Family Business Review

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Integrating Professional Management into a Family Owned Business

W. Gibb Dyer
Family Business Review 1989; 2; 221
DOI: 10.1111/j.1741-6248.1989.00221.x

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 A R T I C L E S

Integrating Professional
Management into a
Family Owned Business
W. Gibb Dyer, Jr.

Under which conditions can professional knowledge and values be

integrated successfully into the organization and management of a
family firm?

In recent years, historians of American business have documented the

development of m a n a g e m e n t science and w i t h it the inexorable g r o w t h
i n the p o p u l a t i o n of "professional m a n a g e r s " (Chandler, 1977; Hayes
a n d Abernathy, 1980; Meek, W o o d w o r t h , a n d Dyer, 1988). While there is
considerable debate r e g a r d i n g w h a t constitutes their role, professional
managers typically have received formal t r a i n i n g in a business school
setting i n areas such as finance, production, accounting, a n d personnel.
Moreover, those trained in m a n a g e m e n t generally fit the criteria for pro-
fessionalism suggested by Schein (1968), i n a s m u c h as ( l ) t h e i r actions are
driven by a set of general principles or propositions i n d e p e n d e n t of a
p a r t i c u l a r case u n d e r consideration, (2) they are deemed to be " e x p e r t s "
i n the field of m a n a g e m e n t a n d to k n o w w h a t is " g o o d " for the client,
(3) their relationships w i t h clients are considered helpful a n d objective,
(4)they g a i n status by accomplishment as opposed to status based o n ties
to the family, a n d (5) they b e l o n g to voluntary associations of fellow
professionals. T h i s is n o t to say that all those w h o receive m a n a g e m e n t
t r a i n i n g are necessarily professional managers. For example, some w h o
receive m a n a g e m e n t t r a i n i n g b u t have a technical b a c k g r o u n d m a y still
view themselves as primarily technical experts rather t h a n managers.
T h u s , only those w h o a d o p t the orientation as o u t l i n e d by Schein should
be considered professional managers.
T h e professionalization of m a n a g e m e n t in the United States started
i n 1891 w h e n Joseph W h a r t o n donated $100,000 t o the University of
Pennsylvania to create a school of commerce. Since that time some 650
business schools a n d 600 MBA p r o g r a m s have been created. Currently,
business schools are p r o d u c i n g a b o u t 70,000 MBAs per year a n d graduat
i n g m a n y more w i t h u n d e r g r a d u a t e business degrees (Meek, W o o d w o r t h ,
a n d Dyer, 1988).

FAMILY BUSINESS REVIEW, VOL. II, NO. 3, FALL 1989 221

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222 Dyer

Where d o all these professional managers go? In increasing n u m b e r ,

professional managers are finding their way into positions in family
o w n e d businesses. T h i s is largely due to the downsizing trend in Fortune
500 companies a n d the growth of entrepreneurial firms a n d family owned
businesses. T h e histories of family firms such as Levi Strauss, Ford,
D u P o n t , a n d scores of others d o c u m e n t the rise of professional m a n a g e -
ment in these organizations in recent years. While there has been con-
siderable debate as to whether professional managers have improved or
stymied the effectiveness of organizations (Hayes a n d Abernathy, 1980;
Meek, Woodworth, a n d Dyer, 1988), most organizations benefit by utiliz-
i n g the skills of m a n a g e m e n t science. For example, market research a n d
financial p l a n n i n g , a l o n g the more effective methods of p r o d u c t i o n (such
as statistical process control or just-in-time inventory systemsskills that
are frequently taught in business schools), have helped n u m e r o u s organi-
zations m a i n t a i n a competitive edge. Most critics of professional m a n -
agement do n o t worry a b o u t the skills of professional m a n a g e m e n t b u t
rather their application, a l o n g w i t h the values espoused by those with
professional training. Often cited are the professional m a n a g e r s ' lack of
u n d e r s t a n d i n g of h u m a n issues in organizations a n d their short-term
focus o n financial performance.
In this article, I describe some of the issues, dilemmas, a n d conflicts
that often arise as a family firm attempts to professionalize its m a n a g e -
m e n t a n d discuss w h a t m i g h t be d o n e by leaders of family businesses to
integrate more effectively the skills of professional m a n a g e m e n t into their
organizations. H i r i n g professional managers is one way to gain the skills
of professional m a n a g e m e n t . Another is to professionalize by t r a i n i n g
family members of nonfamily employees currently w o r k i n g in the busi-
ness. T h e data presented in the article are based o n several case studies as
well as my o w n experience in h e l p i n g leaders of family business work
t h r o u g h some of the difficult issues that accompany professionalizing
the m a n a g e m e n t team.

Why Professionalize?

