To or Not to On board heir into family business NOW!.

Every family business owners goes through this tough decision. Whether to on board the progeny into the family business or let her pick knuckled hard outside and join later is a tough call.  The decision to bring in the successor is contingent upon factors including education, scale of business, incumbent qualified professionals, maturity of the business, and alignment of dreams and commitment.  Wherever the educational background is directly relevant to the existing business and the heir could comprehend the nuances of the business and contribute on boarding could be useful, more so if the heir is going to manage and direct line roles.  If the educational background is unrelated and the heir can manage staff roles the decision would be contingent on other factors. A ward with prior industry experience, exposed to the intricacies of how business work may perform well even if she has no family business related industry experience. Scale and maturity of the organization play also play a crucial role in the decision to on board. Early stage growth firm may find on boarding a ward beneficial if she can own and independently drive some key initiatives and functions. Having a trusted family member to share the responsibilities and pace up growth can work if the outcome ownership and governance are well defined.  If the family business maturity in terms of process and resources is low, an experienced heir can come handy, while a freshly minted heir may add to inefficiencies if expectations are not matched early during induction and constantly reinforced.   Incumbent professionals in terms of bench strength and commitment also impact whether you could on board your ward and set her to win.

Amongst all the factors impacting the decision to whether to on board or not, two important ones have a huge impact. These are alignment of dreams across generations and commitment of the ward. Wherever the dreams of the heir are well etched out and in tune with the previous generation, the on boarding may yield better results. If the dreams are not completely aligned in the long run, but the immersion may leads to merging of the dreams succession may end fruitful if industry and markets remains attractive and the heir drives more value creating engines. Finally, what matters is the commitment of the ward. Does he join the business out of desire or obligation or opportunism determines the commitment and likely outcome of the directions. When the heir join out of interest and passion to the business, and have goal fueled by many enchanting discussions about family business at family dinner table, on boarding prove to be beneficial. If the progeny joins the family business out of obligation, the low commitment can hurt the family business if they are caught at the cusp of growth or market changes.  Investing in professional managers to run the business can mitigate the potential risk when heirs join due to obligation.  Whenever the heir joins due to opportunism (lack of other alternatives or the family business experience equips him with better capabilities), such an on boarding is due to opportunism. Such an arrangement can work when results are passable and market benevolent. Summing up, whether to on board or not a heir depends upon:

  • Ward wants to join because of desire or obligation or opportunism
  • Ward has related industry prior experience or wants to learn on the job
  • Has Education is related to you business, or unrelated to your business
  • Scale and maturity of the company
  • Emergent Economic and business opportunities
  • Number of qualified professionals
  • Alignment of dreams and actions

Dr TR Madan Mohan

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