In this article, we are going to discuss the function of the professional manager brought into the family business, and his/her relationship with the family.


 


Effective Company Management


 


Members of a family business are constantly on the lookout for ways of making the company management more effective. One of the best things to be done is to achieve harmony among the opinions of the members, and to develop consistent policies that will guide the second generation in the management. This effort starts with a decision about the future role of the Executive Board. Will the Board supervise the management, or will it consult to the management? What will the CEO’s responsibility to the Board be? Should the CEO act on his/her own, or may the CEO act on his/her own, and should the roles and authorities of a team of senior managers be clearly defined, and these managers be report to the Board? The most acceptable answers to these questions must be identified.


 


One of the greatest problems in family businesses is to reach consensus in the executive board. Boards that function well act with the “mutual responsibility principle” in decision making situations. During the meeting, all opinions are open to discussion. When there are no more new opinions to be voiced, voting takes place. At the end of the voting, even the person who defended the most controversial opinion must do everything possible for the implementation of the decision, or resign. The best utilizer of this method is the British Cabinet.


 


External Participation in the Executive Board


Family businesses that want to open out to the professional world and institutionalize, in contrast to those firmly closed to the external world, tend to establish a supervisory board to ensure the healthy functioning of the executive board. The family business has to find a way of dealing with sharing their private issues with this supervisory board. Even in companies where the executive board is only open to members of the family, having somebody from the outside to provide training to this group on meeting skills, or to moderate the discussions, would be beneficial for the development of the board. In time, when the board starts to convene independently, the accountant and/or the legal consultant of the company, and managers who are not family members should be invited to these meetings regularly. They may serve as a source of experience and knowledge, and having an objective viewpoint on subjects that are controversial among family members, they may voice their opinions. Many family businesses should consider forming a council of consultants made up of members outside the family. After the executive board has established itself effectively, an advisory board made up of experts in various fields can provide continuous consultancy services. As they will be totally independent of the owners/executives of the company, the objectivity of their opinions can be relied upon. An honestly functioning supervisory board has many advantages. Directors may act as mentors for managers that are or are not family members. They may keep both generations from positions where emotions are also involved, provide independent expertise on company policies and may pass judgment. They may measure the performance of family members, may help determine salaries, and may vitalize the process of transferring management with their experience and decisions. Doubtless, these benefits will not materialize immediately. It may take years for the directors from the outside and the board members who are also family members to become integrated in a both supervisory and integrating group. However, the result is worth the effort.


 


Professional Manager: CEO


Can the solution to the generation conflict be a professional manager? In order to end the conflict between the generations, either the founder must have planned for the future in a way that he/she can conform with the times and support the new generation only with his/her experience, or a professional manager must manage the company on his/her own decisions and ignore these conflicts. Is this easy to do?


 


What is usually discussed is the difficulty of the family businesses accepting the manager, and letting him/her bring solutions to their conflicts. However, one of the more important issues is ability of the professional manager to protect him/herself from becoming a part of the family dynamics, and keep the fact that he/she is the manager, and not the company owner, always in mind. The family dynamics that are present alongside the company dynamics among family members who are in the management in family businesses can also influence the manager. Feeling closer to one member of a family, or receiving approval from one family member more often than from the others may cause his/her involvement in family conflicts. Similarly, it may be very difficult for the senior member, who is having trouble leaving the management to his/her own children, to allow the professional manager to gain too much prominence. The family business CEO, in contrast to the CEOs of other companies, is not the visible face of the company, but the secret, decisive power. In many family businesses, no member of the family has a personal relationship with the CEO. No family discussions, private dinners, chats are held, enabling him/her to make objective decisions when there are family conflicts, and ensuring the family’s acceptance of the decision.  If you are going to be a professional manager in a family business, you must never forget that even if you make the decisions, the emphasis must be on the family executive board. Furthermore, you must decide in advance if you want to be a friend of the company owner family, or the CEO of the company.

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