A structured approach to professionalizing a family business

A structured approach to professionalizing a family business

Family businesses are a significant constituent of many economies. Family business have certain traits like high emotional involvement, unilateral decision making and optimization focus that offer unique advantages, more so in tough times. However, these very traits prove to be their Achilles heel once they start to grow and expand.  Family businesses realize a need for formalization of processes and bring in professionals at senior levels to drive focus on results and efficiency. Family businesses attempt professionalization to build newer fences and wedges at some managerial levels to drive the emphasis on outcome rather than relationships.

Professionalization of a family business is a process that folds over couple of quarters. Smart family businesses have traversed the distance pace the change in terms of short term outputs and long term intended results. Results based management is a strategic management tool that can be effectively used by family business embarking upon professionalization program. RBM has various dimensions. Results are realistic, risks are identified and managed and appropriate indicators are used to monitor the progress of the expected results. These indicators help the organization in assessing whether or not the activities are yielding the desired results. RBM helps to bring clarity on the purpose of the programme/activity/change and the desired results from the very beginning. RBM captures the process of change in short, medium and long term. Professionalization results  (in terms of formalization of process, reporting mechanisms, performance systems, outcomes management, etc) are commonly linked together in a result chain. The results are captured at three levels:

  • Short term or output
  • Medium term or outcome
  • Long term or impact

The result at each level aggregate or contributes to the goal or desired impact that needs to be achieved.  RBM integrates people, process, resources and measurements to administer the programmes and improve transparency and accountability. RBM clearly defines the activities to be performed at each stage to achieve the desired results. These activities are further segregated into allocation to different groups. Each group is reviewed based on the activities and the outcomes and outputs are consolidated at the programme level to report the impact or the final result in comparison to the objective set.

While adopting RBM for professionalization program, family businesses must use PCC-DIO framework to identify activities and the outcomes. The PCC DIO involves

  • Purpose
  • Comprehensiveness
  • Consistency
  • Delivery
  • Impact
  • Outcome

Purpose:  Each activity must meet the objective of formalizing, integrating process, functions and roles so that actions drive performance.

Comprehensiveness:  Each activity and tasks are aligned with complete consideration of the the roles, responsibilities, and different levels of learning. The focus is to ensure the tools, and methodologies are rich enough to make informed decisions.

Consistency:  Systems and activities must be repetitive and consistent in terms of data, duration and procedures for the complete professionalization program and show no deviation from the desired architecture.

Delivery: The timeliness and quality of delivery by each activity should meet the professionalization goals and be delivered within the defined time.

Impact: The impact analysis of every process on the concerned stakeholders must be done after delivery.

Outcome: On completion of each process, outcomes must be evaluated to assess what was desired and what has emerged.

While the above frameworks can offer a defined approach to professionalization program, certain critical human elements are key to the success of professionalization program. First, is the change management champion from the family who can anchor the program, imbibe the tantrums and shocks that emerge in the early days of transformation and buffer the professionalization program. Second, a trusted experienced non-family person who can work with new professionals brought into change the desired areas. Thirdly, planning and showcasing some quickly demonstrable outputs like formal employee policy manual, incentive models or documentation of knowledge management processes to convey the seriousness and commitment of family business on professionalization program.   Fourthly, preparing the business to bear the shock of untimely exit of relatives or other executives who find adopting to the program a little difficult.  Finally, family learning to clearly devise approaches to successfully manage the conflicts between family business and business of the family.

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