T h e r e are a n u m b e r of reasons why a family owned business m i g h t w a n t

to b r i n g in professional managers or to professionalize their current m a n -
agement team. O n e of the most c o m m o n reasons is a lack of m a n a g e m e n t
talent w i t h i n the family. Family members sometimes lack skills such as
m a r k e t i n g , finance, or accounting, a n d the family m u s t acquire such
skills if the business is to survive. As a family business growsparticu-
larly in a complex environmentit is unlikely that the family will be
able to staff all the key positions a n d have all the necessary skills. There-
fore, the family will, o u t of necessity, look outside the family for h e l p or
attempt to broaden the skills of family members.

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Integrating Professional Management 223

A second reason for professionalizing m a n a g e m e n t is to c h a n g e the

n o r m s a n d values of business operations. L a n s b e r g (1983) a n d m a n y
others have pointed o u t h o w family values such as u n c o n d i t i o n a l love
a n d concern often conflict w i t h business values of profitability a n d effi-
ciency. Some leaders of family firms believe that the family's lack of
professionalism a n d the employees' lack of concern for profitability a n d
efficiency can be c h a n g e d by i n d o c t r i n a t i n g the current m a n a g e m e n t
team in s o u n d business practices or by b r i n g i n g in professional m a n a g -
ers whose values are more consistent with organizational efficiency a n d
achieving higher profits. By m o v i n g to professional m a n a g e m e n t , the
family may feel that u n p r o d u c t i v e employees can be let go a n d stricter
controls can be enforced. Often leaders of family firms w h o have a pater-
nalistic orientation toward their employees are reluctant to m a k e such
changes themselves, so they b r i n g in "hired g u n s " to make the painful
changes the family will n o t make.
A third reason for a c q u i r i n g or developing m a n a g e m e n t expertise is
to prepare for leadership succession. T h e founder or family leader may
w a n t to retire in the near future a n d may feel that family members in the
business need a d d i t i o n a l t r a i n i n g before a s s u m i n g the m a n t l e of leader-
ship, or the founder may feel that n o o n e in the family is capable of
r u n n i n g the business after he or she is gone. A search is then m a d e to
find managers that can be trusted with the future leadership of the firm.

The Problems of Professionalization

M a n y of the problems that a c c o m p a n y the transition to professional

m a n a g e m e n t in a family firm can be traced to differences between the
t r a i n i n g a n d values of the family a n d those of the professional managers.
Schein (1983) points out h o w founders a n d professional managers analyze
problems differently, occupy different positions of authority, a n d relate to
others in very different ways. For example, founders of family businesses
tend to be driven by their particular vision of their product or service.
T h e y tend to be intuitive in their decision m a k i n g , their power is based
o n o w n e r s h i p , a n d they motivate their followers t h r o u g h their charis-
m a t i c behavior. Conversely, those trained as professional managers gen-
erally derive their p o w e r n o t from o w n e r s h i p b u t from p o s i t i o n s of
authority. T h e y tend to m a k e decisions based more o n logic a n d rational
analysis than o n intuition. Furthermore, these managers tend to be rather
i m p e r s o n a l in their interactions w i t h others, in contrast to the more
personal style of the founder.
While not all founders a n d professional managers differ dramatically
a l o n g these dimensions (I have seen instances where professional m a n -
agers act more like founders t h a n the characterization of professional
m a n a g e r s o u t l i n e d by Schein), n u m e r o u s case studies of professional

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224 Dyer

m a n a g e r s entering a family business generally s u p p o r t Schein's analysis

(Dyer, 1986; Meek, Woodworth, a n d Dyer, 1988). Professional managers
often have world views a n d a s s u m p t i o n s that differ from the leaders of
family-owned firms. Moreover, the organizational systems a n d methods
of o p e r a t i o n that are preferred by professional managers are often anti-
thetical to those of family leaders, w h o are accustomed to a more informal
(and, at times, seat-of-the-pants) m a n a g e m e n t style.
T h e reasons for the differences between professional managers a n d
those w i t h o u t such t r a i n i n g w h o work in family businesses can often be
traced to organizational a n d occupational socialization experiences (Van
M a a n e n a n d Schein, 1979). T h o s e " g r o w i n g u p " in the family business
learn skills a n d practices that tend to be idiosyncratic to that organization
a n d generally have h a d little or n o experience in other types of organiza-
tions. These employees learn the i m p o r t a n c e of the family's values a n d
the role of the family a n d the firm in the c o m m u n i t y a n d recognize h o w
to accommodate the needs of the family a n d top m a n a g e m e n t . T h e i r
t r a i n i n g is often informal, individual, a n d technical (not managerial)
a n d is idiosyncratic to the particular work they perform.
In contrast, professional managers are typically socialized collectively
in the classroom (White, 1977), where the t r a i n i n g is formal, a n d generic
skills are t a u g h t as t h o u g h they could be applied to most, if n o t all,
organizations. T h e case method, w h i c h is a n integral part of most m a n -
agement t r a i n i n g classes, is generally biased toward the analysis of large,
b u r e a u c r a t i c organizations h a v i n g well-defined systems a n d processes.
M u c h of m a n a g e m e n t t r a i n i n g is value free, despite recent attempts to
integrate the study of ethics into the c u r r i c u l u m of business schools.
After g r a d u a t i o n , m a n y professionals go to work in large companies.
T h e y also tend to c h a n g e jobs frequently a n d thus gain a broad range of
organizational experiences (Schein, 1976).
T h e following case of Jones Entertainment, Inc., (all n a m e s have
been disguised) will be used to illustrate some of the differences in orien-
tation between professional managers and family business founders (Dyer
a n d N y m a n , 1987). While there are certainly events a n d personalities
u n i q u e to Jones Entertainment, the case is prototypical of m a n y other
cases involving the professionalization of a family firm (Dyer, 1986).

