Outside In

Growing a family business from the outside

The tiptoeing phase is over, and the time to start building is now. An avalanche of stimuli is about to be triggered in the global markets, and this is also becoming apparent in businesses’ expectations of strong growth.

How did we get here?

When COVID-19 struck, development, consulting and purchased services were minimised and cash resources were secured. Now businesses once again have more leeway to implement their strategic plans. Success however may require new competences and new profiles – the CEO or the members of the management team may even need to be changed.

A new CEO from outside the family business?

Many external candidates have reservations about joining family businesses because every family business has its own unique cultural heritage - and this is often not openly discussed. The way the family make decisions, discuss matters, approach things and perhaps even how they operate outside formal structures - as well as all the unspoken values and powerful characters operating from within the family.

Recruiting a good CEO from outside requires the family to be transparent and clear about their organisation’s culture.

What do external candidates look for?

Someone joining a family business needs to be genuinely interested in its story. In addition to the business operations, there may also be something attractive about the family business’ values or ways of working. Some are looking for a lifestyle change and perhaps a company that commits to a long-term vision in their business operations instead of quarterly optimisation.

Family businesses must give external executives room to work and breathe.

How do we ensure compatibility with the family?

Objective methodology is vital.

Competency profiling and cultural profiling with candidates is at the heart of the process. It’s extremely important that the outsider is compatible with the culture of the family business.

The biggest risk is taken if an executive is recruited on the basis of a recommendation by an acquaintance or family member. A “good person”, as recommended by an acquaintance, may not necessarily work as the impetus for change - plus familial relationships can easily be ruined.

A successful management team

The COVID-19 era may also bring about a need to update the management team. Listed below are four typical situations where it’s a good idea to determine whether there is a need to make changes to the existing management team:

• There is a change to the strategy defined by the owners.
• The business has been managed by the same management team for more than five years. The owners want to test whether the management team is still able to actively reform itself.
• There is an acquisition. The investor or another owner assesses whether the management team of the acquired business is compatible with the strategy.
• A new business unit is established.

Mika Rossi, Partner
Finland