Generations

Resilience highlights a strong family culture

Highlights magazine, revered by young readers and their parents since its founding nearly 75 years ago, presents educational content in format so subtle that children don’t even notice they’re learning. Seeking out images in a “Hidden Pictures” puzzle or pondering the behavior of recurring characters Goofus and Gallant just seems like entertainment.

Today Highlights is published all over the world, in print and digitally, in addition to Hello, for children under the age of 2, and High Five, for those between 2 and 6. However, the magazine wasn’t always successful. There were a couple of false starts in the early days — times when the company struggled financially and even faced a family tragedy that would have ended a lesser business.

In 1960, Highlights for Children Inc. founders Garry and Caroline Myers were in their 70s and transitioning leadership to their son and daughter-in-law, Garry Jr. and Mary.

On a December morning that year, Garry Jr., Mary and non-family vice president Cyril Ewart were traveling from Ohio to New York for a business meeting when their plane collided with another over Staten Island. There were no survivors from either flight.

With that, a family was leveled. The company could have faced the same fate.

Instead, says Pat Mikelson, one of Garry and Mary’s five children, the family rallied. She and her siblings moved in with an uncle in Texas, and Garry Sr. and Caroline began transition plans anew.

“My grandparents would simply not let go. They literally drove [the company],” says Mikelson, the family and company historian and archivist. At that time, she says, an aunt, an uncle and two of her cousins joined the board of directors and the editorial office. “They just carried on forward.”

Once new executives were put in place, Garry Sr. and Caroline were reassured the company’s future was in good hands and the business turned attention back to a growing marketplace.

Though the crash occurred nine years before he was born, current family CEO Kent Johnson Jr. says the family and the company are still affected by the deaths — and so is he.

“The leader who took on rebuilding the team managed the company and moved forward,” says Johnson, the founders’ great-grandson. “I think the family’s commitment was only made deeper by that tragedy. My sense of resilience and optimism is that no matter what happens, we can get through it — this can’t be as tough as what they had to do in 1960.”

From the classroom to the printing press

Read more about Highlights

The Mission

'Power of the Place'

Garry Myers Sr. and Caroline Clark married in 1912. They met at Ursinus College, where both trained to help children, Garry as a child psychologist and Caroline as a teacher. Together they advocated for child development, writing and lecturing on the subject and training other teachers while working for a magazine called Children’s Activities.

By 1946, they wanted to take their educational point of view and aesthetic to the masses. They left Children’s Activities (which their business would eventually acquire) to start their own publication, Highlights for Children. They declared at the time that “children are the world’s most important people.” Highlights’ early content included the “Hidden Pictures” puzzle along with other features, stories and illustrations.

Just three years later, they ran out of money but found people willing to lend them funds to stay afloat.

“They were able, over the next five or six years, to find some marketing techniques to really help them succeed,” says Mikelson. She says the techniques included hitting the streets, selling door to door and getting the product into people’s hands to build interest.

That’s why so many Highlights (“for Children” was dropped from the magazine title years ago) readers have fond memories of paging through the magazine in the doctor’s or dentist’s waiting room. Winning over a captive audience helped put the company on the map.

Garry Jr. took sample issues to medical offices where children — and, more importantly, mothers — would congregate.

The magazines contained cards that mothers could send in to order subscriptions for their kids. “There was a time when we were in virtually every doctor’s waiting room in the country,” says Christine French Cully, the current non-family editor-in-chief. “It was a nice place to build awareness.”

She says the classic marketing strategy continues. In fact, it has expanded. Highlights can now also be found in car repair shops and hair salons.

Cully isn’t the first non-family member to serve as editor-in-chief. The 1960 plane crash necessitated a new plan for editorial succession. Walter Barbe was hired as an editor to replace the late Garry Jr. Barbe became editor-in-chief in 1971, after Garry Sr. died at his desk.

Third-generation member Kent Brown Jr. came in as an editorial assistant in 1971 and worked his way through the ranks, mentored by Barbe. When Barbe retired in 1989, Brown took the top job. He ran the editorial side and served as publisher of another Highlights division, Boyds Mill Press, founded in 1990 to specialize in trade books for children.

In 1991, Highlights for Children Inc. acquired Staff Development for Educators, now a sister company, which provides continuing education for teachers. Stenhouse Publishing, established in 1993, produces research-driven professional development books for educators.

In 1984, Kent Brown established the Highlights Foundation, a 501(c)(3), to support children’s authors and illustrators around the world through retreats, seminars and workshops, most on-site at the family homestead in Boyds Mills, Pa. When Brown retired from the magazine in 2007, the foundation became his sole focus.

On the business side, an interim president was installed for 18 months after the plane crash. In 1962 non-family vice president of representative sales Dick Bell was promoted to president and then CEO when the position was created in 1980. When Bell moved into the role of chairman of the board in 1981, Garry Myers III became CEO.

Garry III joined the company in 1965 as a mail analyst with an MBA and worked his way up to the C-suite. Before his untimely death in 2005, he had groomed Johnson to become CEO. When Johnson took the reins, it marked the transition to the family’s fourth generation.

A household name
A year after Johnson got the top job, Highlights printed its billionth copy and hand-delivered it to a young girl in Dallas. The milestone coincided with the magazine’s 60th anniversary.

And while there are more than a million subscribers worldwide and the magazine is translated into about two dozen languages, Johnson knows the internet has irreversibly changed the publishing industry and Highlights must adapt to thrive.

Johnson’s entry to the business was as a board member. He learned a lot there, he says.

“My experience on the board allowed me to see the company was far more diversified and complex than I realized and to know so much change and disruption was coming — change in tech, customer behavior, education,” he says. “We work very hard to evolve our culture around innovation, trying to look at changing tech not from a lens of fear, but a lens of opportunities.”

He says one of those opportunities is to help kids outside the U.S. learn English through digital platforms. The company is also developing a digital library. Johnson believes that through technology, Highlights can “reach hundreds of millions.”