Jones Entertainment, Inc.

G r e g Jones a n d his wife, Marsha, started a h o m e entertainment business

in the early 1980s that included m a r k e t i n g books a n d a u d i o - a n d video-
tapes for children. Initially, the business was just a hobby, b u t it grew
m o r e rapidly t h a n they could have imagined. Marsha provided m u c h of
the creative inspiration for new products while Greg handled the finan-
cial a n d m a n a g e m e n t side of the business. As the c o m p a n y c o n t i n u e d to

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Integrating Professional Management 225

grow, G r e g felt that the business was b e c o m i n g too complex a n d con-

s u m i n g too m u c h of his time. H e felt a need to retire in a few years a n d
wanted to find someone to replace h i m . While Marsha a n d Greg h a d
some of their children work in the business, neither of them felt that the
children were interested or qualified to assume Greg's role. Furthermore,
Marsha was supportive of Greg's desire to be less involved in the day-to-
day operation of the business.
T o find the right person to replace h i m , Greg called a local " h e a d
h u n t e r , " T o m Wilson. Wilson did a n a t i o n a l search a n d found J o h n
Lewis, w h o seemingly fit Greg's needs. Lewis h a d m a n y years of experi-
ence w o r k i n g for a large retailer, b u t n o w wanted to work for a n d lead a
smaller organization. After interviewing Lewis, Jones felt that the fit
between Lewis a n d Jones Entertainment was a good one. Lewis was
hired a n d began w o r k i n g for Jones in 1987.
After just a few weeks of w o r k i n g together, problems began to surface
in the r e l a t i o n s h i p between Jones a n d Lewis, a n d the organization began
to suffer as result. As the tension m o u n t e d between Jones a n d Lewis,
they began to avoid each other. At times, weeks went by w i t h o u t a mean-
ingful conversation between them. Finally, they decided to b r i n g in an
outside consultant to help them analyze their differences a n d to facilitate
a resolution of the conflict. After interviewing Jones a n d Lewis, the con-
sultant identified seven issues o n w h i c h Jones a n d Lewis h a d different
views a n d expectations. T h e s e differences are summarized in Exhibit 1.
Not only did Jones a n d Lewis differ about the issues listed in Exhibit
1, b u t they disagreed o n the priority of the issues. Jones felt that improv-
i n g distribution channels was the most i m p o r t a n t problem facing the
firm, while Lewis felt that e x p a n d i n g the sales force should be the com-
pany's top priority.
T h e firm's employees also noticed several differences between the two
men. T h e employees saw Lewis as a good motivator, communicator, a n d
trainer. H e also worked well w i t h the c o m p a n y ' s distributors. Jones was
seen as a rather a u t h o r i t a r i a n m a n a g e r w h o needed to check o n all the
details of the business a n d h a d little time to deal w i t h larger issues. H e
did n o t delegate well or provide his employees w i t h m u c h feedback o n
their performance. Furthermore, he did n o t relate well in one-on-one
situations w i t h his distributors. Still, Jones was seen as the visionary
w h o h a d b u i l t the organization from n o t h i n g a n d was acknowledged as
the clear leader.
T h e differences between the two m e n reflect two distinctly different
views of the world a n d the role of m a n a g e m e n t . Lewis sees his role as
o n e of a hired employee, w i t h a n a c c o m p a n y i n g utilitarian logic: he
brings various skills a n d abilities to the workplace, puts in an eight-hour
day, a n d in return is compensated for his work. According to Lewis, his
role is to understand the "big p i c t u r e " by analyzing the overall business

