Read this FT Article and then offer your take on the issue of who offers best advice in the following groups:
- ….FB or non-FB members,
- FB Professional versus non-FB professional,
- non-professional FBs versus Professional non-FB members
Enter hyperlinks to your sources and evidence- or refer to experiences in your FBs!!
If the link above doesn’t work, here’s the full article or look at Page 4 on sources of business advice in the original in the report:
Families trump bankers as best advisers
By Jonathan Moules
Published: February 19 2010 17:21 | Last updated: February 19 2010 17:21
Accountants and family members are better sources of advice and support to entrepreneurs than the bank or Business Link, according to a survey of high growth businesses.
Delta Economics interviewed 2,120 businesses, with an average turnover of £1.23m, asking them to rank the usefulness of 10 different sources of advice.
Professional advisers were the most widely used, both during the start up stage and later in the company’s development. They were also ranked among the most useful, slightly behind family members, other entrepreneurs and mentors.
But the percentage using banks for advice fell as businesses matured and the information provided was ranked among the least useful, slightly above that given by government agencies, such as Business Link.
Entrepreneurs tend to go to experts such as accountants and lawyers when they need answers to specific questions, such as how to handle redundancies, according to Rebecca Harding, the report’s author.
“People tend to use different types of advice as the business grows,” she said. “They go to networking events, but often to be part of the business community and see if things are the same for everybody else.”
Experienced entrepreneurs are often a good source of advice because they do not expect anything in return, according to Andy Lopata, a business networking strategist. “Experienced entrepreneurs are above selling, so they like to meet interesting people,” he said.
The low ranking of Business Link will give further ammunition to those wanting it scrapped. Mark Prisk, shadow enterprise minister, has said one of his first actions if he were to become small business minister would be to axe Business Link and hand its functions to local enterprise agencies.
David Parkin, Business Link director, defended his organisation’s service, and said it was right that owner managers sought advice from several sources.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web
Risks and Rewards of Non-Family CEOs
by Bonnie M. Brown, Ph.D.,Transition Dynamics, Inc.
The right non-family CEO might be just what you need during the interim. Why? Often the next generation badly needs mentors and coaches. Dad or Mom might have a harder time with those roles than an outsider. And, the next generation might have an easier time taking direction from someone other than a parent.
Leadership development is a long-term process that builds skill sets through training and hands-on experience. Senior generation owners/managers generally let go of day-to-day control of the business gradually. With a non-family CEO, they have the opportunity to stay involved at the board level, but have more free time to explore retirement options.
The next generation of family business leaders needs guidance, help with setting and meeting goals, regular feedback about business performance and the chance to take on challenges incrementally. Non-family CEOs frequently have experience in larger corporations where strategic planning, budgeting and performance appraisals are built into the corporate culture.
A non-family CEO will have a difficult time succeeding and the business will probably suffer. If the current owner/manager consistently “meddles,” he/she will undermine the non-family CEO’s authority, credibility and effectiveness. Employees and may be placed in the awkward position of taking sides in power struggles.
To function effectively, a non-family CEO needs a job description that delineates expectations, boundaries and accountability measures. Once those are established, the CEO needs the space, time and resources to build effective management teams and strategic management systems that will foster sustained growth and competitive advantage in the market place.
What are some of the risks of bringing in a non-family CEO?
The current owners/managers will lose both personal and financial privacy. I’ve worked with family business owners who didn’t even share financial information with family members, much less an outsider.
There is also the risk that as the non-family CEO learns more about the company, family secrets might surface — a family member, for example, who is basically retired on the job, and often shows up drunk for work. There may be very strong family pressure to keep that person on the payroll. There may be equally strong pressure from non-family employees to let that person go. If the non-family CEO doesn’t have any real authority and autonomy, he/she will be in an untenable position.
Another risk relates to compensation of that non-family CEO and inadequate formalization of management/owner relationships and expectations. Only one of the non-family CEOs interviewed expected an equity position in the company. However, all of them found compensation negotiations difficult. Those most comfortable about the outcome of the negotiations cited the owners’ willingness to look at options for tying compensation to performance and to provide some kind of deferred compensation or phantom stock. Most used an outside compensation expert to help create the compensation package.
