It used to be the case (and in many cases still is) that family businesses were staffed and managed almost exclusively by family members.
It was often seen as the individual's birthright that upon leaving education, there would be a place for them in the management of the family business, whether or not they actually added value to the business. In many cases, underperforming or freeloading family members were a massive drain on an otherwise perfectly viable business.
I have seen a general trend amongst the family business owners I advise (and those I don't) towards operating as a meritocracy. Those wanting to work within the business must prove their worth, and that they are the best person for the job, regardless of their surname.
The Falder family (the family behind fourth-generation family business HMG Paints) is an example of a family business who believe that only those worthy of the position should work in the business; they also don't believe in a direct route to management for family members, requiring them to prove themselves in their chosen field first.
Although currently run by brothers John and Stephen as joint Managing Directors, only two of their combined five children now work in the business, and they have had to prove their drive and ability to take the business into the next generation.
Although ownership of the business will undoubtedly remain firmly within the Falder family, they seem to be assuring themselves the brightest of futures by operating as a true meritocracy.
The business has got to be a meritocracy and the next generation coming through have got to be good enough