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226 Dyer

Exhibit 1. Differences in Views and Expectations of Jones and Lewis

Issue Jones Lewis
Salary Jones feels he is paying Lewis realizes he has a high
Lewis an extremely high salary, but it is a cut in pay
salary. As a result, he expects for him. His performance in
maximum time and effort the past has been recognized
with quick results. and rewarded. He feels no
need to change his work
habits.
Results Jones (and others) expected Lewis feels that it is
that the new high-salaried unrealistic to expect any real
executive vice-president changes immediately, and
would come in and make that one should be given two
immediate, even dramatic, or three years to make
improvements in sales and significant changes.
profits.
Time Jones believes that Lewis Lewis works under the
should be spending a great assumption that he can get
deal of time everyday, on top of the business by
including weekends, learning putting in a full regular day.
the business and being on
top of all issues of the
business.
Detail Jones recognizes that Lewis Lewis doesn't think detail
should work on broad areas work is a wise use of his
but feels he should also time. He prefers broad-range
perform detail work. Jones thinking and has others do
is concerned that Lewis the detail work for him.
doesn't follow through.
Level of Jones has a visionthe type Lewis is excited about the
commitment of home entertainment he product and wants the
sells can positively affect all company to succeed but
who use it. He feels Lewis doesn't have the same sense
must have the same vision. of mission as Jones.
Writing Jones is not satisfied with Lewis feels pressured to write
Lewis's writing skills and like Jones and thinks much
rewrites many of Lewis's of what Jones rewrites is not
reports. worth the time.
Expenses Jones is very frugal with Lewis feels one must invest
expenses. His motto is "Stay in development and not
out of debt and pay as you expect immediate return. He
go." He feels every is accustomed to having his
expenditure should pay off. own budget to spend as he
sees fit.

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Integrating Professional Management 227

situation a n d to avoid getting bogged d o w n in details. Jones, o n the

other h a n d , is driven by the mission of his business: to provide whole-
some entertainment to y o u n g people. As the founder, his n a m e is o n the
c o m p a n y ' s products, a n d he thus feels a sense of responsibility for all
aspects of the business. Moreover, he feels that each employee s h o u l d be
as dedicated as he is a n d s h o u l d share his vision.
After w o r k i n g w i t h the consultant a n d recognizing that there were
significant differences in their views, Jones a n d Lewis came to the con-
clusion that there were basically three o p t i o n s : (1) Lewis could leave the
c o m p a n y by choice or by b e i n g fired, (2) the m e n could develop a new
work relationship, or (3) they could c o n t i n u e o n as they were a n d h o p e
things w o u l d improve. Both Jones a n d Lewis felt that it was to their
advantage to renegotiate the initial contract written w h e n Lewis was
hired. (Jones's first choice w o u l d have been to fire Lewis, b u t Lewis h a d
a provision in his contract that Jones w o u l d have to pay h i m one-year's
salary if he were terminated, a n d Jones wanted to avoid such a payment.)
T h e y decided that Lewis w o u l d n o longer be considered Jones's successor
a n d that he w o u l d work o n a commission basis. Lewis was confident
that h e could increase profits, a n d Jones was certainly willing to pay for
any increase in profitability.
T h e case of Jones E n t e r t a i n m e n t h i g h l i g h t s m a n y of the issues com-
m o n to family businesses w h e n family values conflict w i t h the values of
professional managers. T h e family has a set of expectations regarding
the function a n d role of professional m a n a g e m e n t that often d o n o t cor-
respond with those of professionally trained managers. Conflict often
ensues, resulting in uncertainty a n d confusion of c o m p a n y employees.
Decision m a k i n g is slowed down, priorities a n d goals become unclear,
a n d new ideas a n d projects are delayed as a result. In m a n y cases, the
firm begins to lose its competitive edge, a n d profitability declines. We
will n o w t u r n to some alternatives available to mitigate such conflicts.

Alternatives for Integrating Professional Management

into the Family Firm

T h e r e are three basic o p t i o n s available to those leaders of family firms

w h o w i s h to b r i n g professional m a n a g e m e n t skills i n t o their organiza-
tions: (1) professionalize members of the o w n i n g family, (2) profession-
alize nonfamily employees currently w o r k i n g in the business, or (3) b r i n g
in outside professional m a n a g e m e n t talent. T h e first two o p t i o n s typi-
cally represent e v o l u t i o n a r y a n d i n c r e m e n t a l c h a n g e s in m e t h o d s of
d o i n g businessthat is, changes will occur rather slowly over a n u m b e r
of years. Moreover, the c o m p a n y culture will probably n o t c h a n g e dra-
matically. T h e third o p t i o n generally reflects a m o r e revolutionary type
of c h a n g e effort, where significant changes in b o t h methods of o p e r a t i o n

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228 Dyer

a n d c o m p a n y culture can occur rather quickly. Each of these o p t i o n s

will be discussed in m o r e detail.

