What is professionalization of management ?

The term is often associated with a family business transitioning from being run by a member or members of the founding family, who act as “owner managers” to being managed by a team of “professional managers” who are not family members and therefore not part of the ownership structure of the business.

Why does it matter ?

Businesses with poor fundamentals usually do not last long, irrespective of the quality of their management. Businesses with good fundamentals can also falter if their management is not up to the task. Conversely, successful businesses achieving longevity are usually beneficiaries of good management. Thus, empirical evidence points to the management of a business being a crucial ingredient and determinant for its success and longevity. Getting the right management in place makes a difference. So, in circumstances where family members are no longer able or willing to act as managers, a business needs to transition to “professional” managers with no direct links to the owing family or families. Moreover, as a family’s interests grow and diversify management challenges increase and family members may not be best suited for all aspects of management for all businesses under the family’s control. Utilizing non-family, “professional” managers can be a smart way to access a wider pool of talent and manage a larger and more complex business.

How is professionalization of management achieved ?

Successful family businesses need succession plans in place in order to ensure smooth and timely transitions, whether from one family generation to the next or from the family owner-manager(s) to “professional managers”. Succession planning within the family or with the introduction of “professional” managers can sometimes be facilitated by external advisors.