In an ideal world, many family businesses would prefer to have a family member in charge of the business. However, there are times, either from a long-term perspective or due to near-term circumstances, when there are no family members sufficiently talented, trained, or motivated to serve in that capacity. Rather than force the issue and put the business in a precarious position, it may make sense to choose a non-family member to lead the company as Chief Executive Officer.
Here are the 4 keys to success in this situation:
1. Make sure the non-family CEO is comfortable with and willing to operate within the family vision for the business.
With any new non-family CEO, there needs to be a very clear understanding of the family’s ultimate goals and vision for the company. Discord can occur quickly if the CEO wants to take the company in new directions that fall outside the family’s desires for the business. Sometimes that means family members must first agree among themselves about their collective objectives for the business. But once the vision has been established, the non-family CEO must understand and buy into that vision for there to be long-term success and harmony between the family and their new leader.
2. Clear roles must be established for family members working in the business, particularly those who may have been thinking they were in line to be the next CEO.
If there are existing family members working in the business, it is critical for them to respect the authority of the non-family CEO. It is important to set out clear role descriptions for the family member employees so there is no misunderstanding about their roles in the business, to whom they report, and who they supervise. Any misunderstanding of their roles or undermining by the family employees will spell disaster for CEO, and ultimately for the business. Other employees will take their lead from the family employees who need to project support and allegiance for the CEO.
3. The non-family CEO must understand and be aligned with the company’s established culture.
Shared values, attitudes, and standards which constitute corporate culture are critical to most businesses. In some sense it is what defines the business. Unless the business is in need of a major corporate culture overhaul (which could be why the “outside” CEO is being hired in the first place), it is of vital importance that the CEO understand and embrace the company’s existing culture. In the selection process for succession leadership, it's critical for the family to identify a leader who subscribes to the company’s established culture.
4. A family board should be in place to provide proper oversight and accountability for the CEO.
The CEO should be accountable to the Board of Directors of the company, which is presumably comprised of family members and possibly some non-family members. This allows the family to retain oversight of the company direction and culture. Discretion may be required in determining which family members are on the board and what role family employees should have on the board, since it may be impractical for family member employees to both report to the CEO and hold the CEO accountable.
Has your family business hired a non-family CEO? What did you learn in the process? Share in the comments.