Father merchant, son gentleman, grandson beggar.
It’s the Mexican way of expressing the American saying, “Shirtsleeves to shirtsleeves in three generations.”
Then there’s the Brazilian equivalent.
Rich father, noble son, poor grandson.
And let’s not leave out Italy:
From the stables to the stars and back to the stables.
Family businesses have faced the same problems for generations. And while the public is well aware of the possibility of failure, there is also a strong opportunity for success . . . especially if senior management (also known as senior family members) have the fortitude to assess and address behavioral issues of family members regardless of age and ranking within the organization.
Here are potential pitfalls along the way . . . and how to avoid them
Guaranteed jobs. Restricted career choices.
It cuts both ways. Children of family-owned firms can see the company as fallback employment. Sometimes adult children have pursued a college major that strikes their fancy. Or they have embarked on a creative or entrepreneurial dream that has not panned out. Or they have pinned down a regular day job that has them on a rigid schedule, with routine responsibilities and without a clear career path or opportunities for promotion.
This can be especially discouraging if the child grew up amid wealth and wants to maintain this standard of living for himself and his own children. He may not see how his career choices to date can lead to financial success or even moderate financial security. Resentment may be added to the mix if siblings or cousins who joined the company right out of college—or even got involved in the business while in school—are enjoying the fruits of years of involvement.
“There is always a place for you in the business” is not a good message to the younger generation and certainly not to family members as they age. Successful businesses have requirements they apply to family members seeking to join the business. These may include a college degree, perhaps in a relevant major. They may include full-time employment out of college in another firm, possibly in the same or a related field. They may include competing for an opening against non family applicants.
Objective assessment may include aptitude, skill, and other evaluations conducted by an outside firm. These lend credibility to hiring and promotion decisions and help take some of the pressure off family members in leadership positions who must make and communicate these difficult decisions. Family-owned companies benefit from working with qualified outsiders who consult on these personnel decisions.
It goes the other way too, with older family members pressuring their children to join the firm. The parents are emotionally tied to the company, and if the firm has been profitable, they want to assure that their descendants participate in the ongoing prestige and profitability of the company.
Poor performance endangers the entire organization
Sometimes adult children attain high-ranking positions requiring leadership and technical performance skills that they do not possess. Poor performance endangers the entire organization because of their visibility and their broad span of control. These individuals may be unhappy or depressed, trying to fill roles that do not inspire them or use their strongest talents. They may even resort to alcohol or other crutches to medicate away their discomfort.
Unfair hiring and promotional decisions in favor of family members also weaken the organization in another way: Nonfamily employees recognize they are at a disadvantage and are unlikely to progress in their careers. Savvy applicants who study the company before coming on board also see they won’t go far and bail on the hiring process. Not having access to the best talent in the marketplace endangers the family-owned firm.
However, the picture is not totally one of gloom and doom. It’s universally recognized that today’s large companies are too driven by market demands for short-term, positive financials. Family-owned companies have a special incentive to manage for long-term success and continued survival, if not growth, over decades.
Family members need their companies to survive. They must withstand near-term pressures from family members who are not the best choices for positions of responsibility.
Making, communicating, and implementing these difficult decisions is not easy in a family-owned firm, but they are essential. Management must demonstrate insight and courage. Impartial, scientifically-based employee behavioral assessments help senior management, including family members dealing with sensitive issues, to make wise decisions and carry them out.
Thinking of who would be the best fit to take over the family business? Check out our upcoming webinar “Move Your Mission Forward with Succession Planning”
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