Attributes for effective non-family CEOs:
1. Competence and credibility
2. Orientation to ongoing teaching and learning
3. Self-direction and willingness to take direction
4. Commitment to a shared vision
5. Integrity and courage
6. Flexibility
7. Team-building and coaching skills
Five requisites for retaining effective non-family CEOs :
1. Delegation of real authority and reasonable autonomy
2. Compensation related to contribution
3. Recognition of achievements and effort
4. Chance for development and growth
5. Courteous and consistent treatment
(Brown B.M, Transition Dynamics, 2009).
In their paper titled ‘Business Advice: The Influence of Distance’ Bennett and Bratton look into the increased use of external advisors by SMEs to solve some of their problems. The focus of paper is to explore the distance between client and advisor as a vital factor. Even though the focus is somewhat irrelevant to us, the paper is still useful as it helps highlight some of the reasons and concerns advisors are brought in to solve.
In our family business when my father faces professional issues that he needs advice on he often turns to more qualified non-family staff already working for us to bounce ideas off. If need be, he then talks to other friends and associates with better knowledge of the subject.
When it comes to family based issues he tends to struggle as I find he rather ignores and lets the problems pass rather than take stern preventive action. This is perhaps more down to his character and the importance he places on family. In such cases we sometimes find family friends taking on the role of advisers.
Like most family owned/controlled business, our skepticism to commission professionals for the purpose of advice has left this form of advisors unexplored. It would be interesting to look into what these so-called ‘professional’ have to offer.
Bennett & Bratton - http://www.cbr.cam.ac.uk/pdf/wp167.pdf
In relation to Ed’s questions (top), I think that judging whether a non-FB professional is better or worst than a FB professional actually comes down to the expertise required for the company at a specific time and for a specific purpose. I believe that a non-fb proff. for example may have enough business expertise to make good contributions to a fb firm. However, it is clear than when succession-related issues come up (for example) a FB professional will handle the situation more effectively.
For example in my family, there is a mix of both family members as well as non family executives. This is based on their expertise and ability to contribute.
In relation to Ed’s article:
“Professional advisers were the most widely used, both during the start up stage and later in the company’s development. ”
I can relate this also to our family business where at certain points we had to bring in professionals to deal with specific business developments (sorry I can’t get into too much detail)
Talking about members of family business organisation, it’s important to mention women’s role as non-family employee.
the reserch was taken and it was discovered that the non-family women managers worked for several years for other employers before joining the family business and their motives for moving to their current employment were mainly positive.
Non-family women have acquired managerial knowledge and skill and have made considerable progress in their careers but many experience problems. Only a minority feel that adequate training is provided by their organisations, they do not feel that they are well served by mentors and their personal contact networks are small and homogeneous.
Non-family women are less likely to have children than family women and many who have children consider that motherhood interferes with careers.
These are the main point of the research, but you can find more on the Emerald database. The article is called “Women as managers in family firms”, by Stanley Cromie and Sarah O’Sullivan
Hey guys
A found an article which compares family member managers with non family members manager.
Title: “A comparison of family-member and non-family-member managers in American family businesses”
Article from: Academy of Entrepreneurship Journal
Article date: July 1, 2007
Author: Lussier, Robert N.; Sonfield, Matthew C.
This is the abstract:
“This exploratory study contributes to the United States family businesses literature by investigating the relationships between the percentage of non-family-member managers in a family business and a variety of management activities, styles and characteristics of that business. The research design is survey data collection with a sample of 159 family businesses. The regression findings used to test nine hypotheses indicate that although the nine independent variable model is significant, only the percentage of women involved in the operation of the business and the use of sophisticated financial management methods are significantly related to the percentage of non-family managers. Implications for family firm owner/managers, for consultants to family business, and for researchers are presented.”
You can read more at: http://www.highbeam.com/doc/1G1-175110722.html
Dimitrios
If you are willing to buy a house, you will have to receive the loans. Furthermore, my sister all the time uses a small business loan, which supposes to be really rapid.