In our latest edition of Leadership and The Private Enterprise, we approached Tim Lorge to discuss the crucial differences between family operated and publicly run firms. With leadership roles at Field Container, Charter Steel and Crown Holdings, Tim has valuable insight into what it takes to succeed in drastically different corporate cultures.
In your experience, what are the key differences in leadership that you have seen in family business vs publicly traded business?
In a publicly traded company, we have the mindset of running a 24-hour fiscal year. Every day is a tightly controlled operation. A private enterprise can operate within this mindset but can also be more flexible in the balance of the short term and long-term thinking. Publicly traded companies are forced into strategic decisions that can demonstrate early and consistent growth. Family controlled companies, by comparison, are willing to let investments pay back over a longer period.
However, the flexibility inherent in the long-view of family-held leadership is often underutilized.
Many family businesses are led by tactical leaders that excel in managing day to day operational details, but despite their hopes of generational transition, lack leadership development with a long-term view.
For example, they have a tendency to prefer entrepreneurial practices over sustainable business processes. Family-held businesses can hold a bias for their instinct and can succumb to group think as a result. In many respects, the role of the non-family executive (NFE) is to provide a counterpoint to the family’s instinct to ensure the best decisions are being made.
In your experience, what are the big challenges of a non-family executive, and how are they overcome?
Business owners can simultaneously be open to new ideas while being entrenched in old ones. This creates a cycle where changes and opportunities are observed and discussed but status quo is maintained. Non-family executives are often hired as a change agent to move the needle from discussion to action but are often caught off guard when the family is unwilling to break from tradition.
In your experience, what are the big challenges of a non-family executive?
It is an odd feeling to be hired to achieve an agenda and then be resisted. Overcoming that feeling is an exercise in consensus building. As a non-family executive, I need to honor the history of the family and the business. Yes, I have been hired to bring change to an organization, but that requires meeting the business and its people where they are.
To overcome early challenges, clarify on the front end:
First, what is it that ownership wants when bringing an NFE in?
Second, how does the NFE build the credibility necessary to achieve those goals? Be clear on the objectives.
Many companies hire change agents and then resist their leadership. How do you address this dynamic?
“Communication, Communication, Communication. Patience, Patience, Patience.”
The family needs to align on what is important to the family and focus on getting the family comfortable with change and what the change may bring. Fostering a culture of clear communication and expectations will set the stage for successful change. But it’s also important to acknowledge that meaningful change is a difficult process for all parties.
When hiring a senior leader from the outside, a Family Controlled business should consider the operational culture their NFE is coming from. A new CEO hired from a publicly traded company will need to adapt to the culture of the family business. This can only be done with a team mindset. The Family must embrace the CEO, and the CEO must embrace the Family.
Coming from a public business, how do you adapt to a culture where personal and professional relationships overlap?
Start by getting comfortable with yourself. There will be ambiguity and there will be a strong social network that exists outside of the org chart. In a family business, you never know who has influential relationships or how deep those relationships are.
Take your time to meet the people of your business, family members and employees alike. Learn the culture of the business, and do not make assumptions on the flow of information. As you map the organization, the dynamics of personal and professional relationships will reveal themselves and become a lever you can use to guide the business.
It is also common to be dealing with owners who have some form of withdrawal—after a lifetime of work in the business, retirement can be difficult, and they end up back at the office.
Family businesses are not used to hierarchy, so you need to be comfortable with everyone going to the owner directly.