Merit or Inherit: How to Approach Succession in a Family Business – HBR.org Daily

by | Sep 12, 2022 | Business

One of the most critical questions facing family businesses is how to treat the next generation. They are clearly different from other employees, as current or potential owners of the company, whose wealth and reputation are on the line. On the flip side, most parents rightfully worry that providing too many unearned advantages undermines not only the next generation’s work ethic, but the soul of the company. In answering this question, families often default to one extreme or another: giving the next generation special treatment that doesn’t hold them accountable to the same standards as other employees (the “inherit model”) or requiring them to earn everything they get (the “merit model”). This article describes a path that blends elements of both, and which is far more likely to set family members up to succeed.

“Some people are born on third base and go through life thinking they hit a triple.” This quote, often attributed to NFL football coach Barry Switzer, perfectly captures what many people think about family businesses. Family members are given jobs, promotions, and salaries that they would never have achieved without their name being on the front door. As one non-family executive put it, “He’s the COO of the company — the child of the owner.”
One of the most critical questions facing family businesses is how to treat the next generation. They are clearly different from other employees, as current or potential owners of the company, whose wea …

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