A fine balance of power

Marjolein de Jong has her own executive coaching and family business consulting practice. Albert Jan Thomassen is associate to the Family Business Consulting Group. Both are based in Bilthoven, the Netherlands.

An increasing number of family firms discover the advantages of working with outsiders in their executive board. It's all about finding the right chemistry and managing to balance ego, power and influence, as Marjolein de Jong and Albert Jan Thomassen explain

Some business families have learned through good and bad experiences how to work effectively with non-family executives (NFE) while others are still trying to work it out. Leaving top management in the hands of a non-family executive or even non-family CEO is not an easy decision, especially for the first time.

Frequently cited reasons for these hesitations refer to worries about giving up control by the family CEO, the presence of an outsider who gets to know the confidential ins and outs of both business and family, and the fear that they may not fit well within the family business culture. While these are salient issues, appointment of non-family members as top executives is often a necessary, and brave, decision that business families face in their company's development, for several reasons: families may not have the management and leadership talents needed for their business to grow; there may be too large a gap between the retiring family CEO and the next generation; or the family business culture may need an outsider to take the business to a higher level of professionalism.

The success or failure of NFEs has to do with the ability to develop a constructive working relationship over time between the family CEO and his NFE. Both family CEO and NFE must commit to a 'marriage of reason with shared passion'. They must both be rational yet the intuitive. They have to respect and challenge each other, maintaining the spark required to fuel the relationship. Most of all, there must be a developing relationship where personalities meet who give and take yet manage to balance power. Along the way they have to negotiate the hazards and hurdles, but overall they need to form a learning team with a strong commitment to the business and their relationship. This implies that both the NFE and the family CEO must realise they are in a process that takes time and dedication. The development of a constructive working relationship faces many challenges on a personal, business and family level.

On a personal level, the major challenge for the NFEs is to know their CEO inside out. This helps them understand his thoughts and actions and helps the NFE be most effective. As one NFE states: "I knew he was a dominant man so, if we disagreed, he was the boss and that was all right with me. But whatever the disagreement, I always felt respected by him". Clearly this NFE felt influential in the company and used a more subtle strategy to get his views accepted. Another NFE said about his CEO: "He needed me to convince him or almost force him to undo certain decisions he had made impulsively". This executive described himself as a dominant man as was his CEO, yet they were able to constructively battle together when important decisions had to be taken. There was also mutual respect.
 
Another example illustrates how the NFE had to be like a father to the family CEO. The NFE advised him, empowered him in his decision-making so the CEO could take a strong stance with the family. At the same time the NFE became keenly aware that his influence over the CEO became too strong so that roles almost reversed. The CEO became too dependent on his advice. Later on he decided to increase his professional distance thereby productively challenging his CEO to take the lead. Ultimately, this stance seemed to be the best way for him to survive as non-family executive and for his CEO to grow in his leadership role both in the business and in the family. Had he not been aware of the magnitude of his influence on the working relationship, he might have run the risk of losing his position by becoming too powerful. This kind of psychological mindset seems to be an important quality of successful NFEs.

On a business level, each of the NFEs we interviewed were quite outspoken. They were taken seriously in their expertise, felt they had had influence on strategy and any important business decisions and were quite well-connected to the family business. Clearly it was not the money that drove them into the family business. As one of the NFEs said: "I sensed the family's passion and commitment for the business, it's not all about money here. That's what I like". He actually articulated values of the business, which strongly resonated with his own values in life. Another NFE mentioned: "I feel myself as the caretaker of the soul in the business together with the family". He really liked the family business he worked for and identified with its drive and spirit.

When asked to summarise the significance of their role as outsiders NFEs characterised themselves as either informal leader and business steward, internal management consultant on strategic and operational levels or as shadow entrepreneur. It became clear that their contribution to strategic decisions and the implementation of strategy was substantial. Each also mentioned the amount of freedom to execute their job as well as the trust they received to do what they were good at.
 
In light of the working relationship between the NFE and the family CEO, successful NFEs seem to constructively curb the creative and entrepreneurial actions of their CEO. They do this by providing challenges and making explicit what the strategic intentions are of the business family. They provide the reflective counter-balance needed for solid decision-making and sound company development.

On the family level, each NFE negotiated his relationship to the family in a different way. The family checked them, but they checked the family as well. NFEs realised sooner or later that working in a family business means knowing the family. Knowing their traditions, knowing the way they relate to one another and how they resolve or postpone resolving their differences. As one of the NFE's expressed: "If I had entered the family business with what I know now, I would interview each of the key players personally and assess the discrepancies in their vision about the company. It's all about family cohesion. If that's not present to a satisfactory level I would not enter the company". Meanwhile this NFE fulfilled an important role as communicator between business and family. Another NFE said bluntly that he followed his gut feeling whether this was a truthful family or not, and whether they "had their heart in the right place". When he encountered severe family differences that affected the business, his positive feelings for the family helped him to keep an open mind to all parties involved, sympathise with their differences and not become distrustful and defensive. Yet another NFE challenged his family CEO on the notion of fairness and professionalism when the latter threatened to impulsively lower his son's salary after a dispute.
 
These NFEs managed to maintain a natural distance by not becoming too involved with the family. They each knew that certain boundaries should not be crossed. As one of them said: "Everyday I was glad to drive home to my separate life 25 km away. You do need a separate life to stay professional". Another said: "I am quite fond of them but my mental stance is that of an interim manager. This protects me from getting too involved". These NFEs never felt like an outsider with the family, yet each in their own way knew where the invisible boundaries were.
 
The right chemistry between the NFE and the business ­family is essential and a prerequisite for a good working relationship. However, NFEs become and stay successful in a family business only when they are process-oriented persons who take their time, listen and then act.
 
They are confident in themselves, in their expertise and in their influence as sparring partners. The NFE has a keen sense of when to confront and when to stay low and not press the issue. But most importantly, he does not shy away from challenging his family CEO. This aspect of the relationship is a crucial one because it allows for the necessary feedback to the family CEO and the business family in directing and innovating their business. Equally important is the fact that the family CEO will "allow" himself to be "forced" to reconsider his steps when needed. Their working relationship is a continuous act of balancing power, ego and influence.

Their characters should complement each other. While successful NFEs do not aspire to become CEO in the spotlight, they seem to enjoy the vicarious pleasure as their CEO and his family are successful. They identify with the success of the business and experience their freedom to manage and advise in the family business as a form of shadow entrepreneurship.

Above all, it takes two to tango. The family CEO must respect his business counterpart. He must know what kind of NFE the family and the business need to thrive and he must be willing to learn and change. As one of the NFE's interviewed said:  "He's got to do what he is good at and to trust and leave the rest to others".