“As a company, we see our brand has a lot of love and heritage in the country. [People] see us as a magazine company, but I’m also excited about the rate of growth in retail, growing even more rapidly in the global market,” Johnson says.

Growing a fourth-generation family publishing company as CEO seemed unlikely for Johnson less than 20 years ago.

Originally a high school physics teacher, Johnson returned to school to get his Ph.D. in physics. He went to a medical diagnostics company to work in research and development. As the company grew, he moved to product development, manufacturing and some customer service.

“At one point, Garry III said to me something like, ‘You are no longer purely a science guy, you have become a business guy, so you can’t use science as an excuse and you should consider the possibility of working at Highlights.’”

The two men discussed possibilities for about a year before Johnson settled into the role of VP of strategic planning in July 2004, the role he held before becoming CEO.

Johnson’s cousin George Brown, son of former editor-in-chief Kent Brown Jr., always wanted to work for the company.

“I’m a Highlights kid through and through,” says Brown, now executive director of the Highlights Foundation. “My father worked at Highlights when I was a kid, and I distinctly remember being 8 years old and hanging out in his office thinking, ‘Wow, this is cool. I want to be a part of this.’”

Brown started at Staff Development for Educators before moving to Highlights. There he worked in editorial, product development and publishing technologies. He joined the foundation in 2016 and became executive director in 2018.

Aside from George Brown and Johnson, few members of the owners group work in the business, which is why current CEO transition discussions are leaning toward a non-family executive in the not-so-near future. (Johnson is in his 40s and has no plans to leave Highlights any time soon.)

Focus on governance
The family always saw governance as an important tool and over the years has applied best practices at the board level. The business had a board early on, but it was made up of family. Mikelson joined the board as a family director in 1990.

The first independent director joined the board in 1993. Networking with other family businesses and learning best practices through family business conferences and consultants inspired the family to add more.

“By 2000 we had two or three outside directors, and very quickly we realized the tremendous benefit of outside board directors,” Mikelson says. The board is now majority independent.

“We really had no concern about having control,” Johnson says, noting that as the owners, the family elects the board members and exhibits control in that way. The relatively small size of the seven-member board helps keep boardroom conversation “more strategic,” he says.

“I think also that as we really looked for strong outside board directors, we got people with tremendous expertise who were able to ask the questions and raise issues from a different perspective, with some challenges to make management and family directors really think about things differently,” Mikelson adds.

Mikelson says board service is one way the family transitions leadership from generation to generation. Fourth-generation members now hold all three family board seats.

The board and family were united in the summer of 2019 when Highlights took a rare stand on a political controversy. In a letter signed by Johnson and disseminated over social media, the company condemned the separation of undocumented migrant families at the U.S. border. In part, the statement read:

“This is not a political statement about immigration policy. This is a statement about human decency, plain and simple. This is a plea for recognition that these are not simply the children of strangers for whom others are accountable. This is an appeal to elevate the inalienable right of all children to feel safe and to have the opportunity to become their best selves.”

Johnson said at the time that business leaders rewrote and edited based on how the draft statement sounded, how it “felt.” They ran the finished statement through a couple of departments that included human resources and strategy. Several family members outside the business were consulted, but the decision wasn’t put through formal governance channels, nor were all 108 family members notified.

The statement was in line with the family values and Highlights’ mission, Johnson said then. “We talk a lot about being a mission-driven company. We have active conversations about our vision and how we help children around the world. Our mission is trying to help children become their best selves, to help them be caring, creative, curious and confident.”

Johnson says he received no negative feedback from any owners.

There’s a power to the belief that “children are the world’s most important people.” Mikelson says she can see that in the founding of the company through today.

“Within our family, we 100% have a commitment in taking our philosophy to children however we can get to them.
“It leaves us kind of fearless.”                                   

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Golub & Company works toward a magnificent transition

How do you explain the family real estate business to young children? The Golub family has used the board game Monopoly to help illustrate basic real estate concepts and strategy — and to introduce fun and friendly competition.

The family, which owns and operates Golub & Company, an international real estate development and investment firm based in Chicago, has not always been so strategic about preparing the next generation for the business. After a smooth but casual transition from the first generation to the second 20 years ago, the family now has active and significant participation from third-generation members and is laying the groundwork for an eventual transition to the third generation.

Gene Golub, now 88, and his original partner founded the firm in 1960, when they were both 30 years old. In a business that depends heavily on developing long-term, trusting relationships, they made their first connections with the help of a neighbor, an attorney who worked with developers.

Then they got their first loan with a handshake from a banker who liked both the partners and the property they had found on Lake Shore Drive.

“From then on, he was our banker,” Gene says. From there, they were able to successfully develop high-rise residential and office buildings.

In 1982, sensing that his family would be interested in continuing the business, Gene bought out his partner, and the firm became Golub & Company.

The company grew and became an international real estate presence. Golub and its affiliates have developed, owned, leased or managed more than 50 million square feet of commercial and residential mixed-use properties. Golub currently has about $4 billion of assets under management and is developing projects from West Palm Beach, Fla., to San Francisco — as well as in Central Europe.

Still, its roots are in Chicago. That’s where its corporate office, with about 50 employees, is located. (The company usually employs between 80 and 110 people worldwide, depending on which projects are active.) The firm has owned and managed properties in Chicago’s premier commercial district, the Magnificent Mile, throughout its history.

In 2007, Golub & Co. led the acquisition of Chicago’s John Hancock Building, and in 2016, Golub and partners acquired the Tribune Tower. The firm is working on a development plan that will enhance the existing building and add a mixed-use high-rise tower.

Eight family members work in the business. Gene is chairman and founder. Three members of the second generation run the company: Gene’s son-in-law Michael Newman, 63, principal, president & CEO; his son, Lee Golub, 57, principal and executive vice president; and his daughter Paula Harris, 63, principal and senior vice president.

