Professionalizing: a necessary hurdle - using professionals in family-businesses

Nation's Business, Nov, 1989 by John L. Ward

Professionalizing: A Necessary Hurdle

Many family-business owners resist "professionalizing" their companies because it seems to demand so much of them.

The penalty for not doing so, however, can be severe: Opportunities are missed, and the fun of running the business fades away. Can this be happening to you?

A growing business will inevitably outrun your family's ability to manage it alone.

This usually happens when you reach 20 to 50 employees. And your company is sure to stagnate by the time the 100th worker is hired if you haven't taken steps to professionalize--to attract good nonfamily managers and embrace professional management systems.

New, skilled managers can bring invaluable benefits to your business. These include renewed growth, a more effective management team, fresh ideas and insights, and rejuvenated employee commitment to your company's goals.

Eventually, professionalization will ease your managerial responsibilities. It also offers you relief from heavy frustration and feelings of isolation. And it can give you greater freedom to concentrate on long-term goals and plans for the business and your family.

How do you know when you've reached that point when professionalizing is crucial? Here are some clues that can help you make that determination:

* Sales and market share stagnate, and you lose the sense that you are on top of changes in your industry. New competition surfaces from unforeseen sources--doing things you could do.

* New ideas seem to go nowhere, worsening the feeling of stagnation.

* One or two promising young employees leave for better opportunities. Yet there always seem to be reasons not to add new, young, ambitious replacements.

* You grow annoyed by subordinates' chronic failure to seek responsibility or take initiative. You say to yourself (and sometimes out loud): "The burden is all resting on me!"

* Personnel problems compound. You spend mounting hours in your office worrying about follow-through and lack of teamwork. You are sick of hearing reasons why things aren't better.

In short, where your business used to make you high, it now lays you low.

Professionalization can provide a strong shot of new energy, commitment, and freshness at this stage. So why the reluctance?

A common concern I've heard is that outside professionals will fill the management slots that the owner envisions for the next generation.

Or an owner may fear that outside talent will stir resentment among loyal, long-time employees, who may face changing roles and greater challenge.

But, in fact, professional management can so enrich a business that it spawns a wealth of unforeseen possibilities for children as well as nonfamily employees.

The vice president you hire today, for instance, could be heading up an entirely new West Coast sales region several years from now, far afield from the management path you have charted for your offspring.

Privately, many business owners doubt their own abilities to attract and manage professionals from outside the family. Others resist paying enough to recruit top people and then worry that they won't be able to retain them.

But good people are not an expense--they are the best investments you can make in your business. No growing company can employ too many good people.

And with careful planning, you can put in place a system of rewards that will sustain nonfamily managers' loyalty and contributions. While granting stock may not be desirable, other incentives such as bonuses, perks, management-development programs, and personal-growth opportunities can be very alluring.

Professionalizing also means installing sound management systems. Formal budgets are invaluable, not only to give your managers the information they need but also to offer them some latitude in managing their parts of the operation.

Performance reviews are critical to building a more effective management team.

Management meetings become more important for building teamwork and sharing helpful information. And employee-development programs form a first step toward growing your own managers from within.

Accomplishing all this will be emotionally and professionally demanding. "It was painful," says the owner of a Minnesota food-service concern that went through the process recently. A couple of his long-term employees left--one a surprisingly early retirement--because of competition from the new recruits. And the professionalizing process took several years. But his company is running smoothly now, and yours should, too.

You should find that professionalizing will sustain the growth of your business at a new level for a very long time and restore your confidence in the future.

Best of all, you'll also find that running your business is exciting again.

John L. Ward is the Ralph Marotta professor of private enterprise at Loyola University of Chicago and a consultant to family businesses. Co-author Laurel S. Sorenson has taken a leave from this column to work with Stew Leonard, a Norwalk, Conn., family-business owner, on his autobiography, set for publication by Alfred A. Knopf in 1990.