Albert Jan Thomassen is chairman of the FBN 17th Summit Programme Committee.
Growing family firms must attract the best managers and directors from outside to keep up with business challenges. But it is just as crucial to make the family business attractive for their talented next generation, says Albert Jan Thomassen
In economies all over the world companies face favourable climates, markets are up and recent restructurings have paid off. There is increased competition but there are also opportunities to grow and expand, and to develop new business. This all requires qualified and talented managers and executives.
There is, however, a difference between public and private companies. New laws and regulations for publicly traded companies have become increasingly strict so that many executives are forced to spend more and more time dealing with the proper administrative requirements instead of developing the business. Daniel Mailand, CEO of headhunter firm Egon Zehnder, recently explained in an interview that top managers are tired of the over-regulation of Sarbanes-Oxley and prefer to work for private companies. Top managers also prefer to work for companies (partly) owned by private equity funds because they pay better and offer the opportunity to participate as a shareholder. Family-owned companies face increasing competition from these equity-driven companies and for many talented managers the large publicly traded companies remain attractive.
Families have gone through fundamental changes over the last few decades. These changes have been partly influenced by society but also driven by the lessons many families have learned from their own history as a business family.
In many societies individualism has become a dominating value. Collectivism, a key value before the 1970s with the family as a cornerstone of society, is much less prevalent. In those days life and career choices were much more driven by what the family or patriarch saw as important.
Families themselves have stimulated more individual choices. The lack of a proper education many senior generation members had experienced in their early years has caused a counter reaction to their children. Parents strongly supported and facilitated their children to have a proper education. In addition it was – and still is – promoted to work elsewhere before joining the family business. In line with the move towards individualism many parents leave their children to make their own choices of education and career – for fear that children might feel influenced into the responsibility of a position within the family business.
There is the added pressure of the next generation members looking for a proper work/life balance. For some family CEOs/fathers it is hard to imagine that one can give preference to taking the children to school or working part-time. There are numerous cases of next generation members who prefer to have their career in another company which allows them to have a better work/life balance. There have also been numerous cases where a highly talented and motivated successor was seen as not suited to the job because of the desire to work part-time.
There will always be competition between companies to attract the best resources. It is the family, as owner and employer, who is responsible for creating the right conditions to attract and retain talented managers from both outside and inside the business – and from the family.
For business-owning families, as for others, it is rather easy to attract talent to the company by offering good salaries. But it's usually just a short-term solution. The real and distinctive route to follow is to create the right conditions and have the right culture within the family and within the business to attract but, above all, keep talented family members enthusiastic about taking responsibility within the family firm. The key questions above show that it all starts with the business owning family. Being a responsible owner of a family firm means that the family must take charge by clarifying their own vision and ambition and making efforts to develop the right governance structures and procedures to foster talent for the benefit of the firm and the owning family. That allows families to successfully deal with the double talent quest, inside and outside the family firm.