Job one: Create a strategic plan

Even before recruiting an outsider, a family should sit down and analyze its needs and then devise a strategic plan for the hiring process. A company in crisis will need a manager who is sufficiently decisive and experienced to battle the forces that threaten the firm, while businesses that plan to slowly transfer control from parent to child will want a mentoring manager - someone capable who can run the company while training the future family CEO.

Experts suggest creating a family council to guide and oversee the new manager. The council should meet regularly to address business issues and reach a consensus on the company's direction and strategy. Then a council representative takes that message to the manager, who is thus spared the unpleasant experience of being whipsawed by contradictory orders from family members.

"Our managers spend zero time dealing with questions and suggestions from various family members - by design," says Dave Juday, 63, chairman of Ideal Industries in Sycamore, Ill. Founded by Juday's grandfather in 1916, Ideal is one of the world's largest manufacturers of wire connectors, tools, and testing equipment for electricians.

Juday, who is chairman of the board, created a 32-member family council to address company issues at scheduled meetings - not at the dinner table or annual family barbecue. The council also insulates senior managers from family strife.

"No manager wants to negotiate with this or that kid," Juday says. "We give our managers a level of authority and autonomy to accomplish what we've asked of them. We don't meddle."

A cultural fit

Family-business owners are known for being quick to hire and slow to fire. New to the recruiting game, they often go for candidates with flashy degrees and brand names on their résumés.

"For years dear old Dad has been happily driving a Toyota (TM) Corolla," Keyt says. "Now that he's hiring someone to run the business, he's got to get the Harvard MBA - even though that guy probably has no long-term interest in running Dad's widget company."

Far more crucial than a prestigious degree, experts say, is a keen understanding of and appreciation for the family-business culture. "A family business isn't just about the money," Keyt says. "It's way more complex than that. It's about legacy, influence, and reputation in a community. That owner sees his employees and their families at church on Sunday, which breeds a powerful sense of responsibility."

Structuring an outsider's compensation package is also a challenge, because families often are unaware of managers' pay scales in the world beyond their company. Some family firms won't offer outside hires a stake in the business for fear of diluting family ownership, which complicates and slows recruiting.

"Equity usually isn't on the table in negotiations," McGann says (though the Mirables offered it to their new CFO). An executive-search consultant can offer advice on competitive salaries. McGann and other experts suggest creating a profit-sharing plan with phantom stock - typically a merit-based cash bonus based on the value of a set number of shares.

After hiring, families often neglect the most important part of the plan: integrating the newcomer into the company and, to an extent, the family. Studies show that the most successful managers share the family's values and understand its often unspoken rules.

"Hire someone with a high emotional IQ," says McGann. "Then overcommunicate the first year."

Create an independent board of advisors for the company, which should include trusted, experienced hands such as the company's lawyer, banker, and accountant. Boards can act as buffers between family and managers if trouble arises. Also, say experts, boards tend to be more objective than family in evaluating the manager's performance.

Doing all this is harder than it looks on paper. Like schools of fish, family firms seem to react to signals that outsiders can't see or hear. Interpreting and explaining the signals can frustrate outsiders. And while imposing discipline might sound like a good idea in theory, it can be tough to live with changes initiated by an outsider. With professional management come new rules, procedures, proposals, and committees. Change can unsettle some family members, who may feel that the business has become more corporate and bureaucratic - or that outsiders are running in scary new directions.

Accepting change takes discipline and a new mindset. "Consider it a success when you've hired competent managers who get the business and the family," says Juday. "Your next step: Get out of the way and let them do their jobs."  

1 2