Professionalizing the Family

T h i s o p t i o n is most viable w h e n the following four conditions exist:

First, there m u s t be family members w h o are willing a n d able to gain the
necessary m a n a g e m e n t skills a n d w h o want to work in the family busi-
ness. Second, the family m u s t feel that the cultural values established by
the family need to be perpetuated a n d that the family is best able to
ensure the continuity of those values. T h i r d , the family m u s t wish to
c o n t i n u e to b o t h o w n a n d m a n a g e the business. Fourth, the strategic
focus of the business s h o u l d not be likely to c h a n g e in the near future
that is, there m u s t be a relatively good fit between the organization's
strategy a n d its environment.
Under these conditions, the family is likely to be successful in devel-
o p i n g their o w n talent. C r e a t i n g a t r a i n i n g a n d development p r o g r a m
for family members is essential to this success, a n d leaders of family firms
have used a variety of different methods to d o so. At Levi Strauss, for
example, the H a a s family has encouraged family members to get a H a r -
vard M.B.A. before w o r k i n g in the business. A n o t h e r family firm in
H a w a i i requires that family members n o t only get a formal business
education b u t also work at a n o t h e r c o m p a n y for at least two years before
r e t u r n i n g to the family business. T o ensure that his children b r o u g h t the
right set of skills back to the business, one entrepreneur in Texas encour-
aged each of his four sons to get degrees in different areas. Each son
came back to the firm with different expertise.
W h i l e business school e d u c a t i o n a n d w o r k experience can h e l p
e n h a n c e a family member's m a n a g e m e n t skills, a d d i t i o n a l t r a i n i n g may
be necessary once a family m e m b e r enters the business. Executive m a n -
agement p r o g r a m s a n d seminars can be used to broaden skills. Affilia-
tions with professional associations can h e l p family members network
a n d keep abreast of the latest developments in the business world. A
m e n t o r i n g system where highly respected nonfamily managers teach fam-
ily members b o t h m a n a g e m e n t skills a n d c o m p a n y n o r m s a n d values has
also been successful in a n u m b e r of family firms (Dyer, 1986). Finally,
c o m p a n y sponsored t r a i n i n g a n d development p r o g r a m s can provide
needed information a n d skills.
C h o o s i n g the family o p t i o n to professionalize the business has draw-
backs, however. Some children in the family may feel u n d u e pressure to
return to the family business, w h i c h can result in guilt feelings if the
child chooses a career outside the family business (Barnes a n d H e r s h o n ,
1976). Moreover, feelings of resentment on the part of parents are com-
m o n if the child follows a different career p a t h . Sometimes the expecta-

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Integrating Professional Management 229

tions of the family leaders a n d of the children are similar, b u t conflict

may occur once the family m e m b e r rejoins the business after c o m p l e t i n g
his or her education. In one family firm, the son of the founder was sent
to M.I.T. to get a M.B.A., with the expectation that he w o u l d return to
work in the business. After c o m p l e t i n g his degree a n d r e t u r n i n g h o m e ,
the son discovered that the father was n o t willing to listen to the new
ideas that he h a d learned at business school. T h e son felt cheated a n d
estranged from his father a n d family a n d soon left the family business,
w i t h bitter feelings.
Before c h o o s i n g the family o p t i o n , family leaders m u s t understand
the career aspirations of family members. T h i s a p p r o a c h requires o p e n
c o m m u n i c a t i o n a m o n g family members a b o u t career choices, w i t h the
o p t i o n of career counseling, preferably by trained professionals, for poten-
tial family managers. T h e family m u s t also recognize w h a t future skills
a n d abilities will be needed to m a k e family members aware of business
needs as they explore career o p t i o n s . For example, a family business that
once h a d needs for engineering talent may need personnel a n d m a r k e t i n g
skills in the future. T h u s a family member w h o m i g h t not enjoy engi-
neering b u t likes w o r k i n g with people could be counseled to get some
t r a i n i n g i n personnel or m a r k e t i n g , with the u n d e r s t a n d i n g that there
w o u l d likely be a future role for h i m or her in the family business.

