Nurturing the Talent to Nurture the Legacy
Career Development in the Family Business
By Amy M. Schuman
Palgrave Macmillan Copyright © 2011 Family Business Consulting Group
All rights reserved.
Ensuring Your Company's Future
Nothing could be more important to the continuity of a family business than the preparation of next-generation leaders—both family and non-family. Yet, career development is often neglected in family firms. Family business founders, and CEOs frequently take an attitude of "sink or swim" toward the next generation. "That's how I did it," they may say. Most family business leaders want to nurture next-generation development but do not know where to begin.
"Sink or swim" is unlikely to provide an expanding and increasingly complex business with the leadership required for continued success. Talented leaders may emerge on their own, but the odds don't favor that result. To improve the chance of survival and success across generations, a family business should engage in a deliberate program of planned, strategic career development. This book will show you how.
By definition, career development is a continuous process of building leadership capacity to meet the needs of the future. Consider one of the saddest examples of a family business's failure to develop such leadership, the Steinberg family business. The Canadian retailing and real estate empire was broken up and sold in the third generation in large part because the dynamic second-generation leader, Sam Steinberg, had neglected to prepare his four daughters for business ownership or leadership. Only one daughter, Mitzi Dobrin, actually worked in the company. She was trained as a lawyer, joined the family business when she was 42, and with no retailing experience was immediately put in charge of the money-losing Miracle Mart department store division. Although her father may have seen this as an opportunity for his daughter to prove herself and her leadership capacity, this "sink-or-swim" approach was doomed from the start. Mitzi failed to meet this challenge not because of a lack of capacity but because of a lack of preparation. After her father's death, she was forced out of the company. Later she forced the sale of the company to outside investors. If she and the business had more carefully invested in her career development, perhaps the story could have had a happier outcome.
As businesses become more demanding and complex, leadership development becomes both more critical and harder to achieve. A family business may have a cherished vision and ambitious long-term strategies, but unless today's leaders recognize the need to give the next generation the necessary training and experience, dreams of family harmony and success can painfully pass away.
WHO CAN BENEFIT
If you are the CEO or president of a family firm, this book is especially for you because, ultimately, you are responsible for seeing that a career-development program is established, maintained, and taken seriously. You and other senior-generation executives may feel dissatisfied with the level of ready leadership in the business. If you do not know how to build the talent you need or if you are hesitant about the prospect of making judgments regarding people's capacity and performance, this book will be of great value.
Others in your family and company will find the information helpful as well. They include:
* Next-generation family members employed in the business. These young people want to know they will have the opportunity to grow and learn so that they can achieve their career objectives.
* Family members outside of the business. Whether or not they are owners, family members are justifiably concerned about what plans the business has to develop the next generation of talent. Family members want assurance that their children will be given every opportunity to develop and prove their leadership abilities when it is their turn.
* Members of the family business board of directors. One of the most important responsibilities of a board of directors is to assure the presence of competent successors. A healthy career-development process will assure the future of the business. The directors may need to prod a CEO to launch a career-development effort. They may monitor the effectiveness of the development process. This book will help the board understand how to approach this critical activity.
* Non-family executives. These individuals often are dedicated to helping family members achieve their career goals. They may see a need to initiate or promote a career-development process but don't know how to broach the issue productively with the business owners. Additionally, their long-term security depends on the company's ongoing effective leadership, and they often seek to develop their own careers to the maximum extent.
* Anyone with responsibility for a family business's human resources. A business with a specific individual with responsibility for overseeing a career-development program will find this book imperative. Human resources professionals or an individual assigned to human resources functions will understand leadership development on a deeper level after reading this book.
THE CAPACITY TO SUPPORT STRATEGY
Whatever your interest, this book will provide you with greater insight into how career development supports the strategic goals of your business and its continuity as a family firm. You will learn how to create and implement a fair and objective career- development process that meets the needs of your business and the individuals within it, and you will be given practical tools and ideas for doing so.