Four third-generation members have joined the company in recent years: Harris’s daughter Samantha Patinkin, 33, human resources manager; Michael Newman’s son Alex Newman, 33, asset manager; Michael Newman’s daughter Laura Newman, 30, associate; and Joshua Patinkin, 34, Harris’s son-in-law and vice president of capital resources.

The three second-generation principals own the company, with none holding a majority of the ownership. (Ownership of the company’s assets is more complex, since it also involves partners for each project.)

The company’s governance remains fairly casual.

“For crucial decisions, Lee, Paula and I collaborate,” Michael says. “We’ve been doing this together for 30 years, so we don’t need a formal structure for that.”

They are aided by a board of directors that consists of four family members — Gene and the three second-generation members — as well as three independent directors: Lloyd Shefsky, a consultant and a retired professor at the Kellogg School of Management; John McClure, a former executive with the Northern Trust Co. who has worked with many multigenerational family businesses; and Robert Langer, a retired Ernst & Young partner who headed the real estate practice in the Chicago area. Third-generation members have recently started to attend and participate in the discussions.

A smooth succession
The transition from the first generation to the second happened organically.

Paula was the first family member to work at the business, as a part-time worker during high school.
“I started out checking serial numbers in refrigerators and measuring the amount of linear cracking in a development we had just purchased. Not a very glamorous job, by any stretch,” Paula says.

She joined the business full-time after graduating from college as a closing coordinator for condominium sales, then left for a few years after having her first child in 1985.

Around that time, her brother-in-law and brother joined the company. Michael came to Golub as a financial analyst after having worked as a CPA in a public accounting firm, as well as for a real estate finance company.

It took some time for Michael and Lee, who joined as a commercial leasing broker, to find their place among more experienced employees. “There was no planning or discussion around integrating family, business and all team members,” Michael says. As the working family members gained experience and started producing at a high level, they recruited new employees to join the team. The employees soon realized that having a forward-thinking new generation of family members interested in growing the business was good news for everyone, since it meant the business would continue. 

“In those years that we were working together, we just grew together and learned to work together,” Paula says. “A lot of it was unspoken. My father didn’t know this was going to be a family business — it just kind of happened. He was simply showing us what he knew.”

After gradually handing over day-to-day leadership of the company to the second generation, the family engaged Shefsky as their family counselor to guide them through the process of making the arrangement more formal.
Gene “wasn’t ready to step away completely, so we had to come up with an approach that gave him a purpose,” Shefsky says. “There’s a lot of love in the family, and a lot of respect also.”

The transition “worked pretty easily,” Shefsky says. “By the time it worked in a formal sense, the second generation was already running the company.”

“I realized that when you turn it over, you’ve got to turn it over,” Gene says. “I was very fortunate. My kids are great, they have a great work ethic, they’re smart, they’re moral, and they have done fabulously well with the business. It’s very rewarding to me to see that, especially now with the third generation coming in.”

The roles of the three second-generation members evolved from their interests and strengths. It felt natural for Michael to become president, for example.

“Michael, Lee and Paula have different personalities, but they get along great,” Gene says. “They’re smart enough to know that they’re stronger together than they are separately.”

“I watch over our culture,” Paula says, “leading our people into developing themselves and holding on to the motto of our company: We’re a family business that treats the business like a family.”

Preparing for the next transition
Although the second generation is not yet ready to hand over the reins, they are aware that the next transition poses a challenge. The business has grown so much that the third generation must be prepared to take over a much larger, more complex operation than the second generation inherited.

“We know the odds of a successful transition from the first generation to the second are a lot better than from the second to the third,” Paula says. “We really want to beat those odds.”

The family is also larger. “It’s different now than when there was just the first and second generation,” says Samantha. “Now there’s a whole generation of cousins, we have wives and husbands, there’s a lot of people.”
Although conversations about an actual transition are just beginning, the family has started laying the groundwork.

They have formalized some policies. Family members must get four years of work experience elsewhere before joining the business, for example.

They have also started making sure all family members, including the third and fourth generations, have a clear sense of what the business is. This started with the Monopoly game at the annual family gathering but also includes hands-on exposure to the business.

At one family gathering, an engineer gave the family a tour of a building’s boiler room. During the time the company owned the Hancock Building in Chicago, the family got a tour of the observatory, the roof and the crown of lights.

“They have grown up knowing the business at a level they could relate to,” Paula says of the younger generations.
Because their parents were heavily involved in the business, the third generation grew up with it.

“I was here often enough to know that there’s a hidden mailbox behind this piece of artwork in the hallway,” Samantha says. “It used to be a real working mailbox, and you can drop a letter in it and it goes all the way down to the lobby.” Samantha and her cousin Alex both interned at the company.

Still, says Samantha, “I don’t think I ever thought about working here.” She changed her mind after working for another real estate firm after college. “If I’m going to do this for another company, I might as well do it for my family company.”

The family is working on creating a family council to help strengthen communication and bonds among all family members.

It will be “a way to formalize what we have been doing as a family for a long time, meeting all together in person at least once a year to spend time with each other and discuss business-related topics,” Alex says.

Another key to making the second-to-third-generation transition a success, Shefsky says, is to have the third generation find ways to expand the company, not just learn to run it as it is. The Golub family has already found ways to do this. “They have taken advantage of the skills that this G3 group has,” Shefsky says.

Josh came to Golub with a background in finance and raising capital, and since joining the company he has worked to expand the firm’s capital-raising abilities, particularly with private investors.

Laura has moved to Denver to help establish an office there in hopes of helping the company expand geographically.

“Geographic expansion is one thing we’ve been pushing as a third generation,” says Alex. “The family is only going to be bigger, so in order to be sustainable the company has to get bigger.”

