How can the
prince of an absolute monarch survive and inherit the throne? How can the child
of a family business founder take over the business? Two different questions
with the same answer: Don’t be too ambitious, and don’t be too capable. This
sounds like a bleak story, so I should explain the research behind it.
The theory
and evidence are found in a recent article in Administrative Science Quarterlyby Xu Huang, Louis Chen, Erica Xu, Feifei Lu, and Ka-Chai Tam. They look at the
problematic situation that parents and successors of family businesses find
themselves in. Family business founders believe that success comes from exactly
their actions and values, so successors should imitate them exactly. Yet
imitating them too closely creates competition, which encourages the parent to
dominate the child instead of giving the successor freedom.
How can
this domination be avoided? The answer is simple and discouraging. The
successor should not be too ambitious or too capable, because these attributes
would increase the competition and lead to dominance by the founder. In fact,
highly ambitious and capable children will be dominated by the family business
founder because they are too good, just as unambitious and incapable children
will be dominated because they are not good enough.
The
research team found evidence for this through surveys of family business
founders and successors in China. But they went further than that: One part of
their study looked at how princes of Chinese monarchies before 1000 AD fared, finding that those who were not
too ambitious and capable had the best chance of succeeding the king. Of
course, not succeeding an absolute monarch is a little worse than not taking
over a family business – those who failed might be killed by their father and
replaced by a more amenable prince.
So in some
ways the world has improved, because the price of being too capable is no
longer death. But this research still does not deliver good news. Family
businesses are very important in most parts of the world. If only the
moderately capable successors gain freedom, these firms will not become as
successful as they might, to the cost of the family, the employees, and
society. Strictly speaking this effect has been shown for only the founder
generation of family businesses, and we could hope that it disappears in the
second or third generation.
Family
businesses are complicated because they mix family and business, which are
usually kept apart in modern society. In the ancient world family and business were
the same thing, and I can’t help wondering whether that meant they had better
mechanisms for dealing with the mix than we do now.
