If you're an outsider considering a job at a family-run company, it pays to know why the family wants to hire you. Outside executives often are sought to mentor a scion or fill in until a relative is named to a top job. They also may be recruited to manage growth, new initiative or to provide special expertise needed to keep the business running smoothly.
Nonfamily executives often serve as buffers for family interests within a business, says James Lea, a University of North Carolina professor who advises family-owned businesses. For instance, it's common for family businesses to hire senior financial managers from the outside to ensure financial objectivity and integrity, Mr. Lea says.
"You find a lot of people in the controller or CFO position who aren't family members, and that's often intentionally done to be sure that no family member gets in a key financial-management position that might be a disadvantage to the others," he says.
If you're thinking seriously about joining a family-owned business, experts and nonfamily executives advise taking the following steps:
Do careful research.
Candidates who accept jobs should go in with their eyes open. Prospective recruits can research family-run companies by "talking to the people interviewing you, competitors in the industry or people in the community," says Ann Dugan, executive director of the Institute for Entrepreneurial Excellence at the University of Pittsburgh. "They might be one of the largest employers in town, and everyone may know everything about the family -- business and social."
Research the integrity of the company infrastructure, such as how well the family has planned for succession, whether an advisory board or other outside consultants help govern the company and if a high-quality performance evaluation and reward system is in place, Ms. Dugan advises.
When investigating a family-owned employer, expect obstacles you wouldn't find when checking the background of a publicly held company. The company's privately held status means it doesn't have to report much in the way of sales, financial performance or other financial issues to the public or government agencies. Another tough layer to crack is the family's own interpersonal dynamics, but internal difficulties may be more public than its members realize.
"Poorly functioning families often are under the delusion that no one knows about their dysfunctionality," says Ira Bryck, director of the Family Business Center at the University of Massachusetts, who conducts seminars for outside managers at family-owned companies.
Look beyond how the company operates at the top, he advises. The way the company functions at lower levels speaks volumes about its style.
Despite thorough research and questioning, it's possible to miss signs of dysfunction because family members often are on their best behavior during the recruiting process, says Mr. Bryck. Candidates "don't figure out whom they're working for until it's too late," he says.
Sometimes, issues are so subtle that a new hire decides the wrong person is the "problem." Usually, it's a family member who's a scapegoat, says Mr. Bryck. "That can be the person who's telling the most truthful tale about the family," he says. "They're not the root of the problem but the inflammation that the family has assigned."
Realize you'll always be an outsider.
No matter how much you're wined and dined at the outset, you're still not family and never will be.
"You're not going to be sitting around the Thanksgiving table with them or be there on everyone's birthday," says Robert Rollo, managing partner in Los Angeles of TMP Worldwide Inc., a New York-based executive-search firm. "Family is family. And the reason it's a family business is because they've determined that this is a very important part of their being. You're being brought in to be a hired hand and make that enterprise better."
You also won't share in the wealth in the same way. However, savvy family owners provide offsetting advantages to compensate for not offering significant ownership to outsiders. They might create employee stock-ownership plans or "phantom" equity vehicles that allow nonfamily mangers to "participate in the growth of the company but not literally as an owner," says Chris Komisarjevsky, president and chief executive officer of Burson Marsteller Worldwide, a public-relations firm in New York, and author of "Peanut Butter & Jelly Management" (Amacom, 2000).
Other benefits might include large bonuses, maximum 401(k) contributions, long-term-care insurance, company vehicles, country-club memberships and paid trips. "That kind of stuff goes a long way toward keeping people happy," says Peter H. Calfee, owner of Calfee Financial Advisors in Cleveland.
Mr. Rollo says that many senior-level executives he's placed with family-owned companies have secured employment contracts specifying duties, tenure and compensation.
"If you're the president of a division of a Fortune 500 company, you don't have a strong legal contract with that company," he says. "But if you're recruited to be in charge of an operation of a privately owned company, you'll have contract terms over change of control in the company and even certain rights if they decide to vote against you in significant matters."
Expect quirky compensation programs.
Just like everything else about a family-owned firm, the compensation structure may have quirks that reflect the family's needs and priorities. Diane Carhart, chief financial officer at family-run Stonyfield Farm Inc. in Londonderry, N.H., worked for a family-owned software firm a decade ago. There, "the benefits that the owners particularly wanted for their family were the ones that we had," she says. For instance, the firm had a generous pension program because the owners were planning for retirement but no dental coverage. "It was just unimportant to them," says Ms. Carhart.
Other compensation issues can be complicated. For example, how should compensation reflect how a key nonfamily executive improves the firm's performance so that it can be sold for a higher price? The executive won't hold stock that would reward him for his efforts. On the other hand, what if the nonfamily manager does a great job, but family disharmony destroys the firm's market value?
Some family-owned concerns underpay employees because family members aren't concerned about their own pay raises when they have company equity to fall back on. Or the family may use the business to employ family members who need jobs instead of hiring the most-qualified people. In this case, outsiders may feel family members are well-paid because they aren't qualified for similar jobs in the marketplace.
"There's a tendency to base compensation on the needs of family members," says Mr. Bryck, "because if they're underpaid, there's always the promise of, `Someday this will all be yours.' The nonfamily member isn't getting promised that someday all this will be his, because he most likely won't be sticking around until then, so he might be resentful if he isn't getting paid fairly."
Ensure you'll have necessary support to make changes.
Family owners bring in outsiders because they want to professionalize the company and establish "a more formal governance structure instead of just shooting from the hip all the time," says Mr. Bryck. The process of shaking up a family-owned company can be stressful and disruptive. To succeed, you must have steadfast support from the top.
"When it's done right, and it often is, the family can be very grateful to a nonfamily member, or several of them, who bring professionalism," he says. "If the family is able to accept the talent and experience of a competent nonfamily member, it will heap all sorts of praise and recognition on them."
Even with lots of support, outsiders shouldn't assume too much, says Mr. Rollo. "If you look at yourself as part of the family and as filling some sort of generational gap within the family, you'll usually make a mistake, like getting too close to or taking sides within the family," he says. "But if you look at yourselves as a coach, you can usually do all right."
Sometimes, owners, subordinate relatives and other employees may not appreciate the changes and "won't accept the accountability this manager wants to impose on the company," says Mr. Bryck. "So people who've never had job descriptions or performance evaluations might rebel against the professionalism and formalizing of the company."
Problems can crop up when the nonfamily manager supervises or has working relationships with family members. "It's hard to imagine anything that could frost you more than seeing the boss's kid getting away with murder time after time," says Mr. Lea.
Decide if the move will be good for your career.
Well-run family-owned companies may be better places to grow a career than their publicly held counterparts. "Family companies tend to think longer-term and be more deliberative, so you may have the opportunity to be part of a company that's not obsessed with the next quarterly results," says Ronald Cook, associate professor of small business at Rider University in Lawrenceville, N.J. "They might be more receptive if you want to propose an initiative that won't bear fruit until 10 years from now. They expect someone to be around."
