Family Business 101 #4
Moving Up in Family Run Businesses

  • In family businesses, fairness has an added dimension
  • Handling promotions of family members needs careful consideration
  • Clarity in communication is key

The horserace was on. 

The CEO recognized his Vice President of Sales for outstanding work over the years leading the sales team.  The company had enjoyed 10 years of solid revenue growth, the last 5 of which saw year-over-year growth that was 20 % per annum.  He received a promotion to President and Chief Operating Officer, the first time someone from Sales had been elevated to that position.  And, he was not a family member.  The entire company was pleased with his new posting; congratulatory emails came in from all over.

As the COO settled into his new role, he worked hard to maintain balance between the demands of other departments and that of the Sales group.  After about six months in the new position, he saw clearly that to be effective at bringing the organization along, he would need someone to concentrate solely on that area. 

For the folks in the sales division, that meant that there was another slot that needed filling – Vice President of Sales.  Would management go outside? Or would they fill it from within?  There were two excellent internal candidates; the CEO, the COO and the Board, eager to sustain their culture, saw no reason to go outside.

The first candidate had been with the company for almost 20 years.  He had experience in every facet of the sales and marketing process and had pioneered much of the company’s go-to-market processes.  His skill at developing relationships was unmatched.

The second candidate had an impressive resumé as well.  A 10-year veteran, he had been given a new product line and had taken it from zero to become a multi-million dollar contributor to the company’s revenue stream.  He was intense, energetic, and forever proposing new ideas to improve the performance of the company.

And he was a family member.

Both candidates had impressive credentials; each had his own set of drawbacks.  The COO communicated clearly to both of them what his expectations were for the person who would ultimately take over that role. 

After six months, it had become very clear which candidate had risen to the challenge.

In this situation, there are not only the usual merit-based factors to consider.  If the COO appoints the non-family member, it might appear to those watching within the organization that this was a simple, up or down decision and the better candidate prevailed.  Business as usual, right?  The company is perceived as fair and now everything depends on how well the new Sales VP operates.

Family businesses must also balance the needs of the business and the family.  A study conducted by Kennesaw State University and Ernst & Young (Hall and Astrachan, 2014) found that the largest and longest lasting family businesses globally became and remain successful by optimizing both family cohesion and profitable business growth.

If the family member had been selected, the unsuccessful candidate might decide that his prospects would be better served at another organization and could then shape up his resumé and quietly begin a job search.  That option would be less likely for the family member, although there are notable instances where disgruntled family members have split off and started their own business.  Several family enterprises in the wine industry come immediately to mind. 

As should happen with any unsuccessful candidate within the company, the COO has the obligation to help the family member appreciate the choice made and the good that will result for the company as a whole.  Because there is a reservoir of trust between the two, he can remind the family member that the service of the greater good benefits him as well.  The COO must take steps to ensure that the family member remains connected to the overall purpose of the organization and finds ways to continue to produce work that is meaningful for himself and the company.

If the COO chooses the family member, he has the other dynamic to consider.  Will the other members of the organization evaluate the move as merit-based or family-biased?  First, he must take steps to communicate clearly to the other candidate why the choice properly favored the family member.  In his disappointment, he may not be willing to see the logic supporting the choice, but the COO’s obligation is clear.  Again, in a trust-filled organization, this will be less of a problem, but cannot be overlooked.  If trust is lacking, the COO and the new Sales VP must work diligently to demonstrate his bona fides and make sure that the dynamics within the Sales area are optimal.  Celebrating victories in either case is an important component of cementing favorable opinions about the choice.

Family business leaders must be relentless in ensuring that the steps taken are in keeping with the culture that has been mapped out for the organization.  There are excellent diagnostics available that Level Three Performance Solutions uses to help keep the cultural effort on track, regardless of the choice made for the next Sales leader.  We would be pleased to assist.

Ready, Mindset, Grow!

Ready, Mindset, Grow!: Nuggets Mined from the Leadership Journeys

Business leadership books abound today. What makes this one worth the read? Actionable insights! Ready, Mindset, Grow, delivers to today’s leaders entertaining stories of the transformative power of culture. Backed by solid research, these brief tales, and the lessons they convey, can be put into practice for short-term wins and long-term growth. Entertaining and insightful, the author has filled the pages with cultural nuggets and jewels from his 30+ years of experience in leadership coaching and consulting. Smart leaders will appreciate the candor, catch glimpses into their own circumstances and gain the conviction needed to accomplish positive cultural change.


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