Every growth strategy requires people at some stage. The challenge therefore is making sure you have the right people in place to achieve the growth. And for a family business, this can be a little more challenging.
All organisations, by their very nature, require a strong leadership team in order for the business to thrive and develop. Family businesses are no different; but they may be more complex.
Whilst their management teams are confronted with the same daily demands and monotonous issues of any other business, they can also face additional hurdles when dealing with a panel of family members. The ability, therefore, to balance family relationships with key strategic decisions is key.
The question is whether a family member, or an external person, are best placed for this job.
Not surprisingly, a survey* found that family members are considered the most trusted advisors by far and that the majority of family businesses restrict their management team to family members only.
This may or may not be a conscious (or even strategic) decision, but sometimes it is a successful approach. Other times, it is a complete hindrance. Either way, there is a set of core skills required to lead a family business:
- Managing conflict
Given the importance of sustained family cohesion in a business’ ultimate success, a simple lack of trust between family members and/or the management team, or even just one disgruntled family member, can easily (and quickly) escalate the chance of conflicts arising.
Experience of handling conflict is therefore one of the most important skills to have within the management team of a family business, especially for the person at the helm. Strong family relationships within the company can mean that emotions run high from time to time, particularly with regard to sensitive issues such as individual success and wealth generation. Being able to settle these diplomatically is a great benefit.
- Communicating effectively
Equally as important as managing conflict is the ability to discuss such matters openly and honestly, whilst remaining rational.
The benefit of openness doesn’t only work to resolve conflict, it can also foster a positive approach to innovation and creative ideas. The skill is in building an environment that breeds effective communication, whether this be day-to-day conversations (or interventions!) between family members or more strategic discussions with the wider team.
Everyone involved must be feel a sense of confidence in the management team that their input and opinion are valued; an environment where people are happy and willing to contribute is an environment that is conducive to a positive output.
- Promoting alignment
Cohesion in a family business is essential, not least because of the challenges associated with the increased likelihood of tension and disagreement. But also, because a team that is aligned will positively influence the chance of building a successful business.
A great advantage in achieving alignment is that family businesses tend to excel at living by their company values. They genuinely believe that the business is an integral part of what defines their family. The leadership challenge is ensuring this this is carried through the entire business.
A good leader will not only need to understand (and believe in) the family’s long-term goals but achieve buy-in to these from people outside of the family too. They need to be motivational aspirations for all involved, coupled with appropriate rewards at every level of the business.
- Encouraging change
As family businesses are often built around heritage and values, the ability to drive change is fundamental to achieving a strong, and realistic, strategic vision.
Managing a business with clarity and confidence will ensure a leader is making decisions based on meeting the need for positive business growth, whilst playing to the emotions of retaining family tradition. The outcome should be profitable yet coherent with family values.
This will be achieved when a leader challenges the way things are done (or have always been done) and promotes change that steers the business towards positive growth – whether this be location change, product change or even people change.
The skill is in managing the change through without bruising the legacy of the business.
These are just a few of the essential skills required to lead a business through long-term success, let alone a family business with strong internal ties. Communication, motivation and flexibility are all required qualities when navigating the journey of a growing family business; a strong leader will not only buy into the family values, but will turn these into a positive for all involved.
But what happens if a non-family member is part of the leadership team?
The management of a family-run business usually changes over time as ownership of the business moves through generations. This may involve someone from outside of the family being allowed in.
Being detached yet still committed to the family provides unique leverage by having the ability to take a more objective view of family issues, helping to prevent them hindering a business’ success.
But being the outsider isn’t easy – they can be seen as a threat. So, it is important to have an individual who has the sensitivity to deal with family dynamics, yet the strength to stand up to the family too.
Family businesses generally have the advantage (and disadvantage) of being more people-centred and a leader therefore needs to be able to tackle this carefully, using this personal culture as a competitive advantage. Anyone new coming in should be allowed to apply their own leadership style in line with the legacy of the business.
The chances are that, if someone is employed externally to join the leadership team of a family business, they are there for genuine reasons and with the correct skill set, rather than someone who has fallen into the position through succession (and without the necessary qualities).