An evidently talented young woman marries into a family ‘firm’ without any support and guidance as to what to expect or how to integrate. After repeated requests for help, she decides to ‘step-out’ bringing her husband with her. A successor loses his way mid-career in his family’s business. Working alongside many capable non-family ‘professional’ managers, the successor seeks to re-calibrate direction, first with the consideration of an MBA and then identification of a suitable ‘next’ role. The ‘professionals’ provide little if any support or direction in the face of the family’s express insistence on self-responsibility to identify a suitable path. Indeed they dodge the issue. He leaves in frustration to do the MBA anyway. Finally a large and sophisticated family business, with a ‘professional’ talent development process, does not design a process to develop or encourage family talent. In parallel the family Council pull back from delegating responsibility to such a body to oversee the development of family talent, in large part because of fears over perceptions of preference on the part of the ‘executive’.
In each of the above cases there was no evident locus to manage these and other talent related issues; the inability to do so led to the loss of family talent not only to the family but also to the ‘firm’ they own.
Family talent matters. In 1994, Jim Collins and Jerry Porras published their bestseller Built to Last, Successful Habits of Visionary Companies. For them the imperative for visionary companies is to preserve core values and purpose while ‘stimulating’ progress. For ‘visionary’ family companies the same applies but with one important addition: the necessity to preserve core family talent as essential to keep the vision alive. From this an important principle derives: that the development of family talent is essential for successful succession.
The truism – or principle – that for successful succession, you will need ‘family talent’ to take the family enterprise – business, family and ownership – forward.
Despite this evident priority, families-in-business and those who purport to work and support them contrive – often intentionally – to undermine or to ignore this need for talented family members. Fear of competition on the part of family members, availability of credible ‘alternatives’, perceptions of a lack of authority over family members, a lack of clarity on the locus for ultimate responsibility for the governance of family talent or constant attention to higher-order issues such as ‘governance’ or ‘strategy’ contrive to leave the cultivation of family talent to chance.
In effect family talent is ‘crowded-out’.
If one thing crowds out another, it is so successful or common that the other thing does not have the opportunity to be successful or to exist.
How is family talent important across the enterprise and what are the signs that family talent is being ‘crowded-out’?
Career Successors as managers or specialists bring expertise, loyalty, value and a commitment to progress. Within growth orientated family firms a need to stimulate progress in turn becomes more pervasive with market change and/or increase in company scale or scope. As these change so the ubiquitous and relentless call for non-family talent begins. So far, so good.
How Family talent is’ crowded out’.
A glance at the number and seniority of family members in management relevant to non-family, will give an indication as to the amplitude of this call. The first call to ‘crowding out’ is the availability of management ‘surrogates’: those who can do a job. Based on experience and expertise the possibilities are infinite.
As the company grows, so too the numbers of non-family managers. This re-enforcing of the management body – while conscious of fair process and meritocracy – will not proactively engage in the development and support of ‘family’ talent. Indeed ‘professional’ non-family managers often feel that they have no authority over family managers, so why bother?
With scope and scale come isolation and a lack of authentic real independent feedback. For the family manager this follows from the difficulty to establish informal networks within the family enterprise. Such networks are a key requirement for a successful career, an absence of which directly contributes to ‘crowding out’. Absence of feedback excludes.
Finally, the absence of valid leadership guidance for the ‘family’ manager, who must juggle both family and ownership issues as well as the well-worn demands of management. All ‘situations’ for family managers are different. As a substitute, the (now dated) patriarchal view that your ‘career is your own’ hardly answers or inspires. If no support exists to address the particular examples and situations above, then your family talent runs the risk of being ‘crowded out’ in the face of competing managers.
Unifier Successors are essential to any family. Those members who willingly participate in family governance who bring time, support and generosity.
How Family talent is ‘crowded out’.
In the normal course of events surrogacy – the supplanting of one for another – is impossible. If family members themselves do not participate, efforts atrophy and progress halts.
The path to such non-participation can be a subtle one. A leading indicator can be the willingness (or not) on the part of the family to openly discuss ‘leadership’. If avoided as a topic within meetings, watch out. If not discussed, people will assume it is not needed.
A variant of this – and possible contributor – is the spill over of inter-branch rivalry to the domain of leadership: ‘Anyone but a person from branch x.’ If as a family you cannot discuss leadership or frequently point to exclusion, ‘crowding out’ has already taken hold.
