Bringing an Outsider into Your Family Business

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Blood is thicker than water — and sometimes more important than money. If your startup is a family business, you know what we’re saying.

But as your family startup grows, it’s only a matter of time before your staffing needs outstrip even the smaller branches of your family tree. It’s time to hire an outsider.

A lot rides on this, whether you’re bringing in someone at a high level for their professional expertise — or just because you’ve run out of sisters to answer the phone that, happily, won’t stop ringing.

Here’s how to navigate this pivotal moment in the life of your startup:

Maintain family control

Someone coming into your company as a savior or make-over artist may believe his own success and expertise should entitle him to a seat at the family table. If it comes up, cut it short. Spell out very clearly that the potential rewards do not include a place among the company’s majority shareholders.

“We had known the guy we hired as president for an extended period of time, and it has worked out very well,” says Kevin Fox, CEO of family business Viable Vision LLC, a consulting firm in Gurnee, Ill. The company’s first outsider, brought in two years ago to jump-start growth, “has a not-insignificant equity stake in the business,” Fox says. “But we kept the voting shares concentrated in the family’s hands.”

Look for someone with “family traits”

You can dramatically increase your chances of success if the first non-family member on board is someone who’s already known by, or at least familiar to, you or your family. This candidate already has had some exposure to family relationships and maybe even your company’s culture.

In 2003, Harvard grad Ada Polla Tray launched the U.S. sales and distribution arm of Alchimie Forever, a family-run company based in Geneva, Switzerland. She was looking for an executive assistant she could trust, hired the niece of one of her mother’s best friends, and sent her to Geneva for more indoctrination in family business and culture.

“Having that connection there before hiring someone was very important to me,” Tray says. “That’s true particularly because my enterprise is still home-based, so the trust relationship has to have a whole secondary level.”

Don’t underestimate the importance of the family culture

When you go outside the family to hire, you’re looking for help to take your business to the next level. But don’t lose sight of the family dynamics that got it to this point.

“Unfortunately, most entrepreneurs don’t realize how much conflict it can create if they don’t hire the right person from outside the family,” says Bette Price, president and CEO of The Price Group, a small-business consulting firm in Addison, Texas. “So they look for someone with the experience they need, and neglect making sure that the person is going to fit into the family-owned business.”

Whether or not you’ve done this, if the new hire just doesn’t fit, start over. “You may make a mistake,” says Joe Astrachan, director of the Cox Family Enterprise Center at Georgia’s Kennesaw State University. “Don’t be afraid to say that they don’t fit in and that you’re sorry. Don’t spend too much investment of time and money on the front end trying to make sure they fit. Just go find someone else.”

If you’re the new hire, lose your illusions

Anyone joining a family company as the first outsider should be clear-eyed about what they’re getting into.

“You need to come into it with your eyes wide open, meaning that the family dynamic will dominate, and family relationships will be as important as — if not more important than — corporate performance,” Astrachan says. “Don’t go in there thinking anything other than, ‘I’m not going to rock this boat unless I’m absolutely commanded to.’”

Our Bottom Line

Many family-owned companies reach a point where they need to hire someone who’s not kin. Going outside can work out fine, as long as you hold onto the family culture and all parties are clear about roles and expectations.

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