Tips for recruiting veterans of large corporations

By Tim Howes

Executives from major companies can be key contributors to a family firm--if the hiring process is managed properly.

Today’s challenging economic times have given smaller organizations an unprecedented opportunity to recruit corporate executives, according to recent news reports. In the past, few employees of large corporations would have considered working for a smaller firm. Now, with economic chaos the norm, displaced corporate executives are looking for opportunities with smaller firms.

Family businesses could certainly use talented, seasoned veterans, as many lack an outside perspective or professional management experience. What’s more, corporate executives often possess their own network of other outside professionals, which they can tap into for needed expertise.

Unfortunately, anecdotal evidence suggests serious potential problems exist when a family-run business hires an outside executive. There isn’t necessarily anything wrong with the candidates themselves; rather, the problem lies with the processes family businesses use to recruit and integrate outside employees into their companies. Here are some tips for family business owners to consider when interviewing and hiring alumni of large corporations.

Take your time. Nelson Jacobsen, third-generation family owner and CEO of JSJ Corp., a designer and manufacturer of durable goods in Grand Haven, Mich., notes that his company was well acquainted with its non-family senior executives before it brought them aboard.

“We didn’t realize it at first, but our best professional managers have been people we’ve known in some capacity elsewhere,” Jacobsen says. “Our CFO came from our outside audit team. Our COO was someone we’ve literally known for decades.”

Plan well in advance. Jacobsen’s management team determines what new positions need to be filled in the months, and even the years, ahead. “We think carefully about who is an ideal candidate,” Jacobsen explains. “We start to identify who would be a good fit well before we need to fill the position.” Any family business hiring for a management position should draw up a formal job description, Jacobsen suggests.

Compensation should be part of the job description. I.H. “Chip” Clothier, managing director of HFC Executive Search of Rosemont, Pa., and a former employee of a family-owned specialty retailer, says developing an enticing compensation package is important. “Many corporate executives are used to earning stock options or grants as part of their compensation, yet for family businesses, the idea of giving up equity is a difficult choice,” says Clothier.

Family business owners should consider ways to substitute for equity in a compensation package, Clothier says. “I’ve seen family businesses create phantom stock or weigh more cash for bonuses than would be the standard in the industry,” he says. He suggests that family firms consider benefits that most major corporations can’t or don’t provide, like financial services planning and country club memberships.

Consider the level of control. In drafting a job description, think carefully about how much control you want to give up in your organization and what decisions your non-family employee will make. “Many corporate executives have been used to operating and making decisions independently without having family members looking over their shoulder,” says a non-family CFO at a $300 million family business.

Clothier feels strongly that family members must give some leeway to professional managers. “If you want to get results,” he says, “you have to be willing to give up some level of control.” Establishing an atmosphere of trust, he says, will make the transition much smoother for both parties.

Interview properly. Hiring the wrong candidate at a large company is disappointing, but for most family-run businesses, it can prove to be an unmitigated disaster. Yet because interviewing isn’t something family business owners do regularly, many of them don’t know how to conduct a proper interview. Owners can be easily charmed by an executive’s résumé that boasts of experience from Fortune 500 companies. To ensure that the right information is obtained during the interview process, many hiring professionals provide managers with a list of sample questions to ask.

At Jacobsen’s company, applicants interview with several managerial-level personnel. This provides an opportunity for managers and employees to become comfortable with the candidates and, conversely, for the candidates to truly assess whether the opportunity is right for them.

Just like on first dates, people tend to be on their best behavior early on in the interview process. Smart business leaders spend time with promising job applicants in informal settings, such as at a restaurant or at a sporting event. Eventually, the candidate’s true personality will emerge.

Be candid. Communication is a two-way street. A non-family CFO notes that business owners are often so accustomed to selling their organization that they forget to discuss the details of how a prospective employee would work with them. At his organization, “we’re honest and upfront about what to expect,” the CFO says. “There’s no sense in bringing on someone that will be a poor fit down the road. It’s disruptive and expensive to have to rehire for that position a year later.”

Part of the problem is that family business owners are often reluctant to admit to internal strife and challenges. “There is always some misfit family member that will cause problems down the road for a professional manager,” says Paul Karofsky, CEO of Transition Consulting Group and executive director emeritus of Northeastern University’s Center for Family Business. “As a family business owner, you have to be upfront about these challenges.”

Many corporate executives are accustomed to having support staff to handle secondary responsibilities. When they join a family company, they are often shocked to find they don’t have the same perks they’d enjoyed previously. Effective communication can help prevent future disappointment.

Steer clear of the “large company genius.” The “I know better than everyone else, just ask me” syndrome sometimes afflicts corporate executives who have spent much of their time in large organizations. Many such executives try to force their former employers’ methodologies into a family business, which can prove disastrous.

John Hazen White Jr., president and third-generation leader of Taco Inc., a manufacturer of HVAC equipment in Cranston, R.I., faced this issue many years ago when his company hired executives from large corporations. “It led to an inevitable clash,” he says. Today, White says, Taco prefers promoting long-term employees over hiring outsiders.

Hone your culture and core values. Jacobsen’s company lists its principles and mission statement on the company website so job candidates can quickly assess for themselves if they feel they are a good fit. “It’s not just about the money,” says Jacobsen. “It’s a life decision to work for a family-run business. Candidates have to authentically show that they want to work for us.”

Taco is steadfast about its core values, White says. “They govern how we treat employees, customers, suppliers and even banks,” he notes.

Get them onboard. Once an executive joins a family business, the first 100 days can be full of surprises and shocks. If conditions at the family company are different from what he or she expected, Clothier warns, the business owner must be prepared to keep the new employee motivated. Smaller companies are often too quick to make snap decisions that a new employee was a “bad hire,” Clothier says. With a little handholding and advance preparation at the hiring stage, he suggests, the newcomer can become a dedicated long-term contributor.

Hold family members to a higher standard. Nothing can frustrate a professional manager more than having to work with family members who aren’t held to the same level of scrutiny. At Jacobsen’s company, family members are expected to obtain suitable formal education and to prove themselves with outside work experience before joining the business. This levels the playing field and keeps resentment from building among non-family managers.

Bringing corporate executives into a family business is fraught with challenges and potential landmines. But family business owners often need the guidance that managers with large-company experience can provide. Especially in today’s economy, many talented people are seeking out smaller organizations for their next opportunity. If you take the time to ensure you are hiring the right candidate, you can lift your company to new heights of excellence.

Tim Howes (thowes@SpyglassStrategies.com) is principal of Spyglass Strategies, a consultancy practice that works to improve individual and organizational performance. He is also an assistant professor of management at Johnson & Wales University.

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Summer 2010

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