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A FAMILY AFFAIR
EMB
MANAGING CHANGE: INSIDER INSIGHT
Management transitions can create
disruptions, particularly with respect to
employees and cultural changes within
an organization. In a family-managed
team, there are often informal structures
and work processes in place. In such
companies, it is not unusual to encounter
a relative lack of transparency and
controls, while hierarchical orders can
be complicated by family ties and board
oversight can be ineffective.
In this context, given that PE firms
expect to make money through exits,
they have a vested interest in helping
family-run companies to become more
professionally managed. Naturally, in any
management change situation, there are
challenges related to the transition. Here,
L’azurde CEO, Selim Chidiac, shares some
valuable insight to help address them.
1. THE EVALUATION PHASE
“You take the first 100 days to learn and
observe, but also generate some quick
wins to gain respect, especially if you are
a new CEO coming from outside.”
According to Chidiac, it is important to
start by listening to people and gaining an
understanding of the company. To be an
Employees may
have loyalties to
senior managers that
you need to remove.
This issue becomes
a significant problem
in family-owned
businesses.
EMERGING MARKETS BUSINESS
SUMMER 2017
effective leader, it is vital to not rush to
conclusions. The challenges related to
transitions are even greater when the
incoming CEO is from a completely
different industry, as was Chidiac’s
case. For such incomers, the evaluation
phase is all the more crucial.
2. MOVING TO CHANGE THE TEAM
“Replacing management team members
in a family context requires more than
just bringing in someone who is capable.
It also requires the provision of a strong
support framework for your leaders.”
The easy wins: It is challenging to make
changes to the top team in family-owned
businesses. Many senior managers have
been around for a while and have strong
bonds with the organization. After the first
100 days, consider step-by-step changes
at the top. Meanwhile, it may be that the
weak members of the team need to be let
go. This can be part of the quick wins for
a new CEO, as these changes are less like-
ly to be challenged.
But it’s about more than just hiring
and firing. As Chidiac points out, it also
requires the provision of a strong support
framework for the incoming managers.
In a family business context, the system can
reject them. Thus, having a strong support
mechanism for incoming team members is
very important to help them be successful.
The question marks: There may be
question marks hanging over the ability
or suitability of some employees, but
these team members are sometimes also
well-respected and established within the
company. In such cases, it makes sense
to wait before taking action, otherwise a
decision can backfire. At L’azurde, Chidiac
waited patiently for the right time to show
the rest of the organization that it was
better off without certain individuals.
Moving slow is also sometimes
necessitated by scarcity of talented
managers in emerging markets, who can
step in to vacant roles. According to
Chidiac, “When you make changes in
emerging markets, the pool of talent is
narrower, so that is a constraint. In the
ISSUE NO. 3
US, when I was in charge of Red Bull NA,
I was able to change the top management
team in two months.”
3. STAKEHOLDER CHALLENGES
“It’s not just about changing people;
you have to support existing people.
You have to give them new processes,
new reporting systems and provide
coaching to get better results and help
them grow.”
Employees: An important challenge in
management transitions is that lower level
employees may have loyalties to senior
managers that you need to remove. This
issue becomes a significant problem in
family-owned businesses. According to
Chidiac, any CEO in emerging markets
must have the capability to zoom in and
zoom out. For the L’azurde chief, ‘zooming
out’ means stepping back, looking at the
big picture and defining the company’s
strategy. ‘Zoom in’ refers to rolling up
your sleeves and working with the layer
of people under a leader you may want
to remove.
The strategy used by Chidiac was to
identify high potential middle management
working under a leader that he wanted to
replace, and then work with them directly,
developing and supporting them in order
to build trust. Eventually, lower level
managers start to see that they can
benefit from the new CEO as they learn
and grow. Naturally, this must be done
subtly, without the manager earmarked
for removal realizing the end game.
Banks: Banks, which are a significant
source of capital in any economy, tend to
be risk averse. In emerging markets such
as those of the Middle East, they mitigate
some of this risk through lending to low
credit risk borrowers, which typically
means lending to established family names.
In short, lending is relationship-based,
and herein lies the challenge for compa-
nies such as L’azurde. As a result of
PE-backed management changes, these
relationships have to transition to a new
team, which can be tough.
For new CEOs trying to establish their
credibility with lenders, Chidiac points to
a simple approach that he adopted when
he took over at L’azurde. That is, to provide
full transparency to the firm’s lenders.
He provided clear reporting of performance
and other financial details to banks, and
met with them on a quarterly basis, even
when L’azurde was still a private entity.
In those meetings, the company’s manage-
ment team clearly described the current
numbers and future plans. More impor-
tantly, it started to deliver on those plans,
boosting bankers’ trust and conf