in a company. So, even if the CEO hints that you might have ownership one day, don’t take it too seriously.

However, as a key non-family executive, you should expect to be well-rewarded -- with a fair market-rate salary and incentives that might include phantom stock, bonuses, or other financial considerations.

--Becoming CEO may not be in the picture. While we urge family businesses to create career paths for non-family executives that enable them to aspire to the highest levels in a company, the dream of many -- if not most -- business owners is to pass leadership of the company on to their children. Before you are hired, the owners should make it clear whether or not the CEO role or other top positions are reserved for family. Armed with that information, you can make a more intelligent decision about whether or not a given family company is right for you. Keep in mind, however, that the CEO’s job is not the only important position in the company. If your temperament and ego permit, you might find some other senior-level role equally or even more satisfying.

--All family businesses have ``family issues’’. These range from who in the family is permitted to join the business to how sibling rivalry affects other employees and the business itself. They can include what happens when the owner’s son-in-law, a high-level executive in the company, gets a divorce from the owner’s daughter, or when the founder and his children cannot agree on the direction of the company, or there’s a desire on the part of an owner to have the company provide employment for Cousin Tammy, who just can’t seem to keep a job elsewhere.

You need to anticipate that family relationships will affect the business and that the business in turn will affect the family. We urge you now to educate yourself about the way family businesses work. Many colleges and universities around the country have family business programs that offer seminars for family business owners and key employees. A number of books and publications are also available to assist you. For information on several, please visit our website at www.thefbcg.com.

--You will never really be “part of the family’’. No matter how well you are treated, no matter how much the family likes you, and no matter how many family events you are invited to, you are not a member of the family.

You may be the only non-family employee invited to a family wedding. It’s likely the owner will confide in you, and you will be exposed to personal information about the family. But don’t mislead yourself -- you still aren’t part of the family.

It’s best to be as professional as you possibly can. Be friendly and polite, but keep a little distance. Don’t let a desire for special treatment by the family become part of your emotional need. With the family, family will always come first. Family relationships are stronger than other relationships.

From More than Family: Non-Family Executives in the Family Business by Craig E. Aronoff and John L. Ward. Copyright 2000, Family Enterprise Publishers.

 

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