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As a family business evolves over the years, a time may come when the company finds it advantageous to hire someone from outside to manage its operations. This is especially true if family members aren’t prepared, qualified or willing to run the business.
Choosing to hire an outside manager can be one of the hardest decisions a family-owned business must make. Family dynamics, finances and the possibility of hurt feelings may come into play.
But, if handled well, hiring a manager to fill a gap in time or run the business over many years may be the best option for both the business and the family.
While there are no magic rules to ensure that the relationship with the outside manager will be successful, certain key areas should be considered.
1. Choose the right person
To achieve success with an outside manager, half the battle is won by choosing the right person. Although right is a subjective term, the person for the job must meet your selection standards.
Before beginning a search, identify the qualities you want in a manager. Considerations should include an ability to communicate with family members, management philosophies and beliefs regarding leadership, growth and risk.
Explore a candidate’s prior success in running a family-owned business and other successes. Although no one will be perfect in all areas, consider which areas are of greatest importance to your business. Then search for a person who could meet those needs.
2. Plan the manager’s role
Before a company brings in an outside manager, it should formulate a clearly defined plan. Will this person’s role be to help groom a family member to take over in three or four years? Or will the manager have a long-term role that will take the company to the next level?
By clearly defining the outside manager’s position, length of employment and responsibilities, all parties involved can work toward a common objective. On the other hand, if plans are unclear, the company will basically be operating without a rudder to guide it.
3. Develop solid controls
“Trust but verify” was a slogan President Ronald Reagan often used when talking about the Soviet Union. This same approach should be used with outside managers.
Simply trusting that a person has certain skills, will be 100 percent honest or will abide by the policies set by the owner or board of directors can potentially backfire. Once the position’s responsibilities, range of authority and objectives are defined, controls need to be developed to make certain that the manager’s performance meets those parameters.
Careful planning, preparation, implementation and controls can help ensure a successful transition from family to outside management.