Talent: it’s genetic…or is it?
Suzy Bibko, former editor of Families in Business magazine, ponders the problems of talent — or lack of — within family business and talks to the experts about the inbred challenges for family-run corporations.
Family companies have been making headlines – not for their well-known dedication to innovation and values, or even the ongoing inheritance tax debates – but for their employment practices. Namely, the hiring – or firing – of family members. In the ‘normal’ business world, this would not be noteworthy. After all, people gain or lose jobs all the time. But in the case of family firms, there is more at play than just an effective talent management plan. Family involves blood, and with blood often comes sweat and tears. Companies engaged in talent management employ specific, deliberate strategies to source, attract, retain and promote employees. The goal is that by employing such strategies, the company and employees will benefit each other and both become much stronger.
Surely this all seems like common sense, as everyone wants the best for themselves and their business. So, why should family businesses be making headlines for their employment practices? After all, especially in huge, global, family firms such as media empire News Corporation (News Corp), travel management firm Carlson and baseball’s most winning team the New York Yankees, talent management practices are hopefully in place and the best person for the job is being groomed and/or selected.
But, what may be best for the business may not be what a family member really wants – or what the founder of the business and patriarch of the family demands. This can play out in several unfavourable scenarios. On the one hand, you may have a father who built the business from scratch and wants his child to eventually take over the business. On the other hand, you have a child who wants to pursue other interests. Or was never really groomed in the business. Or wants to take over the business but does not have a head for business. In any of those situations, he or she is not the best person for the job of future CEO.
But the father may force their offspring to enter the business (by threatening no inheritance, guilt or a range of other imaginative techniques), because the business carries the family name and the father has never envisioned, or even worked, with a non-family member in a managerial position. And there is no plan B in place for anyone else to succeed the father and carry on and improve the business. This may sound like a soap opera, but it is often reality. Even corporate giants like News Corp, Carlson and the Yankees are not immune from the ties that bind a family business when it comes to managing talent (see box, bottom left).
In family business circles, talent management is often referred to in the context of ‘succession planning’. However, while succession planning usually refers to identifying who will take over the management and running of the business in the future, talent management refers to “identifying good quality staff at all levels and agreeing career paths with them in order to help them develop and move to higher levels within an organisation,” according to Tony Groom, a senior manager in the Human Resources Services consultancy within PriceWaterhouseCoopers (PwC). Talent management in a family firm “should incorporate policies relating to how the family members enter, develop their careers within, and then exit the business,” says Grant Gordon, director general of the UK’s Institute for Family Business (IFB). The same holds true for non-family members working in the firm. “The goal is about grooming good quality staff to take on more senior positions in the future, and of convincing them that they have a role to play in the longer term growth of the business,” says Groom.
While such strategies are also needed for non-family firms, especially those who strive to diversify and expand, the rationale is a bit more basic for family firms. For family businesses, it is really just down to survival. Paul George, a partner at PwC who specialises in family business, says, “There is a long history of great family businesses that have failed as a result of sleepwalking into a succession process.”
Indeed, the numbers do not lie. In the family business community, there is a well-known phrase: shirttails to shirttails within three generations. In other words, it only takes three generations for a family business to go from nothing to something to nothing again. In the UK, it is estimated that only one-third of family businesses survive to the second generation.
“Lack of planning for succession is the single biggest cause of failure in achieving business continuity and growth for UK family businesses,” says Gordon.
Furthermore, PwC recently completed its 2007/08 Family Business Survey, Making a Difference, and found that while many family businesses around the world are thriving, the transition to new ownership and management and the battle for talent are the top two (of three) major challenges they face in the coming years (the third concerns growing administrative burdens). According to the results, 42 per cent of the surveyed family businesses across 28 countries say that their single biggest internal issue is the recruitment of skilled staff; in Britain the picture is worse: 61 per cent rank it among their main concerns.
Despite this gloomy outlook, family businesses are taking action. Succession
planning and talent management are big buzzwords at family business conferences, in family business publications and among family business networking groups. The 2006 Family Business Network (FBN, the world’s leading network of business-owning families) annual three-day
conference was focused on Building Success on Talent: Attracting the Best Resources to Business Families.
Amazon.com has no less than 10 books on succession and leadership in family firms and universities are increasingly offering MBA courses specifically designed for family business owners. There are myriad consultants around the world ready to help families design proper succession plans and advise on talent management strategies. But, despite the resources available, families still face many challenges. Groom says it is important to carefully consider whether family members want to work in the firm and are good enough to run the business. “In a competitive marketplace, there is little room for sentimentality. It doesn’t help the family or the business to appoint people who simply are not up to the job. In the long run, the business is likely to suffer and this will only
damage the family’s long-term wealth.” Furthermore, he says it is dangerous to force a family member into a role they do not want. Thus, you should appoint people with the right abilities, not the right blood. That said, if a family member is going to be appointed, Gordon says it is important to build emotional attachment so involvement in the firm is regarded as more than just a way to earn a living.
For non-family employees, talent can most easily be attracted, retained and motivated where the firm has solid governance structures in place. Non-family employees also need to have the scope to implement strategy and must be rewarded fairly (prompting the question, Can the family afford not to hire the person?). Groom suggests that prospective non-family employees get clear family understanding of the agreed business direction; identify (and agree) with the family the objectives for the appointment (Stewardship? Turnaround? Growth? Sale?); and agree with the family the level of real autonomy they will enjoy in the role.
Thus, it appears that a clear talent management strategy is important in a
family business, much like for any public company, setting out procedures, policies and goals. Gordon couldn’t agree more: “It’s a vital tool for any
business, whatever the ownership form, family or otherwise, because it is the people that drive the business.”
Source: http://www.talentengagementreview.com/articles/20080311_5
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