Rajiv Agarwal is an Entrepreneurs' Organization (EO) member in Mumbai, a founding member of KRCD India Pvt., Ltd., and Associate Professor of Family Business and Strategy at SP Jain Institute of Management and Research. As one who has both real-world and teaching experience with family business strategy, we asked Rajiv about best practices for onboarding an outside professional into a family business. Here's what he shared.

It's a fact: Most family business owners will eventually face the challenge of recruiting outside professionals to join their inner circle. While it can be a harrowing decision for the first-time entrepreneur, if done right, it could become the critical determinant of future success. We've all heard tales both of successful hires and ongoing woes when the process goes awry. So, how can you ensure your decision falls firmly on the side of the former rather than risking the latter?

Here are seven important questions to contemplate if you're looking to add an outside professional to the family business:

1. Why do you want to hire an outside professional? Ideally, the family should be on the same page about their needs and the role of the new recruit. It's important to identify in detail what responsibilities this new prospect will fulfill and more importantly, what level of authority he or she will assume. While it's understandable that most founders want to be involved in important company decisions, if you can't delegate some authority, then why make a new hire?

2. Will you give the new professional operational autonomy? It's common to see new employees in a family business assume huge responsibilities without commensurate authority, which causes frustration and the inability to execute job duties effectively. While I don't recommend handing over the keys to the kingdom on day one, a well-crafted plan with distinct limits and methods of accountability that is clearly communicated to all parties will help align goals and expectations from both sides.

3. Do you trust this person? A lot of small enterprises opt not to hire outside professionals because of concerns about protecting trade secrets, finances and operational information. This is often the reason why only family members rise to senior managerial positions. However, this insular strategy can severely limit growth in the long term, even for the largest families. It's also worth noting that there are plenty of situations where blood relatives have acted in an untrustworthy manner and caused long-term damage to a company.

4. What skills and capabilities do you require? Remember that you're hiring outside talent to fulfill capabilities and skillsets that your current staff lacks. Identify specific areas of weakness where your business needs improvement or renewed focus, and look for professionals with skills in those areas. With an honest assessment of the company's pain points, the individual hired to improve these areas will understand the important contribution he or she must make, and current family employees may more readily value the newcomer. When choosing between a highly-productive professional or a family member with average knowledge or skill, the overwhelming preference should be an outsider. Keep your eye on the prize: Continued business growth and success is the ultimate goal.

5. Will you offer a path for career growth? Career path and processes are the two biggest challenges small business owners face. Any outside professional you bring on will want to confirm some path for job growth in the future of the organization. While the family founders may be content with the newcomer maintaining a designation as general manager, professionals need to see potential growth in the position, responsibilities and financials over time. This topic merits careful consideration.

6. Are your processes and policies well-defined? Similarly, a lack of defined processes confounds most professionals, especially those who have come from structured environments into the start-up mode of operating reactively and making up policies as situations arise. If policies and processes are not well-defined and documented or the founder changes them at a moment's notice, it will throw most professionals off-track and can be a deterrent to retaining quality staff.

7. Are you willing to pay market price for top talent? Most family business founders will hesitate to pay top dollar for talent since they have likely been underpaying themselves and their family employees. This is short-sighted; it's critical to realize that the money invested in hiring talented staff repays itself many times over. Many family business owners fail to realize that there is a perennial shortage of skilled, loyal, productive employees and that they will have to pay competitive salaries to attract and keep them.

It's a challenge to smoothly transition an outside professional into a key role in the family business. However, the risks and pitfalls can certainly be managed. It takes careful consideration and planning, but it just may become the largest return on investment your company could imagine.

Published on: Sep 26, 2017
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