Professionalizing Nonfamily Employees

A second o p t i o n is to give nonfamily employees the t r a i n i n g a n d skills

that will be needed by the organization in the future. T h i s o p t i o n makes
sense if (1) there are few, if any, family members w h o are interested in
w o r k i n g in the family firm; (2) nonfamily employees appear to have the
necessary m o t i v a t i o n a n d ability to improve their performance as m a n -
agers; (3) the trust level between family a n d nonfamily employees is rela-
tively h i g h ; a n d (4) the family wants to perpetuate family values as well
as c o n t i n u e the strategic focus of the business. I n m a n y family firms,
nonfamily employees are treated as second-class citizens a n d given little
credit for the success of the business. T h e s e employees are often a n
overlooked a n d underutilized resource, often u n d e r s t a n d i n g the business
better t h a n the family realizes. T h e y also have a n appreciation for the
valuesand idiosyncraciesof the o w n i n g family a n d thus can act in
ways that will meet the family's expectations. T h e s e employees can play
a significant role i n developing the business if given the opportunity.
O n e family firm that has attempted to improve the m a n a g e m e n t skills
of nonfamily employees is a large retail business in the Midwest. T h e
two brothers w h o founded the business are in their m i d sixties a n d w o u l d
like to retire in the near future. While there are two family members
w o r k i n g in the business, b o t h are quite y o u n g , a n d the next generation

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230 Dyer

of leadership will have to emerge from the pool of nonfamily managers.

A l t h o u g h the current nonfamily employees generally have excellent tech-
nical skills, they have h a d little t r a i n i n g in general m a n a g e m e n t p a r t i c -
ularly the areas of strategic p l a n n i n g a n d corporate finance. Moreover,
they have spent little time developing their o w n subordinatesa critical
m a n a g e m e n t skill. T h e s e deficiencies are due, by a n d large, to the fact
that the brothers have n o t given nonfamily managers experience in stra-
tegic p l a n n i n g a n d finance, n o r have they themselves spent time coach-
i n g them.
Recognizing the need to prepare the next generation of leaders, the
brothers enlisted the aid of a consultant to help their h u m a n resource
m a n a g e r s design a n effective t r a i n i n g a n d development p r o g r a m , w h i c h
included:
1. Interviews by the consultant with the t o p twenty-five nonfamily
managers to better understand their career goals a n d aspirations.
2. A n assessment of the m a n a g e m e n t skills ( p l a n n i n g , decision mak-
ing, c o m m u n i c a t i o n , team b u i l d i n g , a n d so on) of the t o p sixty
m a n a g e r s in the company. (These assessments included feedback
from each manager's superiors, peers, a n d subordinates. T h i s feed-
back, w h i c h was confidential a n d given only to the manager, was
used to h e l p the m a n a g e r set goals for improvement. These goals
were then shared with the m a n a g e r ' s boss w h o reviewed the m a n -
ager's progress in performance appraisal sessions.)
3. T r a i n i n g sessions to h e l p managers improve their skills in various
areas.
4. A succession p l a n n i n g process to ensure that each m a n a g e r was
p r e p a r i n g someone to replace h i m or her.
5. T h e opportunity for nonfamily managers to attend management sem-
inars a n d conferences sponsored by various professional associations.
So far the results of this p r o g r a m have been quite favorable. T h i s climate,
w h i c h encourages learning, has also created more o p e n c o m m u n i c a t i o n
between the founders a n d nonfamily managers.
T h e e x a m p l e of this organization suggests a n u m b e r of things leaders
of family firms should consider if they wish to professionalize nonfamily
employees. First, they m u s t develop an appraisal system to identify those
nonfamily employees w i t h the a p p r o p r i a t e career aspirations a n d poten-
tial a n d then offer them career guidance a n d new career o p t i o n s . Second,
the family s h o u l d provide incentives to encourage nonfamily employees
to seek additional education. T u i t i o n reimbursement or p a y i n g for work-
shops a n d seminars are the most c o m m o n ways to encourage the acqui-
sition of a d d i t i o n a l skills outside the workplace. I n - h o u s e t r a i n i n g
p r o g r a m s can also improve the performance of nonfamily employees.
T h i r d , the family m u s t be willing to treat nonfamily employees more or
less as equals w h o can enjoy the benefits that may have been reserved for

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Integrating Professional Management 231

only the family. T o merely encourage education a n d personal develop-

m e n t w i t h o u t a willingness to share in the rewards creates cynicism a n d
u n d e r m i n e s morale.
A potential problem of t r a i n i n g nonfamily managers is that they may
be u n w i l l i n g to try o u t their new skills, or they may accept t r a i n i n g
merely to please the o w n i n g family, h a v i n g little c o m m i t m e n t to the
education process. T h i s is particularly true in family firms that tend to
be paternalistic a n d have a n autocratic m a n a g e m e n t style. T h e family
can end u p w i t h highly trained employees w h o c o n t i n u e to follow com-
p a n y policies, procedures, a n d values blindly, failing to use their new
knowledge a n d skills to improve c o m p a n y performance because they fear
p u n i s h m e n t or failure.

