Navigating Change in a Family Business

Dear Coach Alan,

I am the president of a manufacturing company. Recently, the CEO, who is the sole owner of the company, and I recommended an organizational change that would integrate a satellite division that supplied the main operation with product into the main manufacturing operation. The satellite division VP who had up to now reported to me would report directly to the VP of operations.  The satellite division supplied the main plant with parts used in its manufacturing process. Due to our growth, the satellite operation needed to have closer ties to the main manufacturing.  This would bring the satellite division into closer conformity with human resource policies.  It would also help to coordinate state-of-the-art processes such as Six Sigma and lean manufacturing.  The only problem was the VP of the satellite company reacted negatively to the organizational change.  He felt this was a demotion and that the VP of operations would be micromanaging him.  His reaction was so strong that the CEO, who is also a relative, decided to put the organizational change on hold.  This makes me and my VP of operations look bad, and it stalls our efforts to improve organizational effectiveness.  What can I do to move this change forward?

George P.

George, you have recognized organizational gaps and have recommended change to eliminate them.  Congratulations.  Changing the organization to better meet the demands of the company is a role that you obviously take seriously.  I see two issues that you need to sort out before you implement the change you have proposed.  The first is the support of the CEO for this change.  The second is the reaction of the VP of the satellite division.

This is obviously a family business.  As such, the CEO must decide if the company will be run as a business-first or a family-first organization.  In other words, is he willing to make decisions based on the needs of the business or the needs of family member?  From a coaching perspective, you may need to confront the CEO with the dilemma you face in improving organizational effectiveness while dealing with a family member who resists this change.  Do you have the full support of the CEO to implement the change?  If so, what does the CEO need to do to back up this change?

Assuming you have the support of the CEO, you then need to gain the support of the VP of the satellite division.  By now, he has had a chance to process the change.  His initial reaction should not be surprising.  He very likely interpreted the change as a personal failure.  Your job will be to reframe the change as one that the organization needs to improve its effectiveness.  You may want to acknowledge the feelings this VP is experiencing.  This recognition will demonstrate empathy.  You may even want to encourage some venting of the feelings this executive is experiencing as a way of releasing pent-up emotions.  Rational dialogue is much more likely after the emotion is released.

As a coach, you might consider sharing your views of the ideal organizational design, including the integration of the satellite division with the main operations.  What are the gains that will take place once the reorganization is implemented?   If the change were not to take place, what are the losses that the company would incur? Do you have the support of this executive to help the organization realize these gains while avoiding the losses?  By reframing the change from a company perspective, you take the emotion out of the decision.  You will soon find out whether this VP really is able to shift his focus from a personal to a company perspective.

The final piece needed to implement this change is to have both VPs review the new reporting relationship.  What will this relationship be?  Your VP of operations will need to be sensitive in moving this relationship from that of a peer to a role of manager.  And, of course, managing a family member will have its challenges if the family member is allowed to triangulate relationships with the owner/CEO or other family members. As the coach of the VP of operations, you should consider goals for this relationship with frequent updates on how it is proceeding.  Be sure to keep the CEO informed about your progress and gains in implementing the change, as well as the relationship between the two VPs.

Family businesses have challenges that can complicate leadership.  Open dialogue and sensitivity to the family relationships will help you navigate through these challenges.