What are the risks of bringing in an outside CEO to run the family business?

Business Leader Post, November 8, 2013

Thomas D. Davidow, Ed.D.

The expertise of the individual’s skill set and his or her years of experience are clearly important assets. Outside experience can bring a different perspective to the business and can provide tremendous value, if that experience and perspective are implemented. The key word here is if. The biggest risk is that the outsider will get pulled into the family dynamic. Family member/managers, like many other professional managers, can disagree on a number of business philosophies, methods, procedures, etc. However, in the family business, those disagreements can take on an additional level of emotion because of the family dynamic that exists beneath the business disagreement.

The outsider, when faced with this dilemma, frequently begins to drift towards agreeing with one family member versus the other. S/he may drift towards the one s/he is most comfortable with, or who s/he perceives has the most influence or who s/he agrees with more often than not. Having lost a neutral perception, the outsider can then move from making sound business judgments to favoring one family member and excluding the other, thereby escalating family conflict and bringing the business into a risky situation.

Be careful. It is your responsibility to inform the outsider of underlying family issues and to have ongoing meetings and communication about those issues in order to clear the air continually. Absent that, everybody loses, including the outsider.