The transition to Generation 3 is “definitely in the beginning stages,” says Alex. In fact, there may eventually be more than four third-generation members working for the business. “It’s important that we’re talking about it and thinking about it, because the time will come faster than we think,” Alex says. “The four of us who work here have very different strengths. It’s an ongoing conversation.”

Community roots, future focus
Real estate is a field that is closely tied to community, and Golub family members and employees are active and involved around Chicago. The Golub Family Foundation, founded in 2006 and led by family members both inside and outside the business, makes charitable contributions to health, education and cultural organizations.

The company provides employees with paid time off to volunteer, in small groups, at local non-profits. Over the years Golub employees have collected and boxed more than 32,000 pounds of food for a local food bank and have helped distribute 24,000 books to 4,000 children with a local non-profit.

The business also focuses on creating sustainable communities in other ways. The Golub Green Initiative is an approach to reducing the environmental impact of the company’s work. It includes a wide range of activities, such as installing energy-efficient lighting in the buildings it develops and encouraging its employees to serve on sustainability committees of industry groups.

The third generation is cognizant of its ties to the company’s history. Many employees have been with the company for decades.

“We have two women in our office who have been here for 37 years, and they remember my mom walking around pregnant with me,” says Samantha.

With the past in mind, the third generation is already helping push the company in new directions.
“I think every generation has its specialty,” says Samantha. “The first generation created the business and the second generation grew the business. We want to grow it even further.”   

Margaret Steen is a freelance writer based in Los Altos, Calif.

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Generation 3 marks a monumental shift

At our Transitions Canada 2018 conference in September, attendees from second-generation businesses were eager to learn about the challenges they would confront when they transitioned to the third generation. Several were unaware of the monumental changes that occur when a company moves from a sibling partnership to a cousin consortium, a term often used to refer to a third-generation business.

Here are a few of the issues families face in their third generation of business ownership:

• The business likely has grown to the point where experienced non-family professionals and sophisticated management systems are needed. That means family leaders must get comfortable with delegating important projects and trusting non-family executives.

• The family has branched out into separate households, which may be geographically scattered. The households may differ widely in political affiliations, religious beliefs and values systems. Uniting them requires conscious effort.

• Distribution of shares across the branches is likely to be unequal if there are differences in family size. Wealth disparities among the households are also likely.

• Not all family members will be interested in joining the business, and not all family members who want to join will be qualified for jobs with the company.

• Shareholders who don’t work in the business will have liquidity needs and expectations.

• Some shareholders may want to transition out of ownership, and the business must find a way to fund the buyout of their shares.

• Family members who don’t work in the business may be poorly informed about business activities and disengaged from their business partnership with their relatives.

The exponential increase in complexity is one reason why many families decide to sell their business at this generational stage, and others consolidate ownership in one branch.

Fortunately, there is a way to manage these challenges: by shifting from informal to formal business and family governance.

An independent board of directors or advisers can help the company manage transition issues, develop a viable growth strategy and remove family emotions from business decisions.

A family council can establish family policies, clarify the family owners’ goals and expectations for their business, and plan educational and social events to inform family members about their company and develop strong family bonds.

The Golub family, featured on the cover of this issue, is planning ahead for the transition of their Chicago-based real estate firm, Golub & Company, to the third generation. The second-generation leaders recognize that the growth of both the business and the family will require a different style of leadership in the future. They have created some family policies and governance structures.

As we discussed at Transitions Canada, families who educate themselves about the challenges that lie ahead are better equipped to avoid business or family problems that often stem from those issues.

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Elder sages

This past fall, the 240 attendees at our Transitions West conference, held in Phoenix, Ariz., were treated to a spellbinding presentation by renowned winemaker Jean-Charles Boisset of the Boisset Collection. A dynamic and debonair Frenchman, Jean-Charles leads his family firm, which encompasses wineries from Burgundy (where he was born) and the South of France as well as California's Napa Valley and Russian River Valley.

Building on his love of wine and respect for his winemaking heritage, Jean-Charles instituted organic and biodynamic farming at the family's vineyards. He also has been incredibly entrepreneurial, both in France and in California.

Jean-Charles and his sister, Nathalie, spent eight years developing the family's U.S. business and then united the family's French vineyards in the Côte-de-Nuits and Côte-de-Beaune under a single estate, Domaine de la Vougeraie.

Jean-Charles, who is listed as one of the 50 most important people in the wine world, joined together with another winemaking dynasty when he married Gina Gallo, whose family was featured on the cover of Family Business Magazine's Autumn 2008 issue.

At Transitions, Jean-Charles spoke passionately about how he, at the early age of 11, developed a love of winemaking in addition to a love for California and everything American. This enthusiasm was derived from travels with his grandparents, who felt very strongly that America presented a golden opportunity for all who worked hard. They took him west and introduced him to California wines, which made such an impression on him that he vowed to return and make his mark in the Golden State. He also vowed to eventually make Buena Vista Winery, California's first premium winery, part of his collection, a feat he accomplished in 2011.

I was most impressed by Jean-Charles' wonderful and colorful delivery, as well as by the power and impact his grandparents had on his life. I began to reflect on my own grandparents. One of my grandmothers was born in 1886 in Missouri; one of my grandfathers came to this country from Germany in 1903 to work with his cousins in the grain business. Their emphasis on family, history, the arts, reading and philanthropy set a standard for me that has endured. Perhaps the fact that my grandmother was a fervent Suffragette at the turn of the century fueled my passion for publishing and influenced my decision to found a community newspaper.

Watching my own boys learn lessons from their grandfathers has been a real pleasure. My father-in-law, Milton L. Rock, who founded this magazine, instilled a feeling of optimism, integrity and a consummate work ethic in our sons. And my father, the ultimate Renaissance man, focused on a love of history, community and the arts. They both stressed the importance of a happy and successful marriage. Bob and I celebrated our 41st anniversary this past December, and we revel in the thought of our parents' heritage playing out in the next generation.

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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What capabilities does the next generation need?

