Expert Responses

The main considerations for a family business considering bringing in a non-family member include the need to define the role of the new MD, their responsibilities, how they communicate with the family, meetings, planning and parameters for evaluating their performance and more besides.  In particular thought needs to be given too:

Defining their role
This includes job descriptions, responsibilities, remuneration, who they report to, how their performance is to be assessed and how often. Clear consideration needs to be given to who they are reporting to - is it the board, some of whom may also be family members and shareholders or is it all of the shareholders? Clarity of the new person's position including what constiutes success and what doesn't is vital.

Transfence of existing roles
What roles currently being undertaken by family members will the new MD take on? Will those family members continue to have an ongoing day-to-day role in the business or will their involvement cease with the new appointment? If the new MD is replacing existing family members it is important that a handover to phase out the family members is drawn up and agreed up front. Both parties need to be clear as to what is happening and when and work together to meet the timetable set. Failure to agree a plan and leaving things open ended is a potential casue for conflict further down the line.

Developing a culture
A culture of 'employee' and 'owners' needs to fostered. This may include changing how family members are remunerated so that they are paid a market salary for their work as an employee. The return that they receive as an employee should be different to what they receive for being a shareholder in the business. It may be that the business has reached the level whereby it is now a matter of commencing to remunerate directors as well as having a dividend.

Meetings
With the introduction of a non-family MD it may be necessary to convene separate director, shareholder and family meetings because meetings in a family business often cover a large number of topics, some of which are matters for shareholders only. It is therefore important to ensure that the purpose of each and every meeting is clear and consistent with shareholders meetings being run from an investor/owner perspective rather than a day-to-day operational perspective.

Planning
Many family businesses have successfully introduced a non-family member as their MD. The biggest issues that prevent success are failure of the family to let the MD run the business within the parameters set and one way to avoid this is clear and well documented plans which can then be evaluated and discussed at meetings. Such plans ensure that there is full appreciation and agreement of the objectives going forward to enable the MD to get on with implementing these agreed plans.

The new MD will have skills and experiences that may be wider than the skills within the family business and these skills may be used to enhance the business and allow development in new areas and these skills should be leveraged to maximise the benefits of bringing in an outsider. The new MD will also want to ensure that they are given the opportunity to do what they do wel and are properly remunerated for doing so. Establishing what is 'business' and what is 'family' are important in enabling success to be achieved.