When do you bring a non-family CEO, COO or CFO into the family business?

Business Leader Post, April 8, 2014

Thomas D. Davidow, Ed.D.

Over the years, referral sources and others who choose to contact me about my services always focus on the family dynamics and the need for those issues to be addressed. What is either assumed or forgotten is that the state of the business and how it's performing may be affecting the family.

I am not referring to the obvious situation where the business is failing due to the belief that the family member who is running the business is judged to be incompetent by other family members. Nor am I referring to down times.  Interestingly enough, there can be less friction between family members in down times. The family goes into emergency mode with no time for arguing or conflict. Their focus stays on the business, and everybody pulls together.

It has been my experience that family stress and conflict can come when the business has hit a ceiling, and the family members in the business don’t have the skill set to bring the business to the next level. That ceiling can be different for different families and different businesses.  I have seen it be at $10, million, $50 million and even $500 million. Whatever the level, not being able to bust through that ceiling can create frustration and conflict in the family. 

One must be cautious, however, before bringing in those additional skill sets either in the form of a CEO, COO or CFO or in other key positions. If you bring in an outsider before resolving the family dynamics, that outsider will spend his/her time and energy managing the family dynamics; and the business will continue to flounder.  Sometimes the outsider escalates the conflict by siding with a family member with whom s/he has rapport.  Other times s/he gets fired or quits.

The family needs to have a larger perspective about what is good for the business.  That is difficult for families because they are operational-centric, which means they work in the business instead of on the business. Working on the business means spending time thinking strategically versus tactically. There are many professionals who are excellent at taking you through a strategic planning process. It is through that process that you can decide what and who you need to get to that next level. Check it out!