Recently Rupert Murdoch’s biographer, Michael Wolff, claimed that Peter Chernin, the COO of News Corporation had described Rupert Murdoch’s three children, who have held senior positions within the News Corporation business, as ‘cretins’. If this is true, he wouldn’t be the first executive of a family business to think that the owner’s children had been promoted beyond their level of competence simply on the basis of their surname.
Indeed the old adage that the first generation make it, the second maintain it and the third lose it, reflects the ultimate price that family businesses too often pay for nepotism. While no business owner would deliberately employ family members knowing they will eventually run down the business, many family businesses do have ‘providing careers for family members’ as one of their acknowledged basic functions. When it’s your own money at stake you can legitimately have objectives other than maximising profit and return on investment. (When you’re playing with other peoples’ money non-commercial objectives are not so easy to justify.)
Being a member of a business-owning family and being employed in the business can be a doubleedged sword. Rather than having an easy ride, complete with executive office, business class travel, BMW and Wednesday’s – off-for-golf, children of owners often complain that other staff members treat them as silver-spooners who don’t deserve their position, shun them as spies for the boss, try to insinuate themselves in order to further their own careers, and/or lobby the children in relation to their own grievances. While we all know that CEOs find it’s lonely at the top, in a family business, the children of the CEO find that it’s even lonely at the bottom.
Most of these children say they feel they have to work harder and be smarter than another employee in the same position in order to live down the silver-spoon stigma. They also have to become used to being constantly in the shadow of their parent (or grandparent or uncle/aunt), knowing they will be forever compared. The benchmark is always set by the one who gets there first, and it’s not just about ability – it’s also about management style and culture. The ‘right’ culture generally is the one that employees have lived with since they joined the business – the one they are used to.
Often in family businesses, the parent will have established a family atmosphere, will have spoken to each employee every day and assumed a parental relationship with them. This is very difficult for the next generation to emulate, especially those that come in at the bottom, being younger than most of the employees. It’s especially difficult for those that haven’t inherited the ‘people person’ gene from their parent. They are unlikely to ever reach the parent’s benchmark in terms of culture and management style and their eventual succession will almost inevitably be a rocky transition as a result of the failure to maintain relationships with employees and other key stakeholders. If they can’t match the leadership style then they had better surpass the parent in ability if they are to win respect.
Often the succession plan will necessitate that children be fast tracked to management positions and will set out a development program which requires more study, more mentoring and more commitment. To promote a family member above his/her peers without these demands will stir discontent with other staff who will see as undeserved promotion, favouritism – nepotism. Other employees will become resentful and disrespectful and look for ways to undermine the child’s authority. This is an unenviable position in which to put a family member – instead of having staff support they will have a constant battle against people who are trying to bring them down. A sure-fire recipe for succession failure.
No one would want to put their child through the ordeal of failure – of being the one to lose the ‘family farm’. You do your children no favours by putting them in positions where they can’t succeed, where they may have to suffer the emotional and financial stress of failure and even personal ridicule. So, while ‘providing careers for family members’ may be a legitimate objective for a family business, promoting them to positions for which they are unprepared, unskilled and unsuited is bad for the business, the family and the person concerned.
I’ve seen children rise through the family business to succeed parents as naturally as cream rises to the top. I’ve seen others with talent leave the business as a result of conflicts with family members and staff. I’ve also seen children who have ‘stuck it out’, put up with the grudges of other staff and the unattainable expectations of their parents, envious of more successful siblings but unable to bring themselves to leave. (When all your working life has been in the family business it can seem oppressive and claustrophobic but the outside world can appear to be a very alien, scary place for which you are ill prepared).
For the children of family business owners, as well as the owners and the business itself, nepotism does no-one any favours – a lesson that even owners of large businesses need to keep learning.