You will also gain understanding about your role in the process, whether you are an experienced executive trying to help a younger person, a younger person seeking to develop yourself, a board member seeking to fulfill your responsibility as a director, or a family shareholder interested in assuring the future of the enterprise.
This book will also help you become more comfortable with what may seem like a frightening process and enable you to talk with others in the business and in the family about difficult topics like a sibling who is a chronic performance problem or a senior-generation family member who is pushing her son into a position for which he is not qualified. How members of the next generation progress in their careers will have a significant impact on their individual lives and on the family as a whole.
This book is not about making a decision to join the family firm. It assumes that next-generation family members have been working in the business for a few years and have committed themselves to staying in it. This book will help them develop their own abilities and confidence in themselves both inside and outside the business. While a successor CEO may emerge from a career-development process, this book is not solely focused on the CEO role. It is, instead, dedicated to the proposition that many good managers at all levels are needed to carry on a family business, not just a CEO. Finally, this book is about developing family leaders. Leaders are needed not just for the business but also for the family. Not everyone can be the CEO, but there are many other excellent opportunities for leadership and all require adequate preparation.
Career development is an appropriate activity for all businesses, no matter their size. While smaller businesses may have a less-formal process, as an enterprise grows and its leadership needs become more complicated, establishing a professional, carefully planned program that ensures specific skills, talents, and abilities are available to run the business successfully becomes increasingly important.
It takes great foresight to recognize the need for and commit to a career-development process for yourself or your business. When families and individual family members undertake a long-range program of strategic career development, they enhance their chances of achieving happiness and fulfillment in their work and their lives. One young family business president who has such foresight said, "We won't be able to achieve our business strategy without building the human capacity to carry it out. I won't be able to meet my commitments to my family co-owners and board of directors without making career development an essential part of my leadership strategy. My legacy to our family business is developing its future leadership."
Unique Considerations for Family Enterprises
Because they involve family members, family-owned companies find it harder to face the issue of career development than other businesses. If a family wishes to preserve a business in the best possible condition for the next generation, engaging in career development is imperative.
Consider this common family business scenario:
A group of aunts and uncles, siblings and cousins have worked together for over a decade. Performance appraisals are not conducted on family members because they fear offending each other. Since they have never received clear, constructive feedback on their performance, they have not had the opportunity to correct flaws and strengthen weaknesses. "Relationships are difficult enough without making matters worse," they tell themselves. Instead of being clear and direct, they talk about each other behind closed doors. Larry may complain to his own father about what he sees as Aunt Dorothy's rigid style of management, or Dorothy may complain to a niece about her own brother's weaknesses. Their failure to be honest with each other becomes more and more entrenched and, in the final analysis, they and the business have lost a decade of opportunities to improve operations. For all those years, senior members of the business could have been helping younger family members develop more of their potential, and siblings and cousins could have been supporting one another's growth. The chances for business growth and profitability would have been enhanced. Instead, because of people's fears about facing one another honestly and constructively, the business is doomed to underperform its potential.
What would decades of lost opportunity mean to your business?
WHAT MAKES CAREER DEVELOPMENT SO TOUGH?
Here are some of the reasons why career development in family businesses can be so difficult:
* Many families lack processes for family members to get performance feedback. They are intentionally or unintentionally excluded from existing appraisal systems. Non-family executives may be hesitant to give honest feedback to family members for fear of offending others in the family or a future boss. Career development requires feedback. If feedback is viewed as criticism or faultfinding, it may lead to hurt feelings that can endanger family relationships or may make already touchy relationships worse. Rather than being a constructive process, giving feedback is seen as potentially destructive. Lacking confidence in their skills at providing productive feedback or fearing that family members will be hurt by one's evaluation, some families avoid the process entirely.
* It's difficult to be objective about your loved ones. Nevertheless, objectivity is required if a business-owning family wishes to make good decisions about promotions and job placement of family members (and non-family employees, too).
* Deciding who gets what positions can have lasting, significant effects on family relationships. Not only can feelings get hurt, but some people gain more power and prestige than others. Rivalries may intensify. Those who move into higher positions usually enjoy greater compensation leading to financial inequity between family members. Is it any wonder that some families prefer to ignore this issue, despite the fact that leaving development to chance and creating no solid basis for staffing decisions can also create conditions that destroy family relationships?
