Why Did You Really Join the Family Business?

Why Did You Really Join the Family Business?

When it comes to succession, it’s usually a senior leader who initiates and spearheads the transition process. In a previous blog (Succession Planning: Why It Matters, Matters), we explored how important it is for that leader to have a strong and focused rationale for succession. But successors’ rationale matters, too. So why do next generation family members really join a family business? And is the performance of a family member affected by the motivating factors that prompt him or her to pursue a career in the family business?

According to the Family Firm Institute1, there are four different types of motivators or bases for commitment for successors:

  1. Affective Commitment – The desire of an individual to make a contribution to the business. In other words, this form of commitment is based on want.
  2. Normative Commitment – A sense of knowing what has to be done. This form of commitment is based on obligation.
  3. Cost Avoidance Commitment – A feeling that not joining the family business will mean significant losses. This is often a commitment based on protecting assets or inheritance.
  4. Cost Dependence Commitment – Derived from an individual’s perception of limited career opportunities outside the family enterprise. This form of commitment is based on need.

Affective or desire-based commitment occurs when a family member’s career interests are strongly aligned with the business.  These individuals are motivated by a desire to contribute, are confident in their abilities, and are typically high performers.

Normative or obligation-based commitment often comes as a result of family expectations being imposed. For example, when families expect (or worse, designate) an adult child to take over the business, he or she begins to feel the pressure.  What’s important to note, however, is that while these individuals may first join out of a sense of obligation, once in the business, their performance may be quite high.

Not surprisingly, those who join the family business due to avoidance or dependence tend to perform poorly.  Four different factors may underlie the cost avoidance or cost dependence forms of commitment:

  • A perception that there’s too much to lose, or the costs of not getting involved are too high
  • Limited exposure to alternate career paths
  • A general feeling of lack of marketable skills leading to a lack of confidence or fear of failure
  • Situations where individuals’ lives revolve too tightly around their respective families

The reasons family members join a family business can vary significantly. The lesson here is that senior leaders and next generation members do themselves and the business a favor when they examine the reasons why they may be drawn to the family enterprise.

1FFI Global Education Network:  Myths, Realities and Trends in the Field of Family Enterprise. Excerpted with permission from The Family Firm Institute.