A Checklist for Nonfamily Managers

By Edwin T. Crego Jr.

Business loyalty is not dead. It's just changed neighborhoods — from Fortune 1000 corporations to hundreds of thousands of family businesses.

In the current era of frenzied acquisitions, merger mania, downsizing, and belt-tightening, today's disillusioned employees in large corporations are changing careers and companies four or five times during their working years. But many family businesses, once stereotyped as unprofessional, nepotistic, and, for ambitious managers, seen as dead-ends, are now looking better and better.

Rosenbluth Travel, an international travel agency based in Philadelphia with $850 million in annual billings, was dubbed "The Service Company of 1988" by management guru Tom Peters. Chicago's $270 million-revenue Quill Corporation and Oakland, California's $35 million-revenue American Brass and Iron Foundry are as well managed as the best of their publicly held counterparts.

Of course, not all family businesses are ideal places to park your loyalty, The Journal of General Management reported that a survey of nonfamily executives in family businesses found their jobs to be a mixed bag. They identified strengths of their employers as: opportunity for quicker authority, responsibility, and participation in decision-making; personalized work environment; and peer group evaluation at the board of directors level. They also complained about weaknesses, such as lower starting salaries, lack of formal hiring practices, and nonfamily/family and interfamily managerial rivalry.

Still, many hired guns have prospered at prominent family-owned organizations. Some of the best known are Daryl Hartley Leonard, president of Hyatt Hotels Corporation, John Dasburg, president of Marriott Lodging Group, and Richard Miller, who recently replaced Frederick Wang, son of founder An Wang, as president of Wang Laboratories.

Does the family business you work for offer security and the opportunity for career mobility and financial advancement? To find out, rate your employer on the following six attributes:

 

  • Strong core values. Frequently, when the family's name is on the door, they have a stronger commitment than a faceless corporation to do what's right for customers and employees. One of the great things about a family business is that the core values of a family such as honesty, fairness, and responsibility for one's actions, can actually be reflected in the way business is done.
  • Clear mission. Successful family businesses clearly define their purpose: why they exist and what they want to accomplish. Rosenbluth's mission statement, for example, emphasizes providing the finest services through innovation and dedication to quality and excellence, maintaining a creative environment, encouraging achievement of individual and organization growth, and maintaining market leadership through sound business practices and advanced technology.
  • Professional work environment. A mission statement is great, but it should go beyond lip service. A well run family business must have a strategic plan, effective management systems, and efficient operating plans and communications, all of which should reflect the company's mission.
  • Objective recognition and reward systems. The family business should also concentrate on maximizing employee contribution and commitment, by allowing nonfamily members to hold key management positions, assigning responsibilities and authority based on competence, and utilizing performance-based compensation. Specifically, the compensation package should include some combination of nondiscretionary performance- and profit-based compensation, incentive stock options, deferred compensation, and phantom stock, which is not really equity, but appreciates (or falls) with the price of the company's common shares.
  • Commitment to the customer. Tom Peters and others preach about staying close to the customer. Excellent family businesses exemplify this trait. No matter how big they have grown, these businesses have remained externally focused and have kept bureaucracy to a minimum.
  • Innovative and entrepreneurial behavior. A key to long-term business survival is the ability to adapt and respond quickly. This requires continuous innovation and entrepreneurial type risks in responding to changes in the marketplace.

If your organization scores 100 percent, congratulations. You're involved with one of the best companies to work for in America. Give it your undying loyalty. If it does well in four out of six areas, you're still probably well off staying where you are. If it doesn't measure up, there are other family businesses around that are more worthy of your talents and trust.

Edwin T. Crego Jr., national director of Laventhol & Horwath's organizational consulting division, is coauthor of the forthcoming book, "Your Family Business."

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