Being an Outside Manager Inside a Family Owned Business

When John Bristol accepted the position of General Manager at Smith and Sons Freight Company, he never thought he would be spending most of his time refereeing arguments between competing family members; each trying to establish their own policies and growth planning for self-interest.

John clearly understands that an efficient hired manager sees to it that all employees – family and non-family alike – know to whom to report at all times. Family patriarch, Len Smith Sr. hired him with the promise that all of the company’s 150 employees including Smith family members would respect John’s role and follow his directives as the appointed GM.

This was all well and good, but Len Smith Jr. wasn’t exactly drinking his father’s Kool Aid when the elder Smith hired and made his promise to John Bristol. Neither were Smith senior’s other three adult children. To each of them, the family freight company represented an opportunity for a “land grab” that would result in their own children some-day inheriting the upper- hand in company management and revenue shares. John was being placed immediately in their way.

The Smiths resented John – an outsider – being hired by their father to manage their family business so they made the job very unpleasant for him. In less than a year John resigned and moved on.

Some family-owned companies are plagued with a high turnover among their non-family top people. Often the relatives are responsible, as in the fictitious case of John Bristol.

In other cases, top notch managers and workers resign because promotions are closed to them. They look on as qualified and sometimes less qualified family members are given management titles,unearned raises and outlandish perks, while non-family members get lesser reward and recognition for often having to “clean up the mess” others leave behind. That game gets old very fast.

Call this “when bad things happen to good people” or whatever you will, but the family patriarch or matriarch has a responsibility to the business at very least to get to the bottom of the trouble, if he/she can.

Conducting an exit interview is a useful way to get at the root of non-family member turnover. It is not always the case, but a departing employee may be eager to share the whole story – or at least enough of the pertinent details to help develop a course of action for the future.

Once the facts have been brought to life, the current family-member-in-charge may have to confront the disruptive relative(s) with the situation as presented, possibly leading to some very difficult decisions to be made.

How things go in that sit-down is anyone’s guess. Truthfully, it is rare that the owner-manager will cast off a troublemaking, close relative. Sometimes the situation is best resolved by helping the problem relative start his or her own business in a noncompeting entity, provided he or she has the management ability necessary to succeed. Another predictable strategy is to “exile” the relative to a branch office or help find them a job at another company through personal connections. In all cases, this is a very stressful and taxing experience that – none-the-less must be dealt with to insure the company’s future.

Marc D. LeVine, The Midmarket Institute ( http://www.midmarket.org ), an organization that focuses on helping midsize companies and those that serve them. You can follow the Midmarket Institute on twitter @midmarket and find us on Facebook. He can be reached at contact (at) midmarket.org.