A family is a closely-knit unit with shared family values. These values influence the business' ethos and work culture and this is one of the reasons why family businesses have their own success stories.

Family businesses are, by definition, owned and controlled by the family. Unfortunately, most are not able to rely solely on the input and expertise of family members. When there are gaps in the family's skills or succession plan, or perhaps the 'natural' successor has no desire to come into the business, family businesses need to recognise that they may need to look outside and introduce non-family executives into the senior management of the organisation.

A distinction between the family members and non-family members of the management team often forms. It is not uncommon for the family to interpret this distinction to mean that the non-family members are not as motivated as the family members. Conversely, non-family members may feel uncertain of their position and often ask themselves the following questions:

"But you are part of our family" is an well-used but unhelpful phrase often heard in this situation. To maintain harmony and ensure a continued and developing contribution by non-family executives, a family business needs to formulate a long-term strategy.

Qualification requirements
Family issues must be kept separate from business issues. To recruit and retain high quality talent, the qualification requirements for a specific position should not vary, regardless of whether it is a family member or a non-family member who is to fill the position.

Remuneration
Family businesses will need to offer a remuneration package that can compete with other corporate employers, in order to attract suitable business executives. As part of this remuneration package, the family business will need to ensure that there are long-term performance incentives. One of the most effective ways of rewarding non-family executives is to create a reward package which is directly linked to the performance of the business.

Giving the executive a direct equity stake will underline the family's commitment and motivate him to work for the company's success over the long term. However, it is important to carefully consider the advantages and disadvantages of using shares as part of compensation before deciding to issue equity.

One advantage of issuing equity is that it helps the business to lock in key staff and enables it to compete with public companies when recruiting, as they often tend to include some form of equity participation. It will also reduce the impact on short term cash flow in comparison to immediate rewards, and will be in line with the long term goals of the business.

One disadvantage is that a negative impact on cash flow could arise if the executive left the company, necessitating the buy-back of the equity. In this situation, valuation formulae and predetermined pay-back periods are crucial in order to avoid disputes and cushion the impact on cash flow. In addition, the family have to give up an element of full control, even if the shares are non-voting. This is particularly relevant given that the executive will be able to access accounts etc. Thus, careful consideration needs to be given to the ownership percentage that is to be given to employees. A balance must be struck between perceived value by the employee and retention of control by the family.

Other mechanisms such as phantom share schemes or various forms of profit-related bonus arrangements can be used to attract and retain talented non-family executives if the family is not comfortable with external equity. As a half-way house, the company may also issue share options to the executive giving both a performance measured benefit to the individual and the advantage to the family of deferring the issue of equity until such time as tangible benefits are apparent.

Cultural compatibility
Past experience and compatibility of the non-family executive may affect their performance. Therefore, time and effort should be devoted to evaluating the compatibility of the candidate and his past business experience with the needs and culture of the family business during the interview process.

An executive who has worked exclusively in a formal business environment characterised by comprehensive policies and highly defined procedures may find it difficult to adapt to a family business founded upon unwritten procedures and needs-driven processes.

Clearly defined roles
It is important for the long term success of the appointment that the expectations and performance criteria for the position are clearly understood by both parties.

Although in the past the business' leaders may have operated without a formal position description, it would be worthwhile investing some serious thought into developing one.

In the right circumstances and with the right forethought and planning, the appointment of a non-family executive can have a positive impact on a family business.

There is no single all-encompassing method for success which is applicable to all non-family employees. The strategy for introducing and motivating non-family executives must be adapted to suit the business and employee involved. This can certainly be a challenge for family businesses, but managed correctly, it can bring huge benefits.