Family-owned businesses and outside managers—it’s a story of gradual rapprochement. According to a study by the auditing and consulting firm PwC, the Witten Institute for Family Businesses, and the INTES Academy for Family Businesses, the positive effects now outweigh the negative ones. The study found that 90 percent of family business owners are very satisfied with their collaboration with external managers.
Furthermore, 77 percent are convinced that the trust they placed in their external colleagues was justified. According to the study, 80 percent say that competitive situations within the management team are hardly an issue.
A few years ago, the picture was quite different. In 2009, PwC found that 78 percent of family businesses adhered to the motto “blood is thicker than water” and viewed external managers at the top as a last resort. Furthermore, nearly 60 percent stated at the time that they could truly trust only family members.
Nevertheless, external managers have long been part of the executive management teams at many family-owned businesses—and have become indispensable there. Examples include the candy manufacturer Haribo, the screw manufacturer Würth, and the automotive lighting manufacturer Hella. The rule of thumb: The larger the company, the more likely it is to be led by outside managers. An extreme example is the Haniel Group: There, no family member is allowed on the executive board.
The rise of outside managers in family businesses is easy to explain. The next generation of heirs scrutinizes the prospect of joining the family business much more closely than previous generations did. In addition, the demands placed on corporate leadership have increased significantly, making it increasingly difficult to find suitably qualified candidates within the family itself. “In most family businesses, the realization has now taken hold that being born into a family doesn’t automatically make someone a good entrepreneur,” says Peter Bartels, a member of PwC’s Executive Board and head of the Family Businesses and SMEs division.
The advantages of bringing in an outside manager are obvious. An executive from outside the family can use their experience and empathy to inject new energy and critically examine the company’s structures with an objective perspective. Last but not least, outside management can be a good solution without having to sell the company right away.
According to the new study, most owners want a sparring partner: 52 percent favor specific personalities and character traits. This is a decidedly risky desire, as it means that owners—who are usually strong-willed—are willing to accept conflicts. Consequently, 54 percent of family business owners report that personalities clash “more often” or “occasionally.”
Nevertheless, the study’s authors are convinced that this is the right path in the medium term. “An open, constructive culture of debate is beneficial for the company, as it ultimately strengthens team spirit. That’s why companies need strong personalities—both on the family side and among external managers,” says Marcel Hülsbeck, holder of the Endowed Chair for Human Resources and Organization, with a special focus on family businesses, at the Witten Institute for Family Businesses.
Despite the rise of outside managers, the boundaries are clearly defined: At the top of the decision-making body (board of directors, executive management) is usually a manager from within the family. The reasoning is clear: If conflicts become too great, the family can outvote the outside managers.
