CEBU

Soriano: Forcing an unqualified successor (Last part)

Inside Family Business

LET’S face it. It is almost impossible to view your offspring or adult child objectively as your next successor. To add to the dilemma, major business decisions related to transition by any family owning enterprise will have emotional undertones, a far cry from non-family corporate organizations where anointing a successor goes through a rigorous and objective process. Therefore, any talk of transition in the family business, must be thoroughly planned well in advance and articulated to all family members and key non-family executives.

The truth is most business owners commit a major blunder when they make their children feel obligated to join the company. This wrong notion of forcing a child can certainly compromise the business. Why? It notoriously breeds owner/managers who are entitled, uncommitted, unprepared and indifferent. My advice is this: Forcing your children to join the family business is wrong!

When an offspring exhibits a lackadaisical attitude toward the business, you can expect conflict to manifest in many forms. This toxic situation translates to a lot of time wasted for all parties and the business inevitably takes a direct beating. To be blunt about it, companies fall apart—and families can, too—when successors are forced to lead or aren’t ready to manage a family business.

Children who are apathetic or lack the drive should not have worked in the enterprise in the first place. Nonetheless, if parents insist, the tradeoff can cause serious consequences. A bad example happens when an unqualified offspring is made to assume a leadership position that would result in a miserable but entitled successor bullying his or her way to gain respect. The results can be devastating: Non-family executives will become demotivated and parents end up regaining control and are forced to restrain the young successors’ activities. Ultimately, governance and succession initiatives are sidelined.

In my experience coaching dozens of family enterprises in Asia, I have seen ill-prepared next-generation members slugging it out and inevitably destroying the business. As governance colleague Henry Foley remarked in his Harvard Business School article he co-authored...“despite their lack of experience, these offspring may ascend to leadership positions because of the family connection, increasing the chances that the business will fail.”

To escape the trap, Foley suggests intervention on proper training and screening. He continues: “It’s natural for a family business to welcome members of the next generation, and it’s healthy to expose them to the company at an early age, so that they can make an informed decision about whether to pursue a career there. But a job with the company shouldn’t be an entitlement. Those who want to join deserve no special accommodation. We now see an emerging best practice in which families formally require any child who wants a job to (a) earn a university degree—and in some cases a graduate degree, (b) gain several years of relevant professional experience outside the family business and (c) apply for open positions in competition with non-family applicants.”

In an article penned by Alaa Alshaikh, he remarked that: “Handing over the reins can be immensely complex and laden with organizational and emotional challenges. Further complicating things, the demands of leading an established company are different from the demands of founding and building one. To select a successor from among family members requires objectively determining who is most suitable to lead the business as it is, with respect to its history and its future—all while developing that person’s leadership experiences and self-assurance.”


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