Professionalizing family businesses

In the last few weeks I’ve been meeting with a bright, organised and not unambitious gentleman who for eighteen months has been working in Kisumu as CEO of a family-owned financial services company. He’s just handed in his resignation, fed up with being inhibited by the owners. They’d hired him to help them professionalize the organisation, but it turns out they didn’t really have the stomach for it. While he understood the importance of looking further ahead, they just wanted to see monthly profits maintained; while he got down to strategic planning and budgeting, they would rather he micro-managed his people.

Another person I’ve been spending time with hasn’t yet resigned but is facing similar – and far from unusual – frustrations. She too feels unappreciated and taken for granted, as a result of which she must rely on her inner strength and her values to compensate for being actively demotivated by her owner-employer. Despite making excellent contributions to their bottom line, she hasn’t been able to help the company to anywhere near the extent she could have had she been allowed to apply her energy and her style more freely.

I must confess that I have not had the opportunity to talk to the owners of these two family businesses to get their perspectives on the situation – they may well have different views on what’s been happening. Be that as it may let me turn to another scenario, to a couple of cases where I am offering support to the owners of two very successful and fast growing family businesses.

Their challenge is that while they know they must delegate more if they are to continue growing, and that this means bringing in an outside CEO to support their efforts, understandably they worry about finding the right person. How can they be assured that once on the job such new blood will be compatible with their way of running the business? How can they be sufficiently confident they’ll get on with their choice, and that they’ll be able to retain control?

Is it better to play safe, and employ someone less dynamic and less ambitious, someone who will adapt to the prevailing family style? And therefore must they just keep working 24/7, on the assumption that that’s as good as it gets? Or, should they gamble and hire a star?

None of the four organisations above has taken the plunge of inviting outsiders to join the family members on their boards. The latter two are definitely thinking about it, but they’re hesitating. The same questions arise as the ones holding them back from bringing non-family members into senior management: play safe and merely bring in names for the letterhead and the website, making it clear they expect little more than support for the family view? Or take on seasoned characters who risk asking inconvenient questions and proposing uncomfortable changes?

Finally, my mind turns to two family businesses that have already gone far with their professionalisation – for that’s what this is all about. They took the bold decision to invite external non-executive directors to join their boards, people who have indeed been making a difference. If you ask the family directors – still the full owners of their businesses – what effect the introduction of these outsiders has had, they will say the outsiders have brought to bear the consequences of their experience in much larger organisations. They have encouraged the emulation of the formal structures and systems taken for granted by companies at higher scale and of larger footprint, while warning against the risk of silos, bureaucratisation and complicated politics that can too easily creep in as one grows. Generally they offer mature listening and constructive probing, while accepting where ultimate decision-making lies – with the owners.

The non-execs have particularly helped to reinforce the focus on customers, and they have also helped the owners become more courageous, giving them the strength and support to confront what needed confronting more swiftly and straightforwardly than they otherwise would have.

In all six cases, the big question is how the organisation will continue going to scale, and in a sustainable way – including with regard to generational succession planning. The challenge becomes much greater if the product range and/or the geographical is to spread further: the more branches or subsidiaries or product groups or other units and sub-units are to be formed, the more the need for owner-directors to create mind-space for longer term strategy, for coordination and for talent management.

Many are not used to focusing here, and it is not where they may feel most comfortable. Including not feeling comfortable with others drawing their attention to the need. “We’ve done very well this way until now, so why change?” it is tempting for them to ask, and with some justification. They have indeed done well, maybe very well indeed. But the bigger and the more complex the business becomes, the more the need for a proper senior management team, adequately empowered and motivated. And, I would strongly argue, the more the need for dispassionate non-executive directors to complement the strategy brainstorming group.

This therefore is a friendly plea to family-owned, family-run businesses: find ways of bringing in and developing people to whom you can delegate, allowing you to be freed up for more strategic and longer-term issues – whether or not this has been a natural area for you spend time on. And think seriously, very seriously, about taking the plunge to invite a couple of non-executive directors onto your board. Make it a proper formal board, enjoy the challenges that come with it, and enjoy the benefits – including for your work-life balance.

