It is a no brainer to say that there is no family in the world that can continue to provide all the knowledge, talent and energy it needs, to fuel the growth and development of their business, indefinitely. Yet it is amazing to see the usual reluctance to bring in outside talent, even when it has become abundantly clear that the business will flounder if the knowledge and skills that are needed are not provided in a timely manner.
Here are some important things that Family Business Owners/CEO’s must keep in mind so that they can create a climate that can attract and retain the best professional talent.
The first and foremost thing to do is to consciously make the decision to hire professionals. If professionals from big-name MNCs are hired as a matter of prestige or fashion as happens more often than one would like to believe, it is almost certain that the hire will go wrong. Once the conscious decision has been taken it is essential for the family to spend a sufficient amount of time helping the professional to understand what he or she is getting into. Family business cultures are as different from each other as can be. The professional that the family business hires will more than likely not have any idea about the dynamics, culture, taboos, norms and accepted behaviors of the family and their business. It is likely that given the corporate MNC culture of a Western company, he may find some of the norms and expected behaviors difficult or even impossible to follow. In such cases it is better that this is discovered early and the hiring is not done, rather than have to go through what can be a painful and embarrassing termination. Be frank with the incumbent; let him see what and how you are from as close as possible. Share all that you do and expect him to do without reservation and then let him decide if he wants to join. It is a good idea also to create a space for his family to meet your family and share some mindscape. The social interaction can help in breaking the ice and helping both parties to see each other without any pretense, voluntary or otherwise.
- Choose the best:
Believe me, the best really want to work for you. Get professional help to hire the best because the best don’t just happen round the corner. It is a common mistake that many family business owners make of treating professionals as a ‘cost’. They hire below themselves as they don’t want to pay what it takes to hire the best. This is a very costly mistake. And you will pay that price. It is an accepted fact in leading edge global MNCs that hiring superior people is the most cost-effective choice. Survey after survey shows that superior people may be up to 15% more expensive but produce between 40-50% more in terms of output. Hire the best and from them, demand the best. Those who are worthy of their salt will welcome working to high standards. This will also create the kind of achievement-oriented culture you need to attract the best talent. Winners attract winners. So do losers.
- Treat them with respect:
They are not the ‘hired help’. They work for the company, not for you personally. Don’t use them to do your personal jobs and actively discourage those who will offer to do them to suck-up to you. Give professionals responsibility that is commensurate with their qualifications so that you can really leverage their talent and experience for your company. Some family business CEOs collect professionals from various MNCs like people collect watches or paintings. Then they talk about who they have working for them. But when it comes to giving them freedom and authority to take decisions and really bring about change in the company, they tie their hands and don’t allow them to function. Professionals who have self-respect and who are interested in their careers, leave when they see what is happening. Others, for their own personal reasons stay on, lose their edge and gradually vegetate at your expense.
- Don’t make promises you can’t or won’t keep:
Treat them like the professional colleagues they are. Some business owners in their eagerness to hire some high profile professional promise them all kinds of things which they personally have no authority to deliver. When the promises don’t pan out, the professional justifiably feels let down and will more than likely leave. I recall one case where one family business CEO hired a high-profile HR head from a global MNC with the ‘incentive’ that the family wanted to replicate the global MNC’s corporate university in India. The HR professional was very excited believed the dream merchant who hired him, only to be hugely disappointed later. He lasted with them for all of six months.
- Pay well:
This is a big one. Many family business owners are so used to doing things themselves or getting their family or friends to do things for them for love that they almost take umbrage if anyone suggests that service needs to be paid for in cash. When hiring professionals, they treat having to pay a salary like having teeth extracted and try to haggle and pay as little as possible. On the other end of the spectrum are those who are over generous and pay out of guilt or to tell their friends how much they are paying key professionals. Both approaches are wrong. If you pay peanuts you get monkeys who will steal the peanuts. Honesty does have a price, believe it or not. And overpaying does not buy either loyalty or dedication. Check the market. Pay either the market value or 5% -10% more, since your company may not be such a great name to have on the CV. But don’t pay more than that. If the person you are hiring needs to be literally purchased, then he is not worth hiring. You want people to join you also for the challenge and for what they think they can achieve for you.
- Create a clear career path for them:
Professionals are very anxious in family businesses to know where their career will take them. They may accept not becoming the CEO, but they would naturally expect to get to the No.2 position or to the head of a functional or SBU role in a reasonable time. Create a career path for them based on clearly defined goals. I have recommended that even the CEO’s job must be open to professionals because you want the CEO to be the best qualified person. And if it is a non-family person, so be it. That is good for the business and by inference good for the family.
- Demand excellence:
Demonstrate excellence. Inspire and then never settle for anything but the best. Competent professionals like to demonstrate what they can do. Set high goals and reward those who exceed them, handsomely. A good objective performance management system is also a major asset in attracting and retaining the right people. Many professionals are very apprehensive of subjective appraisals in family businesses and the whole business of being ‘liked’. A clear-cut performance management system assures them that their achievements will be noticed and rewarded objectively and that their career progress does not depend on subjective likes and dislikes.
- Expose them internationally: Invest in their learning:
Give your key professionals international exposure. Let them publish, present papers at international seminars, teach at business schools, participate in service programs. Only if they meet others will they learn. What they learn they will bring back to you. Sure, a couple will leave. Those couple would have left anyway. In any case you need a flow of a clean cool breeze, now and again. But others will join you because they see the caliber of people you have working with you. Make learning an item on the Performance Appraisal System. Provide learning opportunities, pay for them, and support those who learn. Then ask them how you can enable them to apply what they learnt in your place. Without the challenge of international exposure professionals will lose their edge and thereby their usefulness to you.
Don’t be shortsighted with respect to employee development. People who want to learn are precisely the kind of people you need. Don’t punish them for wanting to learn. Appreciate their spirit and support them, so that they will create a culture of learning in the organization. Some employers think differently, to their own detriment.
- Give them a stake in the business:
Key professionals help you to become more profitable. They are the cause of your wellbeing. Acknowledge and appreciate that materially. Believe me, they are smart enough to know their own worth. They need to be appreciated and their contributions acknowledged. The best option is to give key executives a percentage of the profit. Some people recommend stock options or phantom stocks, but these can have other implications for the family itself. A percentage of the profit is a neat, clean way to give the professional a stake in the company without raising other issues. They get it if they deliver. Not unless.
In conclusion, business success is about skills and knowledge. Not about genetics and surnames. The family needs the business. The business doesn’t need the family. Just like flying a plane and owning it are two different things and signing the cheque for the plane doesn’t make you a pilot, so also in business. Owning a business doesn’t automatically make you a great businessman. Hire the right people, treat them right, pay them right. That’s the best way to ensure that your own lifestyle doesn’t suffer.
For more, please read my book,
The Business of Family Business’, http://amzn.to/2ptG4sc