In my recent columns, I addressed a growing but often unspoken reality in family enterprises: the hard truth that not every sibling—or cousin—is truly ready to lead. The private responses from founders have been candid—and, in many cases, uneasy.
Some are still in the process of appointing their children and relatives and want to avoid future governance strain. Others are in a far more difficult position: appointments have already been made, performance gaps are visible, and the founder now feels politically and emotionally constrained.
The good news is this: both situations are still recoverable—but only with deliberate governance action.
For founders still making appointments
If you are still in the selection phase, discipline must begin now.
The most resilient family enterprises institutionalize three non-negotiables before any next-generation executive appointment.
First, role clarity before family placement.
Define the job first. Specify the competencies required. Only then, assess whether the family member truly fits the role. Reverse this sequence and governance risk begins immediately.
Second, an independent readiness assessment.
Next-generation leaders should be evaluated against external benchmarks, not internal comfort. Independent directors, external advisers, or professional HR assessments provide objectivity that family systems alone cannot.
Third, performance contracts with measurable KPIs.
Family executives must operate under the same—or stricter—performance discipline as professional managers. KPIs, scorecards, and formal reviews are not signs of distrust; they are instruments of stewardship.
Founders who implement these guardrails early rarely face structural regret later.
For founders already caught in the bind
The more difficult scenario—and increasingly common—is the founder who has already appointed underqualified family members and now feels boxed in by family expectations.
One recent case illustrates the path forward.
Over time, a founder placed his children and relatives into senior executive roles, largely guided by trust and family harmony. As the business grew more complex, performance divergence became harder to ignore. Professional managers were quietly compensating—and at times covering—for the relative’s capability gaps. Strategic initiatives were slowing.
Privately, the founder admitted what many in similar situations feel but rarely say aloud:
“I know the gaps are there. I just don’t know how to unwind this without damaging the family.”
The turning point came when the founder stopped treating the issue as a family problem and started treating it as a governance matter.
With board support, the company implemented three corrective measures.
One, strengthen the board’s independence.
Two additional independent directors were appointed, bringing an external perspective and removing the founder from being the sole source of performance pressure.
Two, formalize executive scorecards.
All senior executives—family and non-family alike—were placed under clearly defined KPIs tied to strategic priorities. The standard became institutional, not personal.
Three, create role recalibration pathways.
Importantly, the solution was not immediate removal. Instead, family executives were given structured development plans, role realignments where appropriate, and defined review timelines.
Within 18 months, the organization regained its operating rhythm. Two family executives improved meaningfully under structured expectations. Others transitioned to a more suitable non-executive role—without public fracture.
The founder’s quiet observation afterward was telling:
“I should have systematized this earlier.”
The founder’s leadership test
Founders must recognize a difficult but essential truth.
Love builds families. Standards build enterprises. When trust is not reinforced by structure, even well-intentioned appointments can weaken the organization over time. Whether you are still appointing—or already managing the consequences—the path forward is the same:
Institutionalize standards. Empower the board. Measure what matters. And separate family belonging from executive accountability.
Because in the end, the market does not evaluate family harmony. It evaluates performance.
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Prof. Enrique M. Soriano will further explore board-level accountability and governance standards in his upcoming webinar, “Director Duties: What It Means in Practice in Family Enterprises,” on March 4 at 10 a.m. By Invitation Only
He will also continue examining next-generation leadership and governance themes in his Governance Masterclass at Vivere Hotel, Alabang, on March 28, 2026. For reservations, please contact Christine at +63 917 324 7216.