Bringing in Outside Professionals

T h e first two o p t i o n s are a p p r o p r i a t e if the family wishes to c o n t i n u e its
present strategy a n d wants to m a i n t a i n traditional family values. T h e
third option, b r i n g i n g in professional managers from outside, is generally
deemed necessary when (1) there is little or n o expertise, ability, or interest
o n the p a r t of the family a n d nonfamily employees to m a n a g e the busi-
ness, a n d (2) there may also be a need to c h a n g e business strategy or
family values. T h o s e family businesses that have failed to m a i n t a i n a
competitive advantage in the marketplace or that have been unable to
effectively organize a n d coordinate the activities of the organization are
often in need of a n " o v e r h a u l . " W i t h o u t outside h e l p a n d new ideas,
such changes could n o t take place; thus, there is a need for new manage-
ment expertise. As noted in the case of Jones Entertainment, the entry of
professional managers is likely to create some tension w i t h i n the organi-
zation, as new skills a n d values are introduced.
T o mitigate some of these problems, the family can take a n u m b e r of
positive steps. First, it can take the time to socialize the professional
m a n a g e r in the ways of the family a n d the business. Some professional
m a n a g e r s see their role in the family firm as o n e of " k i l l i n g sacred
cows"that is, c h a n g i n g the business n o r m s (Dyer, 1986). While some
sacred cows may need to be killed, there are typically some values of
c o m m i t m e n t , loyalty, quality, a n d so forth that o u g h t to be retained.
T h u s the family m u s t c o m m u n i c a t e clearly those values it feels need to
be u p h e l d a n d should focus o n a r t i c u l a t i n g ends rather than means. In
other words, the family s h o u l d o u t l i n e the u l t i m a t e goals it w o u l d like to
achieve, while a l l o w i n g the professional m a n a g e r some discretion to
i m p l e m e n t new ideas a n d new methods to achieve these goals. In the case
cited above, Jones spent little time trying to teach his goals, values, a n d
orientation toward the business to Lewis. Instead, Jones relied o n the
head h u n t e r to find the " r i g h t " person a n d then assumed that Lewis
w o u l d follow his lead.

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232 Dyer

Another i m p o r t a n t a p p r o a c h is to tie the interests of the professional

m a n a g e r to the firm, w h i c h will influence his or her behavior to be more
consistent with family interests. O n e strategy is to offer o w n e r s h i p stock
to key professional managers so they will " t h i n k like o w n e r s " a n d n o t
focus o n p a r o c h i a l m a n a g e m e n t interests. Moreover, i n c l u d i n g key p r o -
fessional managers o n the board of directors can be a good way to gain
their i n p u t as well as teach them h o w the family feels a b o u t the business.
Professional managers s h o u l d also be encouraged to become a part of
the c o m m u n i t i e s they w o r k in. P r o b l e m s can arise w h e n there is a
lack of fit between c o m m u n i t y values a n d the values of professional
m a n a g e r s (Astrachan, 1988), a n d a n u m b e r of studies have s h o w n that
professional managers often decide to live outside the c o m m u n i t i e s they
work in because their interests are quite different t h a n those of the indig-
e n o u s work force (Warner a n d Low, 1947; Meek, Woodworth, a n d Dyer,
1988). W h e n professionals live outside the community, c o m m u n i c a t i o n
barriers are often created between professional managers a n d local em-
ployees, a n d a n " u s versus t h e m " mentality is created. Moreover, some
family a n d nonfamily members may feel their career goals a n d sense of
self-worth threatened if outsiders begin to occupy key m a n a g e m e n t posi-
tions. T h i s can intensify feelings of suspicion a n d distrust. In the firms I
have studied, such conflicts are c o m m o n , a n d the result is lower morale,
increased u n i o n activity, and, eventually, lower overall organizational
effectiveness.
O n e such e x a m p l e is the Brown C o r p o r a t i o n , a medium-sized ($70
m i l l i o n sales) materials h a n d l i n g firm located in a small t o w n in the
northeastern United States (Meek, Woodworth, a n d Dyer, 1988). In 1974
the c o m p a n y faced a severe crisis, a n d the c o m p a n y president, J o h n
Brown, Jr., decided to b r i n g in a professional m a n a g e r to turn the com-
p a n y a r o u n d . T h e professional manager, Reed Larson, took a n u m b e r of
steps to c h a n g e the company. H e implemented a more efficient inventory
control system, set u p financial controls, a n d fired a n u m b e r of employees
considered " d e a d w o o d . " Because of his tough, no-nonsense a p p r o a c h , he
earned the n i c k n a m e Jaws. As a result of Larson's actions, sales a n d
profits increased dramatically. However, after a few years, Brown began
to recognize t h a t L a r s o n ' s values a n d o r i e n t a t i o n were u n d e r m i n i n g
morale a n d that the workers were b e g i n n i n g to s u p p o r t a u n i o n move-
ment. Furthermore, sales declined sharply in the early 1980s, a n d Larson
layed off over one-half of the work force to cut costs. Conflict between
L a r s o n a n d Brown began to intensify as Brown began to see the com-
p a n y ' s basic n a t u r e c h a n g i n g . As Brown attempted to find a way to
c h a n g e L a r s o n or to fire h i m , Larson secretly lobbied for s u p p o r t from
key managers a n d the board so he could purchase the c o m p a n y a n d oust
the Brown family. ( T h e stock was publicly traded, w i t h the Browns own-
i n g a b o u t one-third). Brown found o u t that L a r s o n was trying to "steal

