“Don’t handicap your children by making their lives easy.”
– Robert A. Heinlein

“We can really respect a man only if he doesn’t always look out for himself.”
– Johann Wolfgang von Goethe

One of the most challenging issues for family owned businesses has to do with the succession of a son or daughter as the leader of the company. The American dream of starting a business, building it into a thriving enterprise and passing the mantle of leadership down to the next generation is strongly ingrained in our culture. In fact, we almost assume that Junior will take over when Senior retires. After all, who better to carry on the founder’s vision and business philosophy than the first-born child?

While it makes sense for some business owners to hand over the reins to their children when they retire, it should not be a foregone conclusion. Especially in today’s volatile marketplace, business owners must entrust the future of the family business to the person best qualified to run it. That person may not be the owner’s son or daughter. However, this painful reality may be obvious to everyone in the organization except the owner.

We recently worked with a client, Richard Sr., who is the founder of a very successful investment company. He is known as a man of integrity who treats people with respect and cares about his staff and clients. While he has been strongly driven to sell – and what business isn’t – he has never been known to put sales above integrity.

Richard Sr. has worked hard over many years to build the business. He and his wife live in the modest house where they raised their kids. They now take frequent vacations in their free time, but they still live quite frugally. In fact, Richard told me recently that during his last vacation he had a choice between a $300-a-night hotel and a room at an $80-a-night budget motel chain. He chose the $80 room. “It’s not that I can’t afford it,” he explained, “but why should I spend that much money for a room for the night?”

As a result of his hard work and thrifty lifestyle, Richard Sr. is quite wealthy and does not need to work anymore for a living. He plans to turn the family business over to his son, Richard Jr., when he retires in a few years.

Richard Jr., is known as a cocky, brash and arrogant young man who’s always pushing for new sales. When he doesn’t get what he wants, he tends to treat people dismissively. He has a reputation for not caring very much for people unless they can do something for him. He spends as much time as he can playing golf and pursuing other hobbies. He lives in a large house and tries to demonstrate his wealth and power wherever he can. People who know his family say that his children are also arrogant and constantly try to show off their wealth. In short, Richard Jr. doesn’t embrace his father’s values in either his business or his personal life.

As Richard Sr. thinks about his coming retirement, what should he expect if he turns the business over to Richard Jr.? The staff of the organization already knows that Richard Jr. doesn’t care about them, so they’re not going to be loyal to him. The company’s long-term clients, who are used to being treated with respect and courtesy, won’t take long to figure out that Richard Jr. doesn’t care about them or their needs. They’ll look for another investment company. The business will begin to erode and by the time Richard Jr. realizes it, it will be too late; and even if it weren’t, he would not have developed the skills and talents to turn it around.

Choosing a successor to lead the business you started is one of the most important decisions you will ever make. Treating the mantle of leadership as your child’s birthright may seal the doom of the company you’ve worked so hard to build. Take a step back and approach the choice of your successor just as you would any other hiring decision. Evaluate your son or daughter as you would evaluate any candidate for a key position and ask yourself whether he/she has the skills, capabilities and emotional intelligence the job requires. If you’re not sure you can answer that question honestly – and it’s difficult for many parents – consider working with a trusted consultant who can help you separate reality from the American dream.