What it takes: external management in a family business

Looking at today's management theory, there is far too little emphasis placed on the difference between family businesses and listed companies

This is the first part of our ‘What it takes’ series in which we publish unfiltered contributions from titans of various industries that have been there, done that and are aligned with the tal&dev school of thought. The ultimate goal of the series is to provide you with inspiring, yet pragmatic, examples of different career paths. In this release Prof. Dr. Arnold Weissman, founder of the Weissman Gruppe and tal&dev advisory board member, provides his view on what it takes to be a successful manager in a family business.

Looking at today's management theory, little distinction is made between family businesses and listed companies. Both systems are treated as if they were the same. Yet the differences are so great that I would argue there is a need for an independent study of business administration for family businesses.

I would argue there is a need for an independent study of business administration for family businesses.

Why is this so? In a family business, two different systems must be connected and understood: the family business system and the entrepreneurial family system. As a rule, the family business does not follow the approach of profit maximization or shareholder value. The overall goal is to maintain the company as an independent family business. Independence from banks and the capital market is also an important goal. Family businesses should be managed in a way that makes them "suitable for grandchildren". One could also say: the overall goal is increased survivability. The consequence: while the capital market mainly rewards growth, family businesses tend to rely on a "controlled offensive". The issue of avoiding risks that could endanger the company's existence is much more important!

Family businesses should be managed in a way that makes them "suitable for grandchildren".

Well-managed family businesses are often:

- highly specialized

- niche players

- very international

- sometimes world market leader in their segment

- close to the customer

- socially responsible

- human

- fast

- innovative

What does this mean for external managers in such companies? The first thing they need to understand is the special DNA; the genetic code of family businesses. Without this knowledge, it is not possible to survive for long in such companies. They have to learn what criteria are used to make decisions, how families - even if they are not involved in the operative business - have to be involved. This requires a special degree of empathy.

The competencies of such a manager, in addition to technical expertise and methodical know-how,  is the ability to work together socially. What about leadership competencies? Yes, definitely, but always keeping in mind that the family must be involved and in case of doubt always has the last decision.

Managers who are going to join a family business must be able to think strategically far (family businesses think in generations, not in quarters!!!) and at the same time be close to the people.

Strategically far - humanly close!

I recommend every manager of a family business to be guided on the path of his development. The differences between public and family-run companies are so great that failure would otherwise be inevitable.

Such managers need to know exactly what to do:

- which workplace they really prefer

- whether they are prepared to make the special effort that is necessary in family business systems

- whether they have the "networking skills" or want and can develop them

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Prof. Dr. Arnold Weissman has been advising tal&dev since its inception. In 1987 he founded the Weissman Gruppe in Nuremberg, Germany which is a leading management consultancy dedicated to advising family firms in Germany, Austria, Switzerland and Italy. Additionally Arnold has a passion for bringing his learnings to the forefront of accademia while also mentoring and advising high-growth startups.

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October 1, 2020

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