Wednesday, June 8, 2011

Co-Presidency Doesn’t Work for Most Family Businesses

by Mike McGrann, Executive Director, S. Dale High Center for Family Business

Mike McGrann
It’s not uncommon for family businesses to have two rising executives (two siblings, two cousins, etc.,) both of whom feel they are the right person to become the next president.
If that sounds like your family business, should you be thinking co-presidency? It may seem like the easy answer to a tough succession decision.

However, the fact that it is an easy answer does not make it the right approach. There’s a good reason why the United States has only one president. I am reminded of a comment from former U.S. President George W. Bush, the guest speaker at the 2011 Lancaster Chamber dinner, who said, “The President gets lots of input from many sources. My job was to make the call based on the information available.” In this system, there is no ambiguity about who is responsible for making the tough call.

Family businesses, like all organizations, require a clear hierarchy to function effectively…and having one highly qualified individual at the top of the organization is the most effective way to achieve a clear hierarchy. The challenge with co-presidencies is that, by their very nature, they lend themselves to ambiguity about who makes what decision, and when that decision can be made. This kind of ambiguity at the top of an organization is deadly and quickly leads to confusion, organizational inefficiency, lack of productivity, etc.

Is a co-presidency right for you?
Often the decision to appoint co-presidents is often made because of the potential family conflict that would arise if one family member is chosen over the other. The merit of who is really most qualified to lead the company gets lost in the fear of conflict and hurt feelings that one family member “won” and the other “lost” in the succession marathon.

This is not to say that co-presidents cannot work. In fact, Mars and Smuckers, two of the most competitive and successful food manufacturers in world have long history of effective leadership from two brothers who served as co-presidents. Tim and Richard Smucker operate their business based on a clear set of roles for each brother, constant communication between them, and a high of degree of trust in each other.

So if you are leaning toward co-presidents, you’ll need crystal clear roles and a process for resolving disagreements when the roles of the co-presidents overlap (A&B below). A Board of Directors can be effective in this role.
Mike’s Bottom Line: If you are going to appoint co-presidents of a company, it should for the right reasons: you have two highly qualified family members with distinct skill sets whose roles and responsibilities have been clearly delineated—not because it is the easiest way to avoid a family conflict.

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