Developing Leadership Talent in Family Businesses: Embracing Risk or Playing It Safe

Abstract

On-the-job experiences are emphasized as powerful developers of leadership talent in leadership and family business literature. Our qualitative study of 37 family business leaders from mid-market privately held family firms found that it is not just having experiences but the nature of those experiences that determines whether or not authentic leadership talent is actually developed, particularly in next-generation family enterprise leaders. The “family effect,” the extent to which actors in a family firm embrace risk in the development of next-generation leaders, is identified as central to the development of leadership competencies. We propose a conceptual framework with four factors that promote and four factors that impede the development of leadership talent in family enterprises. Early leadership learning experiences, emotional and social intelligence, job assignments with real responsibility and accountability, and personal reflection promote the development of authentic leadership talent in family firms. Obligatory or entitled motivations for joining the family business, being shielded from risk and/or the consequences of failure, a family business environment characterized by unresolved conflict, and being promoted to positions without necessary qualifications impede the development of leadership talent, and are associated with family business leaders who are likely to hold what we have labeled “pseudo leadership positions.”