Finally, if considering all this seems too much to contemplate in addition to handling your daily operational workload to which you have become all too accustomed, seek advice from those who are a few steps ahead of you. Learn from what worked well for them and what did not, and make the first move. You won’t regret it.

mike.eldon@depotkenya.org

The ideal graduate

I recently participated in the graduation ceremony of KCA University, where for the last few months I have been Chairman of its Council. As Council members and others gathered in the Vice Chancellor’s office before the event started, conversation turned to examining what makes an ideal graduate of this institution. One fellow Council member emphasised the need for students to develop their ability to think and to write. How true.

As I look back on into my distant past as an economics student (I became an undergraduate exactly fifty years ago!) I still appreciate the way my professors challenged and stretched me. Yes, I studied economics and other related subjects, but the serious lasting benefit of my university years was that I became a much more rigorous thinker and a far more fluent speaker and writer – someone who could clearly and convincingly share my thoughts with others.

How far away this is from environments where students sit passively listening to their lecturers just lecture, and later merely regurgitate the product of their rote learning.

The next challenge to the development of our “leaders of tomorrow” is to complement their intellectual development with building their emotional intelligence. Particularly those studying technical subjects (such as IT, engineering or accounting) are likely to pay insufficient attention to working on their social skills – to their great regret later in life.

Another of my Council colleagues suggested the need for our graduates to be at ease socially among more senior people in society, to fit in. “Are we talking about the knowing-how-to-use-the-right-fork kind of fitting in?” I asked. Well, that’s part of it I was told, but of course it’s much more than that. So many university students, even today, arrive on campus from rural areas – or, as one of those present put it more simply, “from the village” – having not been exposed to more Western urban environments, and it can be quite bewildering.

Employers too would wish their new young recruits to be socially adept as they mix with senior people, and from diverse countries and cultures at that. Understandably they would rather be saved the effort of running etiquette classes and the like – given that they are already obliged to help fresh graduates with English and other more basic skills.

Little wonder that when learning institutions like Nairobi and Lenana Schools were built, their designs incorporated golf courses: they were unabashedly preparing their charges to join the elite of society, the establishment. The renowned British Public School systems focused on breeding proper gentlemen whom one could “take anywhere”, with the motto of one (Winchester) being “Manners maketh man.”

But wait a minute. If universities like KCA are to go in for this kind of development, couldn’t we be accused of being a bunch of snobs? Those gathered in the room were more than aware we’d have to do better than simply turn out golfers who knew how to handle silver cutlery. So now talk turned to a second, equally vital aspect of producing our ideal graduate.

In addition to being at ease with sophisticated seniors, our young men and women must feel equally at home back in the village (or in the slums). Bad enough that an increasing number no longer speak the vernacular language of their ancestors, or know the slightest thing about their cultural roots. As time goes by they feel more and more awkward on the odd occasion they visit their places of origin.

So we must help them bridge this gap too. We must have them spend time in a village – both in their own area and in some very different environment and ethnic group. They must make themselves useful, and they must be friendly and humble.

Going back to my own student days I value the vacation time I spent in various mundane jobs, including as a clerk in a tax office and driving a van for a hospital. (Those oxygen cylinders I hauled in and out of my vehicle were awfully heavy, I remember!) I equally benefitted from my AIESEC internships in France and in America. I worked in a coal mining company and in a cereal factory, getting to know people I would never otherwise have had the opportunity to meet. As we chatted in the corridors and the canteens I was able to appreciate their hopes and their concerns, and I know how helpful this has been in feeling as much at ease with blue-collar workers as with those of more similar backgrounds and outlooks.

In the sixties when I was going through these experiences, two things struck me about the contrast between my own approach to life and that of many of the workers with whom I interacted. Whether in Britain or France or America, I was aware of their lack of curiosity to find out more about me; and I noted their expectation that their future would be pretty much the same as their past, toiling away at relatively mundane and unskilled work. The world has changed greatly since then, at all levels of society. But I merely share these reflections on my experiences from those days to confirm what a profound an impact they had on me.

Soon the time came for us to don our fancy academic robes and parade ourselves in front of the graduating students. And what a joyous sight it was, to see all those bright young faces, equally robed, proudly being awarded their degrees.

Just one final point though. As they filed past us to shake our hands and have us congratulate them, we noticed that hardly any among them made eye contact with us. Was it a sign of respect for their elders? Mere self-consciousness? We could only speculate. But now we added one more element to our list of characteristics of the ideal graduate: in this contemporary world of ours, eye contact is everything. For it speaks of confidence.

mike.eldon@depotkenya.org