In the world of family-owned enterprises, where personal relationships and business obligations are deeply intertwined, introducing external advisors can be transformative. These professionals bring an objective perspective that is invaluable for innovation, governance and navigating complex market dynamics. For family businesses, external advisors are not a luxury. They are a strategic necessity, pivotal for fostering sustainable growth and preparing for future transitions.
Too close to the trees
Often, business owners and CEOs are too close to the trees to see the forest. A pair of fresh expert eyes can so easily see the unexploited opportunities lying there in easy reach. There are walls business owners or CEOs cannot see through at all—but external advisors can. This can save companies years, and boost their profits with ease. There is a reason why many of the richest entrepreneurs in the world and many of the most famous CEOs use external advisors and coaches.
At the start of his TED talk he gave a few years ago, Bill Gates said, “Everyone needs a coach.” Gates, who has also been coached by Warren Buffet, understands that a coach can provide a fresh viewpoint on a situation. A coach can help you take a step back, look at your limitations or the situation from a different perspective, and question yourself intelligently.
Global best practices
It is crucial that the right external advisors have global expertise and experience so they can apply global best practices. But they must also have an intimate knowledge of the local markets in which their clients’ businesses operate. This combination gives them a unique edge. I remember one of our Asian clients saying, “It would have been useless for us to work with some hotshot US consulting firm that has no real knowledge of how Asian markets operate and of the peculiarities of Asian culture.”
In addition, it does not pay to save. The wrong advice can cost you years of your life, and your business millions, if not more. Go for the best money can buy, and that you can afford. There is a reason why the best consultants and the best consulting firms in the world have a long list of client testimonials: They would not be where they are if they did not know what they are doing.
The crucial role of external advisors
The introduction of external advisors provides a fresh perspective that is crucial in environments where historical practices and familial loyalties might stifle growth and adaptability.
One of the primary benefits of external advisors is their ability to provide unbiased, objective insights. Family dynamics can sometimes result in decisions that are more emotional than strategic. We have seen this many times with our family business clients around the globe: Emotions run high. Often, decisions are made on a whim, without proper deep analysis and investigation. My team and I often introduce strict discipline at this point, set rules and guidelines, so the best strategic decisions win.
External advisors stand apart from emotional dynamics, offering clarity and impartiality, especially useful in resolving conflicts that family members alone might find challenging to address. For example, one of our clients, a wealthy US family business conglomerate, had two siblings run the business, but only one of them was the CEO. The mother came to us with the request to professionalize the business and also bring peace to the constant sibling rivalry. We established clear swim lanes between the two siblings, and created the ritual of a weekly huddle between the two, in which they could vent anger and frustration, but also address important business decisions. This was a major win for the brother and sister who did not talk to each other for years, and had left the business in constant chaos.
Another prominent example is the Italian fashion powerhouse Versace. It experienced turbulence after the death of its founder, Gianni Versace. His sister, Donatella Versace, took over, but her initial years were marked by internal conflicts and a decline in brand prestige and financial stability. The involvement of external advisors helped stabilize the company by providing strategic direction and facilitating a successful transition. This culminated in its acquisition by Michael Kors Holdings Limited, which revived and reinforced the brand’s market position.
Expertise in specialized areas
External advisors bring specialized knowledge and skills that may not exist within the family, particularly in crucial areas such as digital transformation, international expansion and regulatory compliance. The Murugappa Group, a diversified Indian conglomerate, is an exemplary case where external expertise was instrumental in streamlining operations and spearheading international growth. This strategic integration helped the family business compete on a global scale, leveraging technology and innovative business practices recommended by their advisors.
Driving innovation and change
Innovation is vital for any business, but in family businesses, the reverence for tradition can sometimes hinder new ideas and practices. External advisors introduce innovative thinking and challenge the status quo, promoting a culture of continuous improvement and adaptation. A notable example of this is Ford Motor Company, which after a century of family influence, faced stagnation and financial difficulties. The appointment of Alan Mulally, an outsider from Boeing, as CEO was pivotal. Mulally applied his expertise in engineering and corporate turnaround to revamp Ford’s product line and operations, driving a remarkable recovery without the encumbrances of family history.
Selecting the right advisors
The success of integrating external advisors largely depends on selecting individuals who are not only skilled but also a good fit with the company’s culture. They should understand and respect the family’s values and history while pushing for necessary business evolution. This balance is crucial for maintaining harmony and ensuring that strategic advice is both heard and heeded.
Setting clear roles and boundaries
It is essential to define clear roles and expectations for external advisors. They should know their boundaries within the family business and the extent of their influence. This clarity prevents conflicts and misunderstandings and facilitates a smoother integration into the company’s fabric.
Fostering knowledge transfer and continuous learning
External advisors can also play a significant role in education and training for both family and nonfamily members. This approach ensures that the business does not just depend on external help but builds internal capabilities that sustain growth and adaptation long-term. For instance, Luxottica, the Italian eyewear manufacturer, saw significant benefits from external leadership, which not only brought diverse perspectives but also enhanced internal competencies that supported its evolution into a global leader. INQ
Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries: www.TomOliverGroup.com or email Tom.Oliver@inquirer.com.ph.