Family Firms and Interims

By: Nick Diprose Click author's name for more of his/her articles

Family firms account for a large percentage of the 4.6 million private sector enterprises in the UK economy. The majority of family enterprises are small and medium sized, but the Institute of Family Business estimates there are also over 1000 family firms with more than 250 employees. It is well worth exploring the value that an interim expert can bring to family owned businesses and the benefits that an interim can gain from working in a family firm.

The Benefits to an Interim

Recent research from the Institute of Family Business suggests that there are a number of unique advantages to working in a family firm. Family firms may enjoy greater loyalty from staff members who are motivated to build up the reputation of the family brand name. Survey evidence suggests that a higher proportion of employees in family firms than in non family firms feel loyal to their organisation. For the interim expert delivering company objectives this may mean they do not have to deal with errant management working to their own private agendas.

Family firms are more likely to invest for the long term and focus on long run returns, rather than quarterly results. Family firms may be willing to wait longer than most other investors for a return from capital invested - so-called "patient capital". Recent research coming out of Germany suggests that family owned businesses are weathering the current recessionary storm better than other privately owned businesses. This alone could improve the chances for those interims looking for their next assignment.

Members of family that work for the business will most likely stay longer than employees in non family firms. A survey of family firms established that the typical length of service for the Chief Executive was 35 years. This gives stability and uniformity in decision making - staff know what to expect and have clarity about the objectives of the business. For the interim coming in to the business, provided they have the backing of the Chief Executive, they may be able to get things done quickly without the need to get a lot of buy in across the firm.

However, there are also disadvantages to working in a family firm, particularly if it's a close knit firm with little experience of working with 'outsiders'. Firstly, if family firms only recruit from family members, the level of skill coming in to the business can be low. A nepotistic recruitment strategy can also discourage talented people who are not family members from seeking work at a family firm and adversely affect performance. A recent PriceWaterhouse Coopers survey of family businesses showed that only 22% have established criteria for choosing which family members can (or are qualified to) play an active role in the business.

The Value of an Interim

In such cases, an interim expert can add tremendous value to a family business by providing skills and experience not available in-house. In addition, they can provide formal and informal coaching and training in external, professional business practices. As their role in the business is of a temporary, transient nature, the interim is less of a threat to family members who would normally feel threatened by their qualifications and broader experience.

A reluctance to bring in outsiders, such as non-executive directors in larger firms, can hamper the use of external knowledge and lead to weakness in corporate governance. An interim expert who has experience of how larger, publicly owned organizations operate - and ideally what it is like to turn a small company into a larger one - has something particular to offer family firms.

In the smaller, owner managed business, the personality of the management team or the business founder has a far greater impact on the organisation than in the bigger business. Existing personal issues, for example, between family members can be complicated to deal with. An interim expert must be adept at reading between the lines and knowing when and how to intervene for the benefit of the business. With an objective, 'outsider's' approach, an interim can provide a useful counter- balance to the informality and irrationality of the smaller business.

Ian McKinnon, former Chief Executive, Luxfor Group (A £200m MBO from Alcan UK) said "We have just put an interim executive into one of our acquired businesses, which means we'll have a 'heavyweight, hands-on' manager on site. This is one of the advantages of interims: you get the benefit of an outsider with a lot of experience of handling change, at a cost that is roughly half that of a management consultant."

Hiring an interim might feel like a big step for a family business not used to hiring outsiders. However, interims provide objectivity, experience and skills not available internally and an external reference point against which the business can measure its' progress. For the interim, they get the opportunity to work with a group of loyal company owners committed to the success of the business.

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About The Author: As Managing director of BIE, Nick Diprose has successfully delivered interim management solutions in the UK and in international markets for BIE's wide client base including private-equity portfolios through to large UK, US and European companies. BIE is the market leader in the supply of Interim Managers across all key business sectors and and functions globally. Nick can be contacted at nick_diprose@bieinterim.com or visit www.bieinterim.com