Senior Management in a Family Business

Senior Management in a Family Business

Senior management governs the success and the continuity of family businesses. Family businesses usually start up with informal structure and centralized decision-making. And usually the top managers are exclusively the founders or close relatives. As the business gets bigger and bigger, a more formal structure and decentralized decision making are needed to guarantee the success of a family business for another generation.

Furthermore, appointing the right senior manager is very crucial in this case; professionalism and expertise should be taken into consideration. Senior management selection pool should include family members and non-family members according to their qualifications and value addition to the company. Hence, a clear and formal succession plan would ensure business continuity and survival. Such a plan should start as early as the new CEO is appointed. By creating career development plan system, the nominated managers will go through gradual promotions and training in order to prepare them for CEO positions.

Although the necessity of having succession plan, many families in businesses postpone planning due to complicated implications in a family business environment. The reasons behind this delay are:

  1. Avoid any conflict between the potential CEOs available within the family.
  2. No capable family members for CEO position at current time.
  3. Avoid discussing potential loss of a family member.
  4. Not to admit that company could survive without current CEO.

Good networking, defining roles, establishing boundaries, and fair promotion and reward policy within family members in the business might reduce the conflicts and lead to better environment for success.

In the last five years, my father undertook a project of building a 5000- square-meter factory in a very prestigious industrial area in Northern Bahrain (Bahrain International Investment Park, BIIP). The challenge was to build a huge factory that occupies all operations and management under one roof. And only two weeks ago, all the operations have been shifted to new manufacturing plant. Thanks to god and to my dad’s efforts the factory is fully operational now. My father established this sweets factory in 1983 and with assistance of my mother and two of my uncles. The factory continues to succeed competing in the local and GCC market. And year after year, the business became bigger and number of stuff increased from 3 labors to 150 labors. Later on, two of my sisters and I joined my father’s business few years back. He trained us to lead the business for another successful generation. We are all qualified with knowledge and experience of the industry. The question here who is my father’s successor? Due to seniority and qualifications, my father appointed me as the next senior manager!

My father always says that he has already undertaken so many huge projects, but he believes that developing a leading and knowledgeable generation was the most challenging project in his whole life.

http://www.smetoolkit.org/smetoolkit/en/content/en/6753/Senior-Management-in-a-Family-Business-

http://www.mindtools.com/pages/article/newCDV_40.htm

7 thoughts on “Senior Management in a Family Business

  1. Great post Maryam. Family businesses and their dynamics always interests me, especially that the most if not all of the top businesses in our region are all family businesses or at least that’s how they started. In my previous job we used to study family businesses and help create policies and governance strategies for them. Succession planning was definitely one of predominant elements when it comes to running a family business. I have always been a fan your business and like your father I am certain you will accomplish great things 🙂 wishing you all the best.

  2. Very interesting post. Having to choose a Senior Project Manager is a very critical decision especially in a Family Business. By not choosing the right and qualified person from the beginning the Business may come to an end. Furthermore, you may have a lot of Family individual competing on that position thinking that since they are one of the family members that they automatically qualify for the position. Not taking into account that they must have the knowledge and skills to keep the business running. All they think about is the position and power they would be in. therefore, choosing the right person from the start will save the business and the relationships among the family members and may have a number of individuals in the family think about what qualifications and skills they really need to develop to get in line to be the coming Senior Project Manager of the Family Business.

  3. I can relate slow planning in family businesses due to family implications. I was reminded of family businesses owned by close relatives, which face numerous management problems due to relationship influences. This is relevant in describing or creating awareness of the importance of senior and expert managers in handling family businesses. Another thing to consider is the fact that senior management reduces bias decision-making.

  4. Great post! I can relate to this article as family business’s success often combines ambitious vision, entrepreneurship, and determination. However, most family businesses are confronted by challenges that urge them to create more robust management backbone to sustain their efficiency. A clear vision, a long term perspective, firm management grip, rapid decision making and core skills are the potential elements that lead to sustaining a family business! Moreover, performance management systems and competitive advantage initiatives are crucial factors that can develop a firm to thrive for generations. I wish you all the best!

  5. This is a very interesting post. My husband works with his father in their landscaping business. They are currently in the informal structure stage not because my husband does not have great ideas but because his father doesn’t want to let go of his old ways. It has created a lot of tension in their relationship and caused the business not to grow to its full potential. As his father gets older though and less involved physically, he realizes that his successor (his son) will be the one in charge and that he needs to trust his decisions. I think the next couple of years will be an important transitional phase in the business.

  6. I found myself wondering so true, after reading your article. I worked for one family business, The XYZ Company grown pretty big and has as many 700 employees all over the world and it was managed by one of the family member and all other brothers and their wives were shareholder.
    But when XYZ decided to go public and got international equity funds to hold IPO that time the management activities came in public’s eye and XYZ started downsizing.
    Reasons for failure- Centralized,biased decision making and new/outside shareholders didn’t appreciate that.
    I always wondered at that time -what went so wrong? and I found my answer/logic in your article.

  7. Although not often discussed in many business classes, family business are very prevalent and your discussion of the process of selecting and developing a CEO is very thought provoking. From my experience in working for a family owned business directly under the husband and wife owners, I can agree with you on the four reasons why succession planning is delayed. Unlike in a traditional business environment, management responsibility and authority can much more vague in a family business. Also, unlike your family’s ample competent successors, if the successor is essentially placed into the CEO position due to nepotism, the whole company can suffer.

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