Family members in leadership roles: when emotions eclipse meritocracy

The roles that family members want, can and should play in the family business is a central issue that firms need to address as they evolve and new generations enter their leadership ranks. Yet emotions can blur objectivity and unduly influence the decision-making process.

Emotions can also run high in families, which makes decisions in family-run firms even more difficult. In light of this emotional bias, surgeons rarely perform surgery on family members or others with whom they have a strong sentimental tie since it can cloud their decisions in the operating room.

This is a fact of life, so valid criteria and mechanisms must be in place to ensure good decisions. For family business leaders, it’s important to avoid falling into the trap of “What comes first: my family or my firm?”

The standard response seems too easy – the company must be managed as a company, and the family as a family – but watch out, because there’s a catch. This clear delineation infers a solid grasp of what defines a company and what defines a family, and a deep understanding of people’s needs at different stages in their life. Even more importantly, it requires seeing this awareness and appreciation modeled in others.

Family members can hold a variety of roles in the family business: shareholder, board member, top executive (CEO or general manager), manager or employee. All entail concrete responsibilities and specific abilities to successfully carry them out, and it’s a mistake to think they are naturally transmitted through bloodlines.

This is obvious in medicine, the creative arts and other fields. In the governance and management of companies, however, it is sometimes overlooked: by virtue of being a family member, one is presumed to have “inherited” a specific set of skills and expertise to excel in a specific role, when in reality, this is not the case.

For family-owned firms, this underlying assumption typically doesn’t lead to positive outcomes. But where it wields the most damage is on the people themselves. When family members assume a role for which they are not sufficiently prepared, they suffer both professionally and personally, and their self-esteem takes a direct blow.

And where things really get complicated is when family members hold several of these roles at the same time. Unless the firm has clearly defined and implemented adequate forums to address these crisscrossing lines, family firms are headed for trouble.

On an individual level, self-knowledge and a bit of humility are good protection mechanisms to avoid applying for or accepting positions for which one isn’t adequately prepared. Another valid option for family members is forging their own professional project to sidestep the “appropriation effect” vis-à-vis the family firm. By following this route, they are able to define their own pathway rather than following one already defined by someone else.

Within the company, professional frameworks and processes to hire, appoint and appraise people’s performance is vital. These systems ensure greater objectivity in decisions regarding family members who hold roles in the organization.

And within the family sphere, I can’t stress enough how important it is for everyone to willingly accept whatever resolutions stem from these decisions, which touches on another core component of successful family firms: the need to share common values.

In sum, family firms that follow the principles of meritocracy and market rules when deciding on corporate roles are a step ahead of the game. Some might say a meritocracy is too expensive. To them, I would say the risk of mediocrity is even higher: not only is it more expensive, but it is also potentially lethal for the firm’s long-term success.

 

 

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