* Many families have no models or experience in planning careers. Like the CEOs mentioned in Chapter 1, they say "sink or swim," or exhort the younger generation to "learn by doing." This approach is often a legacy passed down from one generation to the next. They don't know any other way. They reason that "what worked for my father and me will work for my sons and daughters."
* Business owners often place more value on customers, products, and financially focused activities than they do on planning or development, especially in the early stages of a business. "Process" functions, like career development, become more important in later stages and often aren't concerns of founders.
A BETTER WAY
Family businesses tend to give family leaders three kinds of feedback: (1) complete silence, because everybody's afraid to tell others how they're doing; (2) overly negative, microscopically critical feedback, where every little action is criticized; or (3) overly favorable feedback, where every small action gets praised and inflated. None of these approaches helps the business and, in the long run, they are not good for the family either.
What's needed instead is an open, fair process of career development. Such a process sets the stage for family acceptance of and support for potentially difficult, hurtful decisions. The impartiality of such a process leads to decisions of a higher quality about promotions and job placement for all employees. Ultimately, this process is essential for business success.
Suppose Aleta is put in a position of possibly having to fire her cousin, Armand. Armand is not performing well, and Aleta's dad, who is Armand's uncle, has decided Armand needs to be relieved of his management position. Dad doesn't want to jeopardize the relationship with Armand's family and sees this as an opportunity for Aleta to prove herself as a leader. So he arranges to have Armand report to Aleta and urges her to hold him responsible for results and if necessary to fire him. What's Aleta going to do? She knows Armand's current level of performance is holding the company back, but she is conflicted: "Perhaps I should support Armand, no matter what, because family is more important than his lack of performance. If I don't support my cousin, I could ruin relationships in our family. But if I don't confront him, I could be jeopardizing the business, and other employees will see me tolerating poor performance and cutting extra slack for a family member."
What if, instead, Aleta uses this opportunity to implement a proactive career-development process? "We're going to put a process in place where it's absolutely clear to you what's expected of you, and you get feedback on how you are doing," she tells Armand. "We'll make coaching available to help you improve. At the end of a year, if things haven't gotten better, we'll have to take action. You may have to be reassigned to a job that is better suited for your skills." At that time, if Aunt Sophia goes to Aleta and says, "Honey, why did you demote your cousin?" Aleta can say, "Aunt, we had a fair process in place. We gave him a year to turn his performance around, and we provided special training and coaching. But it didn't work. He'll be happier in a position that better matches his interests and skills." Aunt Sophia may not be happy, but she will see that her son was given an honest, caring, and fair chance.
It's never quite that simple, of course. But research shows that when a clear, fair process is used, individuals will accept a decision that is not their preferred outcome if they believe that the process of getting there was fair. A transparent, fair process can counter many of the fears that cause families to avoid career development. Feedback and decision making become more impartial and objective and less personal. Family members learn to be more candid with one another and gain skills in being honest without being hurtful. A fair process helps everyone understand the importance to the business and to the family of choosing the best person for each job. It can soften rivalries and help family and non-family employees work as a team. Best of all, it gives individuals the chance to remedy their weaknesses and reach more of their potential. Chapter 5 will show you how to create such a process of career development in your family business.
WHERE TO BEGIN
The starting point for setting up a career-development process is for the family to answer these questions: What values and goals does our family want to guide our leadership process? Is our goal to have senior management positions, including the top leadership role, be filled by family members? Or are these positions to be open to everyone, including qualified non-family employees?
If your family is deeply committed to having family members fill all senior positions, all the more reason to get started on a career-development initiative. You'll want and need talented family members fully prepared to take on the tough, demanding jobs required for a growing, thriving family business. (Continues...)
Excerpted from Nurturing the Talent to Nurture the Legacy by Amy M. Schuman. Copyright © 2011 Family Business Consulting Group. Excerpted by permission of Palgrave Macmillan.
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