June 30, 2016

12 Reasons Family Owned Businesses Should Consider Outside Leadership


business family (1)

While you might not like the idea of an outsider taking a senior role, it could be what’s best for business. We asked 12 members from Young Entrepreneur Council (YEC) to weigh in on the following question:

“If you run a family-owned business, should you bring in outsiders for leadership positions? Why or why not?”

Here’s what YEC community members had to say:

1. Bringing in an Outsider Reduces Key-Man Risk

“By using outsiders within your business, you are more likely to reduce key-man risks by making the position more replaceable. It is hard to replace a family member. It isn’t as hard to replace an outsider. Using outsiders early on will give your business more scalability and more flexibility as it grows.” ~ Mark DaoustQuiet Light Brokerage, Inc.

2. Bringing in an Outsider Gives You a Different Perspective

“I am the President and CEO of my familyowned business, but my COO is not a family member. He always manages to bring a perspective to the table that we may not have in the family dynamic (I work with my brother and two sisters as well). I also feel that he can be that voice of reason between us family members on any and all situations. It’s been working out great.” ~ Kristy KnichelKnichel Logistics

3. Bringing in an Outsider is Good for the Dynamic

“I definitely think there needs to be outside influence in a family dominated organization. No matter how much family members think they can keep their business and personal lives separate, there is always bound to be an issue. Having an outsider’s perspective always helps manage conflict and, in a lot of cases, prevents it. With that said, I love working with my family!” ~ Drew GurleyRedbird Advisors

4. Bringing in an Outsider Can Help the Company

“It’s a nice idea to keep a business in the family, but keep in mind that just because someone is related to you does not mean he or she has the right combination of skills and experiences to do a certain job effectively. Outside leaders may be better equipped to supplement your strengths, and they are also more likely to be objective because they are not as emotionally invested in the situation.” ~ Alexandra LevitInspiration at Work

5. Bringing in an Outsider Will Improve Communication

Family can be complicated enough without adding a business and millions of dollars of revenue. Creating a clear set of roles for everyone from the beginning is key. Bringing in outside team members to act as managers will help everyone communicate more clearly and effectively. They will have a unique view on the business and may provide a different point of view.” ~ Curt ReveletteJonathan’s Grille / Vet On Demand

6. Bringing in Outsiders Can Give You Perspective

Family companies are great for the loyalty, but that loyalty can also mean everyone refusing to admit when someone isn’t a fit for the position. It’s great to work with family, but assess whether it might be clouding how you see your employees and their performance, and whether that might be causing problems. Outsiders can give you perspective.” ~ Adam SteeleThe Magistrate

7. Bringing in an Outsider to Amplify Your Leadership

“Yes, I strongly recommend you bring in an outsider for leadership. However, you have to firmly state his or her position as the leader so everyone understands this person is a vehicle for carrying your own leadership further and making it better. That way, your leadership gets amplified, and you establish an exemplary role model for others to follow.” ~ Kevin XuMebo International

8. Bringing in an Outsider to Ease Potential Conflict

“I grew up amidst a family business. I’ve allowed partners to hire their family. Never have I seen this not create toxic elements in the company culture and place undue strain on those families. But if you have to do it, yes, you need to hire outside leadership. If nobody with a different last name can do the job better, which I already don’t believe, do it to demonstrate fairness.” ~ Corey NorthcuttNorthcutt Inbound Marketing

9. Bringing in an Outsider Can Provide Needed Balance

“The only thing that should stop a family business from hiring an outside leader is if the family matriarch or patriarch is not ready to step aside. Other than that, having some kind of outside voice and influence can often provide the balance necessary to run a business, a neutral third party in a way.” ~ Kevin HenriksonOutlook iOS & Android @ Microsoft

10. It Depends

“If your familyowned business has been and is still a good business and you are sure the family members involved — and the ones that will be involved in the future — know how to manage it, it isn’t necessary to bring anyone else on board. But if you notice the family is starting to harm it, then you should. ” ~ Murray NewlandsDue.com

11. Analyze the Health of Family Relationships First

Familyowned businesses can be as dysfunctional as the family that owns the business. Success for outsiders is not only dependent on their skills in the industry, but also their skills in navigating the environment of the family business. The healthier the relationships between the family members in the business is, the more likely outside leaders will find success and contribute to company growth.” ~ Christophor JurinConstruct-Ed, Inc.

12. Bringing in an Outsider Can Help Raise New Issues

“Running a familyowned business can raise issues that outsiders are not accustomed to handling. For this transition to work successfully, a familyowned business and the outsider need to be fully transparent about the needs, values and overall vision. While bringing in an outsider to head a familyowned business may not be a viable option for some, every business should definitely consider it.” ~ Anthony PezzottiKnowzo.com

Family Business Photo via Shutterstock

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The Young Entrepreneur Council


The Young Entrepreneur Council The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

4 Reactions

  1. Perspective seemed to be a recurring theme and for good reason. Family members come from similar backgrounds and have similar life experiences (most of the time) which limits new ideas. If the organization becomes too insular it can be detrimental in an ever-changing economy.

  2. It may even be better to have a group of people to lead. This will prevent family members from blaming a single person when there is a rule that they don’t quite agree with.

  3. Definitely a proponent of differing ideas when it comes to business leadership. It’s also important to remember that family members, especially 2nd and 3rd generation owners need to be properly trained before they are put into a leadership role. And make sure that they actually want to be in the business, never assume that just because they share the family ties, that means they want to run the family business. A proper succession plan is key!

  4. Both have its own pros and cons. It boils down to the management side on whether to change the culture they’ve been doing ever since they started there family business. There’s always an opportunity for growth when you look at an outsiders perspective as well, but it can also make political issues inside the family more dynamic which could more likely be harmful to the family itself. But neglecting the opportunity of learning something new from the outsider would be such a waste as well. You need to be flexible on these types of situations.

    Great read!
    Thanks
    Tom

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