Professional Management And Family Firms

While there is considerable debate regarding what constitutes the role of the professional manager, it is generally agreed that professional managers typically have received formal training in a business school setting in areas such as finance, production, accounting, and human resources/personnel.

Moreover, those trained in management generally fit the criteria for professionalism inasmuch their actions are driven by a set of general principles or propositions independent of a particular case under consideration; they are deemed to be “experts” in the field of management and to know what is “good” for the client; their relationships with clients are considered helpful and objective; they gain status by accomplishment as opposed to status based on ties to the family; and, they belong to voluntary associations of fellow professionals.

This and related articles listed below will describe some of the issues, dilemmas and conflicts that often arise as a family firm attempts to professionalize its management and discusses what might be done by leaders of family businesses to integrate more effectively the skills of professional management into their organizations. Hiring professional managers is one way to gain the skills of professional management. Another is to professionalize by training family members of non-family employees currently working in the business.

The Professionalization Dilemma

While there has been considerable debate as to whether professional managers have improved or stymied the effectiveness of organizations, most organizations benefit by utilizing the skills of management science. For example, market research and financial planning, along the more effective of methods of production (such as statistical process control or just-in-time inventory systems), have helped numerous organizations maintain a competitive edge. Most critics of professional management do not worry about the skills of professional management but rather their application, along with the values espoused by those with professional training. Often cited are the professional managers’ lack of understanding of human issues in organizations and their short-term focus on financial performance.

Why Professionalize?

There are a number of reasons why a family owned business might want to bring in professional managers or to professionalize their current management team. One of the most common reasons is a lack of management talent within the family. Family members sometimes lack skills such as marketing, finance, or accounting, and the family must acquire such skills if the business is to survive. As a family business grows, particularly in a complex environment, it is unlikely that the family will be able to staff all the key positions and have all the necessary skills. Therefore, the family will, out of necessity, look outside the family for help or attempt to broaden the skills of family members.

The second reason for professionalizing management is to change the norms and values of business operations. Family values such as unconditional love and concern often conflict with business values of profitability and efficiency. Some leaders of family firms believe that the family’s lack of professionalism and the employees’ lack of concern for profitability and efficiency can be changed by indoctrinating the current management team in sound business practices or by bringing in professional managers whose values are more consistent with organizational efficiency and achieving higher profits.

A third reason for acquiring or developing management expertise is to prepare for leadership succession. The founder or family leader may want to retire in the near future and may feel that family members in the business need additional training before assuming the mantle of leadership, or the founder may feel that no one in the family is capable of running the business after he or she is gone. A search is then made to find managers that can be trusted with the future leadership of the firm.

Conclusion

Many of the problems that accompany the transition to professional management in a family firm can be traced to differences between the training and values of the family and those of the professional managers. It should be borne in mind that founders and professional managers analyze problems differently, occupy different positions of authority, and relate to others in very different ways.


Related articles:

Problems of Professionalizing a Family Firm
Alternatives for Integrating Professional Management into the Family Firm


This article has been extracted and modified from Gibb Dyer, W. (1996). Integrating Professional Management into a Family Owned Business. The Best of Family Business Review (FBR): A Celebration. Family Firm Institute, Inc. Boston, USA.

George Tanewski is Research Fellow in the AXA Australia Family Business Research Unit at Monash University. Dr Tanewski writes extensively on family business issues and also sits on the board of a prominent Melbourne family business. For further information please contact George Tanewski on 61-3-9903-2388 or george.tanewski@buseco.monash.edu.au
First published: 25 July 2001.
Last updated: 5 October 2005.