Family business adviser and researcher Dennis Jaffe, Ph.D., has been working on a “100-Year Family Enterprise Project,” a study of successful business families from around the world. The study has been conducted by Wise Counsel Research, a public charity and think tank, with funding from Merrill Lynch.

In the just-completed third working paper based on his research, entitled “Releasing the Potential of the Next Generation,” Jaffe discusses how these families prepare their next-generation members. Here are the desired capabilities that their family education programs aim to develop in the rising generation:

  • Character: Ethical sensitivity
  • Competence: Financial and governance/ownership skills
  • Commitment/Caring: Stewardship; being a productive part of the family and a good partner
  • Connections/Community: Building trust, personal commitment to each other
  • Collaboration/Compromise: Ability to work together with give and take
  • Communication/Transparency: Sharing information, knowing what there is
  • Change-ability/Resilience: Ability to adapt and change
  • Curiosity/Creativity: Ability to seek out and discover novel possibilities

Back to the future

I always return from our highly successful Transitions conferences elated, energized and enlightened, but this past spring, I also came away with a renewed appreciation for the next generation. One of our panels, entitled "Leveraging the Family Brand, Legacy and Human Capital," featured, along with two other dynamic family business members, a very impressive young man named Kyle York.

While Kyle is currently the chief revenue officer at an Internet technology firm, he also is part of a 65-year-old family business based in New Hampshire, Indian Head Athletics. Kyle is one of five boys representing the third generation. All of them were raised with "a family-first attitude, closely followed by a spirit of giving back to the community," he recently wrote on his blog.

In outlining the history of the family enterprise, Kyle spoke admiringly of his parents, who built the brick-and-mortar sporting goods company. He is grateful that they did not force their sons to go into the family business. What they did encourage was education, an entrepreneurial spirit and a strong work ethic.

The five York brothers recently assessed the company's robust history and decided to reinvent and reinvigorate its legacy brand. They realized that all five of them wanted to capitalize on the values that their family and company represented: integrity, hard work, high quality and community.

Bringing together their individual talents in strategy, management, marketing, technology, e-commerce and access to influential people, the brothers garnered seed money and have moved forward in their desire to transform the family company into a new-age business that integrates technology with accessible and recognizable brands.

Kyle never really gave the company brand legacy much of a thought until he went on eBay to look for memorabilia. He and his brothers were surprised at what they found—Peggy Fleming's skates and cleats worn by Johnny Unitas and O.J. Simpson. Now Kyle's basement is adorned with items representing the history of the brand.

Inspired by Kyle's passion and energy, I eagerly anticipate what my own two sons and daughters-in-law will do. They are members of an innovative, creative and entrepreneurial generation to learn from, even if they have to explain things to us several times! Kyle's purpose in presenting at our conference was to make our audience "think deeply about how to ensure they were relevant and sustainable for the next generation." What a fantastic lesson to bring home from Family Business Magazine's Transitions conference! And good luck to those York brothers, who are well on their way.

 

 


 

 

 Copyright 2014 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Autumn 2011 Toolbox

Why clashes are inevitable—and how to resolve them

Inside the Multi-Generational Family Business:
9 Symptoms of Generational Stack-Up and How to Cure Them

By Mark T. Green

Palgrave Macmillan, 2011; 192 pp., $25

Intergenerational conflicts in family enterprises aren’t just common—they’re inevitable, notes Family Business Consulting Group principal Mark Green in his edifying new book. The underlying factors, according to Green, are discrepancies in values, mindsets, approaches and expectations among members of different generations. Baby boomers (born 1946-64), for example, tend to put off retirement, a situation that creates role confusion for their Gen X children (born 1965-80), who tend to have strong entrepreneurial leanings and yearn to take risks. Members of Generation Y (born 1981-2009) have been spared from unpleasantness by their “helicopter” parents and thus, as they enter the workforce, many feel entitled to major roles they are ill-equipped to handle.

Compounding such generational personality differences, the author notes, are demographic realities: People are living longer and retiring later. Women with children are continuing to work (or, if not, are feeling conflicted about it). The increased prevalence of divorce has resulted in more blended families.

Inside the Multi-Generational Family Business diagnoses seven common strains of a syndrome Green calls “generational stack-up,” which occurs when members of different generations work together as owners, managers, employees and/or shareholders of a family business.

Green’s text includes insights from a variety of disciplines: not only demography, family business and management, as one would expect, but also neurobiology, psychology, sociology, gender studies and more. His multidisciplinary approach adds context to the predictable but intractable family business scenarios he describes, thereby helping readers of different generations to understand each other.

Family businesses, Green writes, “resemble mini Towers of Babel in many ways…. [B]ecause each generation of family business members speaks a different language—based on discrepant values and approaches to work, money, and family—they struggle to collaborate, often clashing, until parts of the tower crumble or the whole thing tumbles.”

The book diagnoses various manifestations of stack-up and analyzes the symptoms (such as a senior-generation member who hoards all the decision-making, or a family business woman who sets unrealistic expectations of herself both at work and at home). The author suggests ways to help resolve the conflicts. “Recognizing the patterns and addressing the symptoms with the idea of making continuous improvement helps keep stack-up patterns from getting out of control,” he writes.

Each chapter includes an illustrative case study (a composite drawn from the families Green has worked with, along with a genogram to illustrate the relationships), a discussion of how and why the problems arose, a checklist to help readers determine whether their own company is affected by the symptom, and recommended ways to address it.

Green’s suggestions for addressing generational stack-up include family meetings and other mechanisms to encourage reticent family members to communicate with each other. He also urges families to plan fun activities and working mothers to schedule “me time.” Family members must take care to follow up, he stresses, to ensure that their progress is maintained.

Many family business stakeholders will recognize themselves or their relatives in the pictures Green paints. His helpful recommendations offer a way out of the circle of recurring conflict, though, as he notes, there are no quick fixes. “[U]ltimately ‘management’ of the problem is what works, not one-time solutions,” the author writes. “You have to take the long-term view.”

