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Walking by his father's office, a young second-generation storeowner is curious about the stranger he spots there. "Just who is that guy in Dad's office -- and wasn't he hanging around here a couple of days last week?" he asks.
"Don't worry," responds the longtime receptionist. "Your dad tells me that he's someone who's here to help us."
Help, indeed. Hired as the new c.o.o. of the company, that "guy in the office" will not only give Dad a well-deserved break from it all, but he'll mentor the next generation of management, who Dad believes is in no way ready to lead his family-owned supermarket company.
According to John Eldred, founder of Ambler, Pa.-based Transition One Associates, this scenario is becoming a real-life experience for many family businesses that lack both structure and a clear vision of how the owners would like to move their businesses into the future.
Eldred, who has worked with next-generation leaders across the country, including Disney family members, suggests that, difficult as it may be, tapping an outsider to run the business is one of the smartest decisions a family can make to improve its chances of continuity and success. Stressing the importance of separating ownership from management, he encourages clients to first determine whether the business is truly in need of succession -- or perhaps even a restart.
"Sometimes it's best to start with a fresh canvas," says Eldred. "Family members must decide if they really want to be in business together, and if they do, in many cases that leads to hiring a professional manager to run the company."
According to the family business expert, three critical factors must be evaluated when deciding whether to bring a nonfamily member on board to lead the company. Those factors are collegiality, clarity of goals, and collective competence.
"Collegiality is just another way to describe how much the family likes or dislikes getting together and solving problems," explains Eldred. "Typically, when low collegiality exists, it's best to bring in an outsider so the family can avoid having to make those difficult and sometimes painful decisions."
Clarity of goals makes operating any business less onerous. "Key stakeholders must be clear on what they want," notes Eldred. "Maybe they just want the emotional pain and stress to go away. Perhaps they want the family business to continue and net $1 million in profits during the next fiscal year. Whatever the case may be, establishing clear goals leads to rational discussions on the best way to get there."
Once family members determine that they wish to continue working together, they must ask, "Is this group capable of leading the business where it needs to go?" According to Eldred, "If it's determined that the group is not capable, then it's definitely time to bring in a new sheriff."
The right stuff
What qualities must that new sheriff possess? The most important traits are integrity, emotional maturity, and the ability to manage change.
Says Eldred: "You obviously want a person who is accountable and does exactly what he or she says they're going to do -- and someone who is past the ego needs. The nonfamily leader must sincerely want to help the next generation to learn and improve their management skills. The worst thing that could happen is to bring in a person of lesser principles who would seek to capitalize on the family's weaknesses by keeping people in the dark and out of decision loops."
He continues: "You also don't want a hand-holder. You're looking for that person who will manage needed change not only in strategy, but also in the structure of the business, compensation systems, identifying key players in the organization, and more."
Agenda for change
Eldred strongly advises placing the responsibility of finding the new leader on the shoulders of the next generation. "In the spirit of collegiality, the ideal process would be for the family to make the decision collectively. Involving all key players will allow a sense of ownership in the decision to emerge."
Eldred additionally urges the new sheriff in town to create a clear set of goals to succeed in such a business environment. "Plan on a three- to five-year commitment. Obtain a clear, written contract from the family, and work daily on positive politicking by building independent relationships with all stakeholders. Most important, after three months on the job, present to the family your agenda for change."
He adds: "Implementing change will demand support from key family members. Ask each to play some role in championing the change."
And Eldred has some words of wisdom for Dad, as well: "Be clear about what you want from the new leader and pay attention to their not getting overwhelmed. Reward the person with bonuses when they truly deliver results, and approach mistakes as a normal part of taking over. Establish a regular communication vehicle, i.e., once-a-month meetings, to allow serious strategic-level discussions to take place. Most important, disappear occasionally so everyone gets a clear sense of who's in charge.
"And by the way, when you're out and about, go ahead and buy yourself a good straitjacket," he adds with a laugh.
Independent Retailing Editor Jane Olszeski Tortola can be reached at [email protected].