Professionals in the family business

When the family business wants to expand, or the would-be heir is perceived as not interested in or incapable of handling the business, the founder may decide to put skilled non-family professionals in leadership positions.

“[If] the owner-founder continually waits and assumes that his prodigal children are going to reform their ways and return to the fold to take up their dutiful management of the company,” says US family business expert Leon Danco, “this may make a nice parable in the Scriptures, but in business it tends to be a disastrous fantasy.”

Making the decision to hire professionals is crucial.  It may revitalize—or damage the firm.

With the entry of professionals come new leadership patterns.  With extensive education and training, professionals normally pride themselves in their skills in management, accounting, finance, marketing, information technology and human resources.

Professionals are usually trained in the problem-solving management style, which may run counter to the traditional situation-accepting style that is inherent in many family businesses.

“The slow, roundabout, intricate and delicate patterns [of the family] are a source of frustration to professionals, who know they have in their bag of tricks more efficient ways of dealing with problems,” says Filipino organizational expert Leonardo Silos.  “The family, on the other hand, usually will not tolerate professional behavior that does not respect the family code, often unspoken.”

Charismatic versus bureaucratic

How does the entry of professionals affect existing employees?  Those who are frustrated by traditional ways of doing things may welcome outsiders at the helm, but this is not often the case.

Envy starts when long-time employees see themselves superseded by young professionals.  But the situation goes beyond resentment.  Many founders are seen as charismatic or father figures, while many professionals are seen as too impersonal, cold or bureaucratic.

Founders normally exhibit more than a business relationship with their workers.  Bonds are virtually familial:  founders attend employee weddings, serve as godparents to employees’ children, pay for employees’ funerals.

With professional managers, the relationship is utilitarian.  Employee commitment depends on salaries, bonuses, performance.  The familial touch is missing, replaced by objective assessment methods.

Concerned about company growth and profits, professional executives tend to see things short-term, wanting results as soon as possible, without much thought for the larger picture.

“Because many professional managers enter a family business during a crisis period, they feel great pressure to get quick results and turn the company around,” says US family business consultant Wayne Dyer.  “Decisions are often made to fire or lay off employees or to sell parts of the business that are not profitable. They are less concerned with product development and innovation and devote most of their energy to improving the company’s financial picture.”

Advantages of professionals

Various studies show, however, that hiring professionals who fit well into the family business makes the latter more automated, competitive, resourceful. The most successful family businesses, especially those that transcend generations, are to some extent, professionalized.  Think of the Ayala, Aboitiz and Gokongwei groups.

Professionals can ensure company growth and thereby maintain family wealth.  A source of expertise, professionals can act as buffers against nepotism.  They can train the next generation, with less emotional baggage.

By focusing on business concerns, professionals can avoid getting immersed in longstanding family quarrels and resentments that hinder the functioning of the company.

Many professionals are initially reluctant to enter family businesses, preferring to work for established multinationals, forgetting that many of these started out as family businesses.

As family businesses become more dominant now, more professionals are enticed to join.  After all, professionals get quick exposure to a wide variety of decision-making situations.  They acquire the power to get things done quickly.

Most of all, they have a good opportunity to learn from and interact with founder-owners, something many professionals I know believe is worth more than any MBA.

Next Friday:  China, India, and Professionals

Queena N. Lee-Chua is on the Board of Directors of Ateneo de Manila University’s Family Business Development Center.  Get her book “Successful Family Businesses” at the University Press (tel. 4266001 loc 4613, email [email protected].)  Email the author at [email protected].