FAMILY BUSINESS ENTERPRISE

TEAM OF LECTURERS
UNIVERSITAS PELITA HARAPAN
Family Business Enterprise | Universitas Pelita Harapan 2016
 MEETING 7:
KEYNONFAMILY MANAGEMENT
Family Business Enterprise | Universitas Pelita Harapan
 TOPICS TO COVER (1)

1. Perspective of Nonfamily Management (Poza 2010, 232-234)

2. Career Opportunities for Nonfamily Managers (Poza 2010, 235)

3. Compensation and Benefits for Nonfamily Members (Poza 2010,

236-237)

4. Performance Feedback (Poza 2010, 237)

Family Business Enterprise | Universitas Pelita Harapan

 TOPICS TO COVER (2)

5. Extending Family Culture to Nonfamily Managers (Poza 2010, 237-

238)

6. Motivating and Retaining Nonfamily Members (Poza 2010, 238)

7. Nonfamily Manager as a Bridging President or CEO (Poza 2010,

238-243)

Family Business Enterprise | Universitas Pelita Harapan

1 Perspective of Nonfamily Management

Nonfamily managers tend to regard their firms positively

Perceptions of business differ from those of family members in

areas of:
The efficacy of management and governance

The capacity of the firm for innovation and change

The qualifications of potential successors

The ambiguity of their own positions in company

Family Business Enterprise | Universitas Pelita Harapan
1 Perspective of Nonfamily Management

Provide critical skills to the business

Establish benchmarks for managerial performance

Help govern the relationship between family and management

Are essential to the health and continuity of family-owned

businesses

Family Business Enterprise | Universitas Pelita Harapan

1 Perspective of Nonfamily Management: Values (1)

Entrepreneurs are often poor trainers of successors

They bring unique and complementary skills to firm management

Children may lack dedication and commitment to the business

Sibling rivalries lead to power struggles

The founder/CEO cant choose between children

Family Business Enterprise | Universitas Pelita Harapan

1 Perspective of Nonfamily Management: Values (2)

They create a benchmark for merit-based compensation

Co-CEOs, management by committee of family members may lead to

paralysis

Family successors may not be trusted by nonfamily employees or

other family members

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2 Career Opportunities

Career opportunities are unique resources that family companies

can turn into a competitive advantage

The surest way to be able to provide career opportunities to family

and nonfamily managers is to promote business growth

Family Business Enterprise | Universitas Pelita Harapan

3 Compensation and Benefits (1)

Nonfamily managers are generally less satisfied than family

managers with their compensation and benefits

Nonfamily managers generally seem to be paid less than their

counterparts in public corporations

Family Business Enterprise | Universitas Pelita Harapan

3 Compensation and Benefits (2)

Other issues include benefits, inflexibility, and lack of career

opportunities

Drawbacks may be offset by nonmonetary rewards and advantages

of working for a family-owned business

Family Business Enterprise | Universitas Pelita Harapan

4 Performance Feedback

Nonfamily managers are generally more satisfied with the

performance feedback they receive than family managers

Younger family managers respond relatively with less satisfaction

with performance feedback, which is significant

Nonfamily managers, who often serve as mentors, may limit the

negative feedback they give to younger family members because of
the risks inherent in providing such feedback
Family Business Enterprise | Universitas Pelita Harapan
5 Extending the Family Culture to Nonfamily Managers

Greater openness by CEOs to the perceptions and views of others would

clearly be helpful

CEOs need to close the perception gap that exists between them and
both nonfamily and family managers over their firms management
practices and ability to handle future challenges

A CEO must take appropriate actions to avoid imperiling the continuity of

the firm by being out of phase with its developmental needs
Family Business Enterprise | Universitas Pelita Harapan
6 Motivating and Retaining Nonfamily Members
How can owner-managers motivate top executives who realize that
the firms prime leadership positions are likely to go to family
members?
How can family companies retain such executives when they could
go to another company where they could likely earn more and have
a more clearly structured job in which achievement itself was a key
motivator?
How can family business leaders motivate nonfamily managers
without allowing them to participate in setting the direction for the
business?
How can owner-managers ensure the loyalty of nonfamily employees
in the absence of equity participation?
Family Business Enterprise | Universitas Pelita Harapan
6 Motivating and Retaining Nonfamily Members: How to? (1)

Build family/nonfamily management teams that provide complementary

skills at the top and set benchmarks for running the family business
professionally

Discuss career advancement opportunities for nonfamily managersand

how the succession process may affect these opportunitieswith candor

Involve nonfamily managers in business planning and succession

planning
Family Business Enterprise | Universitas Pelita Harapan
6 Motivating and Retaining Nonfamily Members: How to? (2)

Offer compensation and benefit plans that are benchmarked to

others in the industry, the profession, and the community

Use performance measuresscorecardsto build motivation

Hold meetings periodically between key nonfamily managers and

shareholders to promote mutual understanding and respect for the
different roles and contributions of each group

Family Business Enterprise | Universitas Pelita Harapan

6 Motivating and Retaining Nonfamily Members: How to? (3)

Educate the entire family, whether active or inactive in the company,

about business and management in order to create common ground
between family and nonfamily managers

Survey nonfamily employees periodically to assess the work climate and

determine whether the relationship between management and ownership
is healthy or requires attention

Emphasize nonfamily employees contributions to the family business

Family Business Enterprise | Universitas Pelita Harapan
6 Motivating and Retaining Nonfamily Members: How to? (4)

Treat family members like employees when they are at work

Use advisory boards or boards of directors with independent

outsiders

Develop a family constitution that spells out policy on family

employment and family-business relations

Use high-caliber key nonfamily managers as bridging presidents of

the corporation and mentors of the next generation
Family Business Enterprise | Universitas Pelita Harapan
6
Nonfamily Managers as a Bridging President or CEO:
Why? (1)
The outgoing family CEO is not capable of leading a succession
process and/or choosing among the children he/she loves equally

No successors are qualified to carry out the chosen strategy

Potential successors are too young or are not quite ready, and a
world-class outsider could represent both a role model and a
provider of substantive mentoring in their developmental process

Family Business Enterprise | Universitas Pelita Harapan

6
Nonfamily Managers as a Bridging President or CEO:
Why? (2)
The owning family recognizes that the business needs leadership
that will focus on the future, not the past

The business needs dramatic change

The owning family has come to grips with both the need for change
and its desire to keep the business under family control, thus
preferring this option to an outright sale of the company

Family Business Enterprise | Universitas Pelita Harapan

6
Nonfamily Managers as a Bridging President or CEO:
Outside CEO (1)
An outside CEO has to:
Build credibility with the multiple stakeholder groups
Proceed with a sense of urgency but slowly enough to
also incorporate traditional values and established core
competencies of the family business into his/her plans

Family Business Enterprise | Universitas Pelita Harapan

6
Nonfamily Managers as a Bridging President or CEO:
Outside CEO (2)
An outside CEO has to:
Communicate extensively, and help shape a consensus
on the board and among shareholders regarding the new
business plans
Provide detailed and timely financial and operating
information to all shareholders and eventually groom his
or her own successor, ideally a next-generation family
owner-manager

Family Business Enterprise | Universitas Pelita Harapan

 THANK YOU
FAMILY BUSINESS ENTERPRISE | UNIVERSITAS PELITA HARAPAN 2016

Family Business Enterprise | Universitas Pelita Harapan