Family Business

Tips for how to select the next family business leader

October 29, 2012 

So who will lead the family business in the next generation? This is the most vexing question facing any family business owner contemplating the succession task before them.

With the birth rate still around 2.2 per couple, and cousins and in-laws thrown on top, the typical family business could have multiple family members in the next generation vying for position as the future leader of the business. Moreover, it is highly likely that one or more high-performing employees could be, or want to be, considered to take the helm of the company.

The first default position is to try to not make a decision. There are a variety of ways to do this:

• Divide the company into parts and let each sibling run that portion.

Unfortunately, it is rare that a company has the size to split up, and even if so, would negatively impact efficiencies. More common would be heading up different divisions. However, this still leaves company-wide decisions as shared responsibility.

• Rotate the leadership role. Every 6 or 12 months each sibling takes a turn running the company.

This sounds good in theory, but undermines strategy implementation, consistent leadership style, and having one face to the customer.

Share the leadership role. This is really the default situation when the no leader is actually chosen. There are many family businesses who manage to run the leadership of the company as a committee. But there are more that fail. The trick is to have a very strong culture of respectful communication, and to truly understand and be OK with the fact that sometimes your idea, despite your passion for it, may need to be given up.

• Buy another business to allow one of the siblings to run that.

Again, not all family businesses have the wherewithal to run out and purchase another business. A better and more practical derivation of this is to fund the startup of another business. However, this needs to be done in a professional manner with the intention and belief that it can be successful, not to give a child something to keep themselves occupied or keep them out of the business.

• Bring in or select a nonfamily member to lead the company.

There are two ways this can be done: the right way and the wrong way. The right way is to have a truly qualified professional who is respected in the industry, and by the family members, to lead the company. The wrong way is to put someone in place who is called the leader, but whose job is really to negotiate between the siblings.

But if you truly would like to increase the chances of the family business continuing successfully into the future, a leader should be chosen. As such, the importance of leadership must be discussed and understood. Libraries of books are written on its importance and myriads of historical examples exist to reflect on. And we read every day about the impact CEOs, entrepreneurs and coaches have on their teams. Equally important, it must be explained that each of the children is loved for who they are, and just because one may be chosen as the leader it has no bearing on the parents love for each child. If the company does well, everyone does well.

So how to choose? The best method is to create or obtain a job description for the leader of a company like yours in your industry. While this can be done through interviews, research, and your own experience, bringing in an outside HR professional will create great credibility and impartiality. Once this is established, bringing in outside business professionals to complement the evaluation process can be invaluable. The ideal situation would be to have a board of advisors in place to coordinate this effort.

The final critical element in selecting the next leader to run the family business is to realize that it is not all about who will lead. It is also about ensuring those who are not selected are in support of the decision and can work as a team with the new leader. And remember, maybe the best leader is not one of the family members at all.

Henry Hutcheson is a nationally recognized family business speaker, author and consultant in Raleigh. He can be reached at Familybusinesscarolina.com.

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