Don’t just keep it in the family
Fostering a culture of diversity is key to attracting talent, securing external funding, and leads to better decision-making
Showing that you don’t just recruit but develop talent is important too. Photograph: iStock
Diversity can help foster business success but family businesses, by their nature, need to take a proactive approach to ensure they don’t promote purely on the basis of bloodlines.
“What you find commonly in family businesses is that they might need a specialist skill set but people feel they will never have shares and never have influence whereas, if they go to a PLC, they might not only get shares but end up running the company,” says Catherine Moroney, head of business banking at AIB.
Being able to demonstrate that your family business has the structures and processes in place to separate out the family from the business can be a vital carrot in encouraging outside talent in. Showing you don’t just recruit but develop talent is important too, if fresh thinking, as well as skills, are to be replenished.
At senior levels, the possibility for staff to receive a shareholding can help, indicating you are willing to walk the talk. “Then the person coming in will say ‘Wow, I can see this family has separated itself out from the business’. You have to show them,” Moroney says.
It’s in your interests to do so. “Diversity leads to better decision-making,” she says. For a family business considering taking on external funding, such as private equity, it’s important too.
“Equity investors are very astute at seeing where the talent lies and will have no problem where family members are driving and growing a business. Where they will have an issue is, as a minority shareholder, around the transparency of the decision-making process,” she adds.
Being able to show good governance structures will help assuage such fears. In fact, it’s why investors can be a very good thing in a family business, driving the governance side, Moroney suggests. “If it grows, everybody wins, the business, the investor and the family. But it’s only a win-win if I, as an investor, can be sure the decisions are transparent and made in around the board and not the kitchen table.”
A family business that does this well will get a higher premium for its shares, she suggests. Equally, bringing high-quality non-executive directors can add diversity to a family business, as well as fresh thinking from other sectors.
War for talent
KPMG’s most recent European Family Business Barometer shows Irish respondents identify the war for talent as their second greatest concern after political uncertainty. That speaks volumes about the importance Ireland’s family businesses place on diversity today, suggests Ryan McCarthy, partner with KPMG Private Enterprise.
“Family businesses are ambitious and have growth plans that often require additional expertise. They are very aware of the need to attract the best people with a working environment that values diversity of thought and diversity of background,” says Ryan.
In PwC’s annual family business survey, 80 per cent of respondents recognise that diversity has a role to play in increasing profits, so the business case is well understood. But how to do it?
“Improving diversity and inclusion is a challenge for all businesses, not just family businesses, and there is no quick fix but there are massive opportunities for family businesses that get it right,” says Owen McFeely of PwC’s retail and consumer practice.
Part of the opportunity is that it enables you to access a greater talent pool. However, for it to thrive in your business, it must have both leadership commitment and critical interventions to drive it on.
It also requires champions within the organisation as well as practical initiatives such as having younger staff mentoring older ones on subjects such as technology or market trends, he suggests.
Unconscious bias training can help too, to winkle out our unthinking preferences in terms of the kinds of people we like to recruit and promote. Ensuring you have role models in the family business who are happy to talk to staff about how they feel their difference is valued is important. Diversity alone isn’t enough, “it has to be about inclusion too”, says McFeely.