Merit System: Selecting Business Leaders Based on Competence

The “business first” principle—or prioritizing the company’s interests—must be the top priority. This means that strategic positions must be filled by individuals with genuine competence, not merely based on personal connections or status. This article discusses how a* merit *system helps family businesses identify leaders who truly understand the intricacies of business issues and risks.

The Essence of Mastering Issues from A to Z

One key aspect to consider in a leader of a family business is the depth of their understanding of the company’s operations. Additionally, it’s crucial to recognize the importance of mapping cause-and-effect relationships. Leaders must understand that failing to take a certain action will result in specific risks. Conversely, if a step is taken, they must be prepared to manage the consequences that follow. This analytical ability ensures that the business is not run based on mere speculation, but on measurable calculations.

Building Credibility and Respect

The title of director or manager may be granted administratively, but respect from team members must be earned through tangible evidence in the field.

One hallmark of a leader’s credibility can also be seen in their communication style. Typically, leaders in family-owned businesses speak based on a genuine understanding of real-world issues, rather than simply issuing unfounded orders merely because they are the owner or a family member. A leader’s authority may gradually erode if instructions are based solely on their status as the “owner’s child” or personal connections.

When it comes to business, business comes first. “Business first” means you must have a good leader. A good leader must be backed by a sound merit system.^1^

David Bingei, Fidelitas Advisors

Prioritizing a merit-based system is a strategic step toward ensuring the organization’s long-term health. By selecting leaders who possess a strong grasp of the issues and the ability to manage risks, the company not only gains effective leadership but also earns genuine respect from every member of the organization.