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Integrating Professional Management 233

the c o m p a n y " from the family, a n d he eventually emerged the victor in

the power struggle. L a r s o n was fired, a n d a new professional m a n a g e r
was hired to replace h i m . T h i s new manager, P h i l Olsen, was also fired
after only o n e year o n the job. A l t h o u g h Olsen h a d a n impressive track
record at a large corporation, he too did n o t understand the family's
values a n d was unable to develop any r a p p o r t w i t h the work force. As
o n e t o p executive explains, "Olsen b r o u g h t in all new people a n d sur-
r o u n d e d himself with those he knew at his former company. H e used
m a n y consultants a n d h a d n o confidence in the oldtimers." Olsen viewed
the local employees as " a small-town b u n c h of jerks." While n o t as
tyrannical as Larson, Olsen was seen as " m o r e secretive, sneaky, a n d less
trustworthy."
D u r i n g Olsen's tenure, sales rose b u t profitability declined as costs
skyrocketed. Olsen h a d little feel for the c o m p a n y ' s product or h o w to
organize effectively to improve productivity. Morale was extremely low,
a n d u n i o n organizing continued. Finally, after h e a r i n g a b o u t Olsen's
" m i s d e e d s " from some c o m p a n y oldtimers, J o h n Brown, Jr., decided to
fire Olsen in 1985.
Olsen's replacement, Brad Adams, has been m u c h more successful
t h a n either Larson or Olsen. Adams, a long-time friend of Brown, was a
successful distributor of the c o m p a n y ' s products. H e knew the c o m p a n y
a n d its problems as well as the family. After t a k i n g the position, Adams
spent his first week o n the job m e e t i n g w i t h g r o u p s of employees. H e
m a d e a conscious effort to be visible a n d accessible to employees, even to
the p o i n t of visiting workers o n the graveyard shift. H e reinstated some
of the employees w h o were fired by the previous presidents, w h i c h helped
boost morale. U n i o n organizing has virtually stopped, a n d the c o m p a n y ' s
profits have improved in recent years. Adams' expertise in sales a n d mar-
k e t i n g has helped strengthen the company, a n d his collaborative a p -
p r o a c h to solving the c o m p a n y ' s problems has received broad support.
T h e Brown case illustrates some ways to alleviate the problems asso-
ciated w i t h b r i n g i n g in professional m a n a g e m e n t . Family leaders a n d
professional m a n a g e r s m u s t establish good c o m m u n i c a t i o n w i t h em-
ployees t h r o u g h g r o u p meetings, newsletters, informal lunches, a n d so
on. Role clarification meetings a n d team-building sessions are also likely
to be needed as professional m a n a g e m e n t is introduced into the firm
(Dyer, 1986). T h e s e actions can h e l p reduce the a m b i g u i t y a n d uncer-
tainty that naturally arise as people w i t h different experiences a n d world
views a t t e m p t to work together.

Conclusion

T h e issue of professionalizing a family business is one that most, if n o t

all, leaders of g r o w i n g family firms m u s t grapple w i t h at some point.

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234 Dyer

H o w this issue is h a n d l e d can often determine whether or n o t the family

firm will c o n t i n u e to function h a r m o n i o u s l y a n d to grow a n d succeed.
T h r e e o p t i o n s for professionalizing the family business have been out-
lined. T h e y are n o t m u t u a l l y exclusive a n d can be used in tandem. T h e
key point, however, is that the family must choose a strategy that makes
sense, given its current situation. Expectations for t r a i n i n g a n d develop-
m e n t need to be m a d e clear by the o w n i n g family so that family a n d
nonfamily members alike will have a clear u n d e r s t a n d i n g of the rules
g o v e r n i n g p r o m o t i o n to higher levels of responsibility.
T h e issue of the professionalization of m a n a g e m e n t extends beyond
the borders of the family firm. However, family businesses that are typi-
cally value driven a n d led by visionary entrepreneurs have u n i q u e chal-
lenges as they a t t e m p t to professionalize. While there are n o easy answers
to these issues, hopefully the experiences of family firms presented in this
article will help leaders of family firms make wiser choices as they acquire
skills of professional m a n a g e m e n t .

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W. Gibb Dyer, Jr., is associate professor of organizational

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