Family-owned businesses frequently struggle with succession planning.
 
It’s not through lack of vision - MDs invariably appreciate that external directors can bring a host of benefits to their companies.

Yet - when the time comes - it can understandably be difficult for families to relinquish control of businesses in which so much emotional investment.

However, getting the right directors into family businesses matters.

Failure to do so is one of the reasons that fewer than 30% of firms survive into the third generation of family ownership, as reported in this article in the Harvard Business Review.

A particular recruitment challenge
 
Family-run businesses face unique challenges in leadership recruitment. There’s inevitably a delicate balance between preserving legacy and driving change. But driving change is often the prerequisite of growth - or indeed survival.

This is why it can be immensely valuable to family firms to hire directors who are able to offer an independent perspective. External leaders with wider industry experience provide objective insights, bridge generational gaps, and introduce new thinking. This matters in rapidly changing markets.

So far, so good. But it works both ways: incoming directors need to appreciate organisational tradition and values. As the management consultant Peter Drucker famously noted: “Culture eats strategy for breakfast”. And culture is often particularly deeply ingrained in family firms.
 
Assuring family recruiters

Cultural fit is a key consideration when ER Recruitment places candidates in family firms.

We start by working with the family to codify not just the skills they are seeking, but their values and ethics too.

This means, after using interviews and psychometric testing to narrow the search to a handful of shortlisted candidates, we are able to show families how applicants map to their brief.

Being armed with our table of competencies and evidence (rather than simply holding a CV) builds the confidence of family firms confidence as they go into interview. It reassures them that the person in front of them has been carefully considered across a host of qualities.

Considerations for interviewer and interviewee

The ER Recruitment process seamlessly integrates professional expertise into family dynamics. But what do the two parties themselves need to consider?

On the part of the interviewer, there needs to be a good degree of emotional intelligence and self-awareness when integrating external directors. Put simply, they will have considered their firm’s own weaknesses. This can be an emotive exercise. Therefore, in addressing perceived weaknesses interviewees require diplomacy and discretion.

What’s more, different family members may have different views on the direction of travel. They may have varying levels of interest in the business between members (both participatory and financial). Successful external directors must therefore be adept at understanding legacy situations and relationships. They should be able to navigate emotional complexity - potentially even acting as mediator when required.

At the same time, external candidates must also be confident enough in their own ability to tactfully introduce new ideas. This is their value. But it entails building trust with all stakeholders. This is why, during recruitment, we work with our partner Breedon Consulting to measure candidate emotional suitability through psychometric tests. It helps to draw out candidates with the necessary emotional and problem-solving capabilities.

Executive hiring for family businesses
 
Of course, once in role, it’s essential that new external hires are empowered by families to do their job. There’s little value in appointing individuals with the aim of driving innovation if they are not trusted to simultaneously act within established organisational tradition. 

Done well, such reinvention will propel firms forward to the third generation and beyond. Done badly and - well - we’ve all seen the TV shows…