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Ruling Roulette

Are you gambling with the future of your company? Why staff rotation is risky business

In volleyball, every person on the team has a chance to play the net, serve and assist. People are continuously rotating so no one dominates any position. Players learn to work together as a team.

Does the volleyball rotation analogy make sense for the leadership of family businesses? Does it promote teamwork to change leaders every few years? Does it pay tribute to brothers and sisters, cousins, even husband and wife--all of whom are valuable to the success of the family firm--to give them a shot at being president?

Absolutely not, say the experts. "It makes as much sense as taking your 12-piece place setting and dividing it equally among four children in a family so that each gets three settings," says Peter H. Calfee, a CPA and partner in the Cleveland consulting firm Family Business Advisory Partners Inc.

For the most part, when the head of a family business suggests a rotating leadership among the children, he or she is falling down on the job--abdicating the business responsibility of grooming and selecting the most skilled successor for the company. "It's a bad way of solving a family problem," says Calfee. "These parents think by tapping just one person as successor, they're saying to the other children, `I don't love or respect you as much as I do your sibling.' "

And nowadays second-, third- and fourth-generation family businesses are not as vertically organized as they were in the founder's day, when all power emanated from the top. "Today, there's more sensitivity to the differences and unique skills of each family member," says Sherrod D. Morehead, a clinical psychologist and Calfee's partner in Family Business Advisory Partners.

Because one relative may be good at human relations, another a terrific engineer, while still another is a marketing genius, asking them to rotate the presidency of the business means you're putting someone who's awfully good at one thing into a position he or she may not be qualified for. This person then struggles to do the job effectively while his or her real talents are needlessly wasted.

It's far kinder to acknowledge the skill sets each member of the upcoming generation brings to the business and then empower the right people by putting them in the right positions. "That, unlike a rotating presidency, says `I respect and admire what you do and how you can contribute to the firm,' " contends Morehead. It also allows for a more valid selection process. "The eldest doesn't always have to be heir to the presidency, nor does the successor have to be male," Morehead adds.

The risks to the company of a rotating presidency increase if each of the people involved wants to build his or her own team and proceed with his or her own vision, says Paul Karofsky, executive director of Northeastern University's Center for Family Business in Dedham, Massachusetts. "Each winds up vying for authority and ultimate control." This not only confuses suppliers, customers and employees, but may eventually undermine the entire business.


Patricia Schiff Estess writes family business histories and is the author of two books: Managing Alternative Work Arrangements (Crisp Publishing) and Money Advice for Your Successful Remarriage (Betterway Press).

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This article was originally published in the August 1999 print edition of Entrepreneur with the headline: Ruling Roulette.

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