Succession Planning – Part 10: Is Non-family Turnover High

Is Non-family Turnover High?

Some family-owned companies are plagued with a high turnover among their non-family top people. Sometimes relatives are responsible. They resent outside talent and, at best, make things unpleasant for non-family executives. Succession Planning – Part 10: Is Non-family Turnover High examines this issue and the issue of expenditures in the small business.

 In other cases, top-notch managers and workers leave because promotions are closed to them. They see your relatives being pushed into executive offices.

 The exit interview is a useful device for getting at the root of this type of turnover. A key employee who has decided to leave may be eager to tell you the true story – or at least enough of the facts to help you develop a course of action.

 When a manager has the facts, he or she may have to confront the trouble-causing relative with an unpleasant story. What comes out of the confrontation is anyone’s guess. Rare is the owner-manager who can fire a troublesome and close relative and make it stick. One way to remove such a thorn from the side of key executives is to help the relative start a business in a non-competing line-provided he or she has the management ability that is necessary for success. Another way is to “exile” him or her to a branch office or find a job with another company.

Spending To Save Money?

Many times, as the owner-manager you feel that you must make an expenditure to improve efficiency, yet other family members oppose the expenditure. They view it as an expense rather than an investment. They feel that funds spent for items, such as more efficient equipment, encroach in their year-end dividends.

 One way to help these relatives see that “you have to spend money to make money” is to base your arguments for the expenditures on facts and figures that non-family employees or your business advisors have gathered. Suggest to the opposing family members that the matter be settled on a cold dollar basis: for example, “by spending money for this machine, we can increase profits and get our money back in four years.”

 

If the opposing relatives refuse to accept your projection, try calling in outside business


advisers. Relatives will sometimes believe advisers, such as your management consultant, accountant, or attorney, when they won’t accept your judgment. But keep in mind that outside advisers, who are personally close to other family members, should not be included among your counselors.

 

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