Should you choose one family member to be in charge of the family business?

Business Leader Post, February 26, 2014

Thomas D. Davidow, Ed.D.

The traditional model for business is to have one CEO or one person in charge. Family businesses are rarely described as traditional, so why should they follow a traditional business model? I suggest that overlaying a traditional model, or, as one might say, choosing an organizational model and overlaying it onto the family business, is running the risk of putting a square peg in a round hole. The organizational model has to come from the inside out. Each family is different, and the relationships between and among the family members have to be taken into account prior to creating the management succession plan for the next generation.

For example, when you have two or more siblings in the next generation, choosing one sibling over the other(s) is usually a recipe for disaster. By definition, family members are equal—giving one sibling authority over another creates an inherent conflict. The other side of the coin is that when you create Co-CEOs, the siblings must have a powerful commitment to their relationship as siblings as well as the ability to communicate effectively with one another about issues that can easily create disagreements and conflict. It has been my experience that titles are not as important as the quality of communication and the strength of commitment to relationships. Most family business members gravitate to their areas of interest and or expertise and are willing to let other siblings and/or family members make decisions within those areas.

There is frequently an implicit understanding that important decisions may come up which will require that family members make decisions jointly, regardless of title. Problems arise when there is a misunderstanding about what decisions require one member to make them, versus all family members. I suggest that the family members/siblings sit down and discuss what decisions they can make independently; what decisions they can make independently, but need to inform others; and what decisions require mutual authority. The issues of authority and titles can then become moot.