Family businesses are known for their deep-rooted values, strong heritage, and long-term vision. When it comes to bringing in the first non-family executive, the Finance Director is often the role that’s filled first.
This key appointment comes with its own set of challenges. It’s not just about integrating an outsider into the family business; it’s also about finding someone with the right skills for current needs and the ability to handle future demands, such as mergers and acquisitions, international expansion, or potential exits.
The Challenges Of Hiring A Finance Director
Integrating a Finance Director into a family business culture can be challenging. The new recruit must align with the company’s values and culture, earning the trust of both family members and long-standing employees.
Today's Finance Director needs to manage current financial operations while being prepared for future growth and strategic initiatives. The challenge is to find someone who excels in the present and is adaptable to future needs, such as M&A, international expansion, and business disposals. Balancing immediate competencies with future potential is crucial.
Deciding whether to hire someone who can grow into the role or to bring in a candidate with extensive experience for anticipated future needs is a big decision. Supporting a less experienced candidate with external advisors or a non-executive director (NED) with relevant experience can be effective but requires careful planning and strong support systems.
How To Hire the Right Finance Director
Start Early and Plan Ahead
Planning ahead is essential. Begin considering the role and drafting a detailed job description well before you need to make the appointment, as finding the right candidate can take up to six months. Clearly define both immediate responsibilities and future expectations, including financial oversight, strategic planning, risk management, and potential involvement in M&A activities.
Gain Consensus Among Stakeholders
Involve other business leaders and family members in agreeing on the job description and the ideal candidate profile. Consensus helps ensure that the new Finance Director aligns with the business’s vision, values, and culture. Beyond technical skills and experience, the candidate’s character and cultural fit are crucial.
Clarify Role Expectations
Develop clear expectations for the role and define what success looks like. Set financial targets, strategic milestones, and key performance indicators (KPIs). Establish how the Finance Director will communicate with the family, board, and other stakeholders, including the reporting structure and frequency of meetings.
Develop A Comprehensive Integration Plan
Create a detailed plan for how the new Finance Director will get to know the company’s heritage, vision, values, and culture. Identify key family members, stakeholders, customers, and suppliers for the Finance Director to meet. Plan visits to important sites and attendance at industry events to help them build their network and industry knowledge.
Design A Competitive Remuneration Package
Develop a comprehensive remuneration plan that includes a competitive base salary, benefits, and performance-related pay. Consider long-term incentive plans (LTIPs), phantom equity schemes, bonuses, and profit-sharing arrangements to align the Finance Director’s interests with the long-term success of the business.
Appointing the first non-family Finance Director in a family business is a significant step that requires careful planning, clear communication, and a thoughtful integration strategy.
By starting early, gaining stakeholder consensus, clarifying role expectations, and developing a comprehensive integration and remuneration plan, family businesses can ensure they make the right appointment.
This approach not only aids in the successful integration of the new Finance Director but also sets the stage for sustainable growth and long-term success.
About the Author: David Twiddle is Managing Partner of TWYD & CO. He advises business families on the appointment of non-family executives and navigates the complex and sensitive people challenges often encountered in family enterprises.