 

 

 

 


 

 

 

 

An adventurous approach to philanthropy

 

Are you seeking a novel way to get your next-generation members engaged in philanthropy? Maryann Fernandez, a consultant with a background in the wealth management and philanthropic arenas, offers services designed to bring fun and adventure to philanthropic efforts—and, she says, to get people “out of the boardroom and into the field.”

Her firm, Philanthropy Indaba (www.philanthropyindaba.com)—the name is a Zulu word meaning “a meeting of people from different tribes”—offers travel opportunities for high-net-worth family members seeking hands-on engagement and an in-depth exploration of the world’s most critical issues. Philanthropy Indaba provides services to a variety of families and individuals but is particularly focused on the next generation.

Fernandez, formerly vice president of family education services and senior marketing representative at Harris Private Bank in Chicago, founded Philanthropy Indaba in 2009 to help donors “sharpen the focus of their philanthropy, and strengthen the impact of their engagement.”

At press time, Philanthropy Indaba had scheduled a two-week trip to Ghana for a small group of next-generation members from ages 16 to 22. The travelers planned to make a documentary that captured the stories of Ghanaian citizens as well as the filmmakers’ own experiences and impressions. (Citing security concerns, Fernandez declined to specify the dates of the trip or identify participants.) A professional field producer/camera operator would accompany the group, but the hands-on work was to be spearheaded by the participants.

The documentary film project aimed to offer the young travelers experience in working as a team and researching the three areas to be explored in the film (the tragedy of human trafficking, the impact of mobile technology in the area and the development of innovative business initiatives, such as a fair trade cocoa cooperative). Fernandez says the hands-on filmmaking project would enable participants to immerse themselves in issues such as poverty and women’s empowerment and, at the same time, help the budding philanthropists to discover their passions and find their own voice.

“I wanted to make sure [the trip] wasn’t just a tour,” explains Fernandez. “I really wanted [participants] to be focused, and I wanted them to be seeking answers.”

Philanthropy Indaba can also develop a service or internship opportunity that’s targeted to a client’s interest, plan a philanthropic family vacation or design custom philanthropic coaching programs. It offers local, national and international travel experiences, all of which can be customized to meet a family’s needs. Fernandez says her organization “quarterbacks” the travel logistics as well as the educational and philanthropic aspects of a trip and offers access to the key people working in the field to achieve social change.

Fernandez co-founded Shaking the Tree Interactive Productions, which uses storytelling to address challenges in affluent families. She has also provided consulting services to non-profit groups and helped launch a private network of ultra-affluent philanthropists.

“What I envision,” she says, “is bringing people with different perspectives, different skill sets and different resources together to address [social-change] issues. People have been siloed up for too long.”

 

 

 

 


 

 

 

 

Planning for a smooth transition by developing future leaders

 

Who Will Drive the Bus? Guidance for Developing Leaders in the Family Enterprise

By Gerard J. Donnellan

Big Leap, 2011; 161 pp., $21.95

Family business owners should never lose sight of the future, contends author Gerard Donnellan, Ph.D., a Lexington, Mass.-based consulting psychologist and family business consultant. “If you are part of a family business,” Donnellan writes in his new book, Who Will Drive the Bus?, “you are always dealing with transition—getting through one, getting over one, preparing for one, denying one is going to happen, or wishing you did not have to deal with one.”

Donnellan’s book focuses on succession planning from a leadership development perspective. The author uses case studies (featuring fictitious families) to demonstrate the advantages of taking a long-term view—and the pitfalls that result when business families fail to do so.

“If everything is considered in light of vision and strategy,” Donnellan suggests, “there will be fewer bad moves.”

The author cautions readers to steer clear of the danger zone he refers to as “snoozetown,” a place where “genes win over merit, family members are more focused on their own interests than those of the business, conflicts go unresolved [and] there is poor communication all around.” Snoozetown, he explains, is “the place where family businesses are headed after they have had a good run (maybe several generations), after the fun has left, and after nobody really cares that much about the business. They are mostly dozing off, waiting for the check.”

Donnellan supplements his case studies with planning tools and theoretical models drawn from academic family business research. He ends each chapter with a checklist of action items and business tips. “Making the decision to act,” he advises, “is far more important than trying to get it absolutely right.”

The author discusses the role of advisers and consultants in helping family business owners work through their challenges—and offers frank comments on the matter of the consultant’s fee. “It’s a business expense,” Donnellan writes, “and should be viewed that way.” He adds, “Anything you do will cost a few bucks. Chill. It is all worth it and is much cheaper than losing the company or your family.”

Donnellan adds an interesting perspective to a common problem: family members’ entitlement attitude. A culture of privilege—where young people rise rapidly in the company regardless of merit—the author writes, can actually undermine self-esteem. “[The children] act as if what they do is of no consequence. That is exactly how they feel—they are of no consequence.”

Donnellan’s sense of humor and step-by-step approach make his advice easy to digest. To begin working on transition and leadership development, he writes, “There is only one place to start, and that’s wherever you are right now.”

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Gen Y: Engaging or enraging?

During a meeting in a family business about a pressing issue, a heated debate arose. Without saying a word, the youngest member of the group (a member of Generation Y) reached in his pocket and pulled out his Blackberry. The leader of the meeting, annoyed by this apparent lack of interest (and perceived disrespect), continued the discussion with the rest of the group for 20 minutes or so. Finally, he turned his attention to the young man, still typing away, and crossly asked him if he had something more important to do. The young man looked up at him, smiled, and said, “No sir; I’m finding you a solution.”

Obviously, generational differences were at play in that tension-filled room. The young man’s Generation Y qualities are a double-edged sword, sometimes acting to his benefit and sometimes hurting his credibility. Our intent is to help frame a mindful dialogue between Gen Y and the older generations in family businesses, as well as offer some advice to each group about integrating these young people into the workplace culture.