A final stage is possible family apathy to family talent as a result of scale and the evident (and championed) involvement of non-family managers and executives: ‘The professionals have our back.’ In such conditions family members do not see the need for ‘family talent’ in any form – a ‘crowding out’ through (lack of) intent if you will. In the short to medium term they may be right. As an approach to long-term sustainability as a family business it is a disaster.
Uninvolved Successors bring enthusiasm, curiosity and youth. They are particularly open to informing themselves on their families’ business and any and all associated opportunities involvement may provide. Generation Z believe that which they discover for themselves.
How Family talent is ‘crowded out’.
For information as to expectations of family talent, successors would do well to ‘listen to the water’. What is the informal or common narrative within the family on ‘leadership’ or (more commonly) ‘working in the company’? Is this expected, partly encouraged (with hurdles attached) or rarely spoken of?
If the importance – or at least relevance – of family talent is not called out you may need to dig deeper. Look for clear and unambiguous language as to the value Successors bring over a lifetime to any and all of the leadership requirements of the family enterprise. Encouraged family involvement will have a specific language unique to the family. A language distinct from that well-developed corporate language of ‘professional’ managers, which is designed as much to exclude as it is to inform.
If stories of family involvement are not your thing, or appear vague, look to tangible opportunities for the active preparation of ‘family talent’. To be effective this must include appreciation of the value Successors bring to the enterprise, a fair indication of the necessary commitment (and reward) and the possibility of varied roles (Ownership, Career, Unifier et al.) and possible paths for those willing to work. If these messages are not regularly advocated and reviewed by senior family owners, family talent will be ‘crowded out’ through lack of example and evident disinterest.
Ownership Successors bring patient capital, continuity and example to those who take the time to look. As shareholders of the company, Ownership Successors are in positions of governance within the business (or SFO) as Directors.
How Family talent is ‘crowded out’.
The opportunity for surrogacy exists with the appointment of non-family representation to Boards, in-lieu of family members.
Family talent may be crowded out with an undiluted trust in ‘structure’ and ‘agreement’. A belief – demonstrated by both the time and money spent to achieve it – that structure and the call to ‘Governance’ alone will lead you to the promised land. While important – some would say an essential component of successful succession – agreement alone will not answer.
Witness the possible conflation of consensus — governance for family unity—and that for talent development — governance for the development of family leadership. These are two separate priorities, the once largely static, the other dynamic, each requiring its unique mix of oversight, business overlap, resource and expertise to be effective in the long-run.
Therefore look for evidence of a suitably tasked and qualified structure to oversee the encouragement, development and support of family talent. Lack of oversight of family talent in any enterprise of scale will have direct implications for the development and retention of such talent. If this body does not exist, whose responsibility is it? What then appears to be everyone’s problem in short time becomes no-ones’ problem. Family talent gets lost.
Delegation of such responsibility to company Boards can be problematic. The apparent ‘micro’ elements associated with ‘family talent’ can seem out of place or immaterial alongside those complex issues usually considered by Boards. Secondly, if there is no champion to advocate family talent, progress will be even worse. Again, issues to do with family talent are crowded out. Where unsuitable to be governed at Board, where do they sit?
A wide assortment of support is available to families-in business which includes advisors, service firms, banks and non-profit associations.
How Family talent is ‘crowded out’.
Suitable consideration of the issues associated with ‘family talent’ can be ‘crowded out’ as those in support focus on seemingly ‘higher order’ requirements. These include Ownership, Strategy, Family Agreement and, more recently, Sustainability, Philanthropic Impact and the holy grail of ESG. The priorities of sponsors are of importance here. As important as these are, they leave little time for the consideration by those in support – and in turn families drawn to them – as to how the preparation and cultivation of family talent can be more effective as requirements, demands and alternative options present.
Perhaps to fully understand and ‘get’ family talent requires practical first hand-experience. Advisors are poorly placed to provide this – usually with limited understanding, a conflict of interest to serve ‘the family’ and charging models unsuited to the longer-term resourcing need.
Those purporting to serve families are solution heavy on policy, agreement and (when relationships collapse) on recovery (or exit). The cultivation of family talent needs preparation, independent support and development. To do this effectively requires considerable resource allocation (to education and learning), empathy – measured in time spent – on the part of advisors and associations. Finally it also needs pushback against those ‘selling’ governance nirvana or promises to save the planet.