Situation: A small but very profitable business was founded and has been run for two generations as a family-owned and operated business. To boost performance, the CEO hired a general manager with a good background who is not a family member. The general manager has told the CEO that he feels that there are too many family members in the business. The CEO likes hiring people she trusts, particularly friends and family that she has known for a long time. Is it wrong to hire family members?
Advice from the CEOs:
Don’t try to change what you’ve already done – plan for the future.
Acknowledge the GM’s idea. Tell him that you appreciate his suggestions. Suggest that he test hiring more non-family members to cover one of your low risk market segments. Measure the performance of this team versus the other teams within the business.
The challenge with family members is accountability and objectivity. The question for the family owners is whether they have the freedom to act in the interests of the company. Can they put family ties aside when someone is not serving the interests of the company?
The essential question for the family that owns the business is – what do you want to maximize? If it’s loyalty and longevity – keeping the family together, employed and in harmony – they can be good. If it’s profits and performance – family and friends can be difficult if emotional ties cloud business objectivity.
The upside to family is loyalty and trust. That said, family and extended family friends are different. The latter don’t have the same ties or sense of loyalty.
Can you keep employees for too long? Yes. Make sure that you evaluate all employees every year. Establish job and performance standards and make sure that all employees – family and non-family – are held to the same performance expectations.
Situation: A company has determined that market shifts off-shore have neutralized their strategy for the past two years. They need to find new markets that offer growth potential. How do you find and evaluate new markets?
Advice from the CEOs:
This is a classic competitive strategy challenge any time a company wants to expand within or beyond its core business. Michael Porter of the Harvard Business School is a top expert on competitive strategy. You can find talks that he has given on TED Talks and elsewhere on the Internet that can help guide your efforts.
Do a SWOT analysis. First, figure out your vision and analyze the strengths that you possess that will fulfill that vision. At the same time analyze your weaknesses to provide a counterpoint on what should not attempt to do. Then consider both threats and opportunities. Have these analyses in place before you expend major effort responding to or developing new opportunities. There are more opportunities out there that will end up as dead ends than there are profitable opportunities.
Don’t discount the expertise that you have developed over the years in your specialty. This is the area of your greatest profits both now and historically. It is likely to remain so in the future.
If you need additional resources to meet existing or new client demand – particularly if these involve activities that are less profitable to you – explore partnerships to access this expertise instead of trying to do everything yourself.
Situation: An SMB CEO has sold his business and seeks a new opportunity. Options range from a mid-level position in a large company to various options in existing or start-up smaller companies. How do you evaluate your career choices?
Advice from the CEOs:
The most important factors are to determine what you want to do and what will make you, and your family, happy. Start with a Pro/Con analysis of each type of opportunity compared with your short and long-term desires. Which among the following choices are more important?
o Financial stability and some level of job security vs. higher risk and potential reward with lower security.
o Desire to be a player or to be the person in charge vs. being happy with a staff position.
o Ability to create your own path or willingness to adapt to the priorities of others.
Given these choices, here is what you may find:
o In a large or established company the most likely opportunity will be a staff position. The trade-off is stability for authority, but be aware that large company organizational politics may be severe.
o In a small existing company it is possible to be a player in a key position. The trade-off is lower stability and viability for more authority.
o In a new company there is the chance to be the CEO, bringing business experience to a group with technology expertise. The trade-off is high risk, long hours and low stability for a high level of authority.
Other factors to consider are how critical your personal situation is and the depth of your resources. If you have time and flexibility, take the time to find a situation that best meets your needs.