Who is Generation Y?

The children of Baby Boomers, Gen Yers were born in the U.S. from the late 1970s to the early 1990s. The oldest of this generation are just beginning to enter the workforce. They have high potential yet are challenging to manage. On the one hand, they are technologically savvy, great multitaskers, goal-oriented and well connected. On the other hand, they can be pushy, impatient, easily bored and overconfident.

In part, these traits are attributable to their upbringing. They have the highest education, the largest social networks and the best support system of any generation in history. Since they were young, they’ve been told that they could do anything and be anyone. They’ve had technology at their fingertips their entire lives. Bruce Tulgan, an expert on Generation Y, writes in his book Everyone Gets a Trophy that “every step of the way, Gen Yers’ parents have guided, directed, supported, coached, and protected them. Gen Yers have been respected, nurtured, scheduled, measured, discussed, diagnosed, medicated, programmed, accommodated, included, awarded, and rewarded as long as they can remember.” They are even more likely than their older siblings (Gen Xers) to believe they should be automatically given respect while their boss must earn it from them. Aroung the dinner table, this might suggest an empowered young person; around the conference table, it could suggest a less than credibile employee.

A very real issue for any generation entering the workforce is the shock of balancing the optimism and energy of youth with the realities of the world. This balance seems more difficult for Gen Yers, who are facing the toughest economy since the Great Depression, than it was for preceding generations.

Many Gen Yers express that they feel as if they are at a fork in the road, engaging in the constant internal struggle between idealist and pragmatist. They want to be successful and have monetary wealth. Yet they ultimately want to be engaged and be part of something larger. They want to do what they love. Delayed gratification is a struggle for them. They want it all, they want it soon, and they want your support in getting it.

From the perspective of a Baby Boomer or even a Gen Xer, who has had to work through the ranks with blood, sweat and tears, this can be infuriating. Gen Yers’ unrealistic expectations and sense of entitlement can leave a less than positive impression.

Challenging as this may seem, there are 75 million Gen Yers entering the workforce, and the ability to effectively harness their strengths would be advantageous for any company.

Advice for family business owners over 30

As a starting point, keep an open mind and approach your relationship with Gen Y the same way you would approach someone from a different culture. Just as one would engage with locals to better understand cultural differences when traveling, an open and honest dialogue between members of different generations is a necessary starting point. Understanding that both members stand to gain a great deal from this partnership is the first step in developing a crucial symbiotic relationship. There need not be a democracy, but there should be a dialogue. Watch for the seeds of independent and innovative thinking that can be cultivated to better serve your family business over the long run.

Though only a few years separate Gen X from Gen Y, the management styles that are most effective for each generation differ dramatically. Gen Xers are more likely to be self-starters and need less constant (positive) feedback, structure and support than Gen Yers do. Gen X is more likely to dislike authority and ignore leadership; to engage and reward this generation, a manager might give them autonomy. Gen Yers, on the other hand, may be best engaged by working alongside a mentor who has earned their respect.

Just as important to Gen Y as the job they’re doing is the reason why they’re doing it. Your ability to paint the big picture and help them feel that they are a part of something meaningful will go a long way toward enlisting and engaging them. Eric Chester notes in his book Employing Generation Why?:

Although they are better educated, more techno-savvy, and quicker to adapt than those who have come before them, they refuse to blindly conform to traditional standards and time-honored institutions. Instead, they boldly ask, ‘Why?’

If you can understand and engage Gen Y, you will have greater access to this talent pool, retain these workers more effectively and even better understand your clients, customers and other stakeholders who are Gen Yers. Here are some steps you can take to align the strengths of your family business with the strengths and values of Gen Y.

1. Values-based leadership that thinks longer-term, is more tied to the community and is more humane can engage the idealistic side of Gen Y. To turn a seemingly less than thrilling family business into a meaningful career path, the business leader might set the scene for them and show them how their job descriptions fit into the big picture.

2. A workplace culture that is more “human” (as family businesses are apt to be) can allow better communication and be less hierarchical than a faceless corporation.

3. Mentor your Gen Yers, monitor them via performance reviews and help with career development. Honor their need for greater feedback and coach them, but don’t give them a trophy for merely meeting expectations. Here is where a mentor might help a Gen Yer understand that boardroom goals are different from classroom goals.

4. Emphasize long-term thinking and leadership development. It may be worthwhile to engage Gen Yers in a dialogue about whether they want to job jump or are considering a long-term commitment. Here is an opportunity to help a Gen Yer see a potential blind spot related to short-term thinking and an emphasis on immediate gratification.

These ideas could be implemented in the family business via some or all of the following methods:

• Employment policy. For example, must next-generation family members earn credibility and marketability through outside work experience before joining the family firm?

• A mentoring program. Be open to learning as well as teaching. Consider your Gen Y employee as a cultural translator.

• A statement of values. In the best family businesses, the values drive the numbers and are what cultivates meaning in the workplace.

• The succession plan. The senior generation and their advisers must accept that future leaders won’t echo their style of leadership.

Advice for Gen Y

Navigating generational differences can be tricky, especially if you are new to the workforce. A few words of advice:

1. Assess your expectations. Determining and prioritizing your values is imperative. Equally essential is understanding that there are tradeoffs. If you want a big paycheck, you may have to sacrifice work-life balance. If you want a structured environment with a good training and mentoring program, you may have to work for a larger, more hierarchical firm that may not provide the ability to rise quickly within the organization. Realize that your career is less likely to adapt to your needs than home or school—especially in today’s economy.

2. Get feedback. Find out what others think of your behavior, particularly members of other generations. There’s often a fine line between being perceived as a “go-getter” and “impatient,” between “efficient” and “lazy,” or even between an “idea person” and a “know-it-all.” The first step in combating these negative impressions is to get honest feedback on how your behaviors are perceived. Make sure that you are achieving the intended result and that others’ perceptions of you match your own. Be mindful of the cultural differences between Gen Y and others (even Gen X). The young man in our opening example could have helped himself by merely explaining to his boss what he was doing and why.

