In the fifth and final article in our series on the secret to sustainability in family business, Liam Lynch, KPMG partner and Head of Private Clients, focuses on talent.
Talented people are the backbone of any great business. Having the right people in place is the difference between mere survival and success. A significant challenge that faces many family businesses as they plan for sustainable growth is the ability to attract and retain executive and managerial talent.
Competing in the ‘war for talent’
As a family business grows, the appetite to tap into skill sets that are outside the family is also likely to expand. In a high employment economy, the competitive experience of engaging in the ‘war for talent’ is intense.
“Many family businesses find that the ability to attract and retain the skills needed throughout their business is now one of their main concerns,” Liam says.
“The competition to hire and retain good people can be fierce. While family businesses must navigate the same ‘war for talent’ environment faced by all employers, finding people with both the right skills and the right cultural fit can feel like an overwhelming barrier.”
The vast majority of families are committed to maintaining family ownership of the business. The structure of remuneration packages on offer to attract talent can be more limited than businesses with other ownership forms. Share based remuneration incentives can tend to be off the table, and even if they are not the exit mechanisms can be both complex and uncertain.
Therefore, it is essential that the business effectively builds and communicates its value proposition to prospective employees; what it means to be a family business and why it’s a good thing to work for one. This might include, for instance, the commitment of a community embedded family business to both its staff and by extension the local community. This commitment might be demonstrated by higher levels of investment in training and corporate responsibility, as well as the prospect of relatively fewer redundancies during tougher times.
“Make no mistake, this is a critical business issue, as without the right skills a business will struggle to deliver on its potential and grow in a competitive market,” Liam advises. “Families in business cannot afford to lose out on skills.”
Implementing an effective people policy may require tough discussions and negotiations that go beyond established family expectations and reform longstanding practices.
Are you ready to put the best people forward?
Proper planning can help family business owners put a framework in place that not only addresses common business issues but may also prevent potential disputes within the family. With the right policies, practices and strategy, the sky’s the limit for attracting the best talent and retaining great people, while at the same time preparing the next generation of leaders within the family.
Liam recommends considering some of the following common issues in developing a broad-ranging strategy to attract and retain the best talent:
- Compensation – Are you offering competitive compensation? Ensure that your reward packages, including remuneration plans, are based on market-driven data. Do family members enjoy opportunities or bonuses not available to other employees?
- Training – Do you have adequate training in place to prepare the next generation to take over leadership roles and responsibilities? Does every employee have access to the same level of training and development for their role, regardless of family status?
- Decision-making – Who is involved in designing compensation packages or making hiring decisions? Do those in decision-making roles have the qualifications required and the independence needed?
- Governance – Is your board of directors made up of family and non-family members? Do you have an adequate succession plan in place? Have you identified all the areas of risk for your business – from economic to competition, loss of talent and cyber security?
- HR policies – Are there clear performance review frameworks for both family and non-family employees providing opportunities for development and progression for both? Are the policies, standards and expectations the same for all employees? Is the workplace an equitable environment overall?
- Communication – Is information communicated clearly and to all levels within the business? Are there cases of perceived unfair treatment, where only certain people are ‘in the know’ in relation to decisions or plans moving forward?
- Blending in non-family members – How are you competing with businesses that offer share based or equity rewards as part of their compensation plans for new talent? What can your family business offer in place of equity, including the certainty of cash which can be more attractive to many employees? Are there opportunities for advancement for employees who are non-family members?
Implementing an effective people policy may require tough discussions and negotiations that go beyond established family expectations and reform longstanding practices, Liam advises.
“Working with a governance model that overlooks the central need to have the right skills for the right role irrespective of family connections can have serious impacts on your business,” he says. “Implementing well-defined HR policies can protect your business, your employees and your family. Developing the right governance model for your business doesn’t have to be daunting, rather it can be an exciting stage in building forward bigger and better for both your business and you family.”
Liam’s previous articles in this series on the secret to sustainability in family business can be read here:
- The importance of inter-generation transfers
- The power of governance in family business
- Family business philanthropy
- Preserving and accumulating wealth
Overall, family businesses face particular challenges that require balancing the needs of the business with the expectations of the family. By making sure that your business has a strategy to develop and retain people with the right skills and fit for your business, you can create an equitable environment where everyone has the opportunity to thrive and build a sustainable foundation for both your business and your family.
Get in touch
Family business strategy requires informed decision making. For experienced guidance for your company, please contact Liam Lynch, Head of Private Clients, or any member of our Private Client team. We'd be delighted to hear from you.