3. Communicate effectively. Learn how convey your needs and concerns to your employer. If more challenging work would give you an incentive to work harder, have that conversation. If you don’t understand what’s expected of you, ask. Have the difficult conversations before a crisis develops and before you have damaged your reputation. This is also part of the shift from school and home to career: Your boss is not supposed to remind you, reward you, praise you or bail you out. Remember, this is where you step up, do some heavy lifting and solve problems. Your career should be rewarding, but if you aren’t contributing (or if you contribute only when you feel engaged), you risk being perceived as immature—and you might soon be unemployed.

4. Since a family business’s values are often expressed throughout the company, learn what they are and compare them to your own. If mentorship and support are important to your success, it’s extremely important to ensure that your values align with your mentor’s. Do your homework and be able to articulate what you want from your career as well as what you can contribute. Family businesses tend to be more concerned than mega-corporations with finding and keeping the right people.

Intergenerational dialogue

The frustrations that arise from miscommunication and lack of understanding are very pertinent and very real. With an open mind, candid but respectful conversation, and some diligent perception management, we hope that you will be able to turn enraging situations into engaging interactions. We did while writing this article!

Greg McCann, a Baby Boomer (mccannconsultant@yahoo.com), is a professor and both the founder and director (1998-2006) of Stetson University’s Family Enterprise Center. He is also founder of McCann & Associates, a consulting firm that helps families in transition, with a focus on the next generation. He is the author of When Your Parents Sign the Paychecks, a book for next-generation members of business families. Leah Sullivan, a Gen Yer (leahsullivan@gmail.com), graduated from the family business program at Stetson University in 2008 and now works for Systems 2000, a family-run software company in Central Florida. She also serves on the board of advisers for Stetson University’s Family Enterprise Center and has been invited to speak at university family business programs about Gen Y in family business.

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Gen Y has arrived

Family Business Magazine, together with Stetson University’s Family Enterprise Center, recently hosted a conference, entitled “Transitions,” to address the impact of economic, political and technological changes on family companies. One of the issues discussed at the conference was the need to transcend generational differences in preparing young family members for leadership.

A panel discussion compared key attributes of Baby Boomers (ages 46-65), Generation X (ages 26-45) and Generation Y (ages 10-25). Nancy Gabel, managing director of Evercore Wealth Management, noted that families must navigate generational differences when structuring succession and wealth transfer plans. Gabel, who specializes in intergenerational wealth planning, emphasized the need to educate the coming generations, particularly Generation Y.

According to Gabel, Gen Y is comparable in size to the Baby Boomer generation, and Gen Yers will inherit some $41 trillion in the U.S. alone. Much work has yet to be done to mentor and educate this multi-tasking, techno-savvy group. Gabel observed that since they were in the cradle, Gen Y has been empowered by technology, and this will enable them to successfully compete in the marketplace. She noted that a task that took 100,000 hours a generation ago can be accomplished in 10,000 hours today; thus, Gen Yers will have more leisure time. These “Millennials” place a high value on work/life balance and self-fulfillment.

While Baby Boomers value loyalty to careers and employers, Gen Yers are typically not loyal to a single company and have high expectations for their success. This presents unique challenges for the senior generation, who must develop new skills to manage and train incoming family members. Research indicates that individuals aged 21-38 will have, on average, 14 jobs in their lifetime and will stay at their first jobs for an average of less than 18 months. They get bored easily and feel they could run the company better than the current CEO.

Gen Y is an entitled generation, raised as “trophy kids” with a healthy dose of self-esteem and the confidence to try new things. Gen Yers do, however, appreciate family values and diversity, and often have a finely honed social conscience. They want to be mentored, and they demand instant feedback. The comments of several Gen Yers on the panel, as well as their Stetson professor, Greg McCann, reinforced Gabel’s observations.

Gen Y has been taught to speak up and be heard. Parents began including this generation in family business discussions and family decisions at a very young age; in my family’s case, at the dinner table. Because Gen Y’s opinions have been valued and considered, they feel empowered to help shape family business strategies. Gabel is optimistic, as am I, about this coming generation, noting that they are “high-performing and fiercely ambitious.” Family businesses will want to harness their energy to take the company through the changes that lie ahead.

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Managing paradox

We sat down recently to discuss some of the paradoxes of maintaining a healthy, wealthy multigenerational family, and to articulate some thoughts on how to address these paradoxes most effectively. It’s no wonder that managing wealth successfully is such a challenge. Here is a sampling of the contradictions involved, along with some thoughts on how to resolve them.

The paradoxes

• The values, attitudes and skills required of the senior generation to transfer power stand in sharp contrast to the skills that they relied on to create the wealth in the first place. Business acumen is not enough to found a multigenerational family that will avoid the curse of “shirtsleeves to shirtsleeves in three generations.” You also must sow the seeds of a successful family. These skills, and the circumstances around their application, are very different. At some point, someone in the family—an “enlightened leader”—must encourage family members to turn their focus from what has brought them much attention and gratification (i.e., the active creation of wealth) to include something much more subtle and abstract: enhancing well-being, nurturing creativity and cultivating the skills of individual family members. The founder of one family’s business commented that as a businessman he was “used to making decisions and not pondering,” but when striving to engage his family in growing their human capital he was required “to ponder”—and he didn’t like it!

• Family success—and the long-term productivity of family wealth—ultimately resides in the actions of descendants and beneficiaries, not in the success of the founding entrepreneur. For wealthy families to succeed beyond a single generation, new skills, values and attitudes are necessary. As noted above, these skills stand in contrast to those required to build the wealth in the first place. Occasionally, successful wealth creators develop the skills themselves. Sometimes their spouses fulfill the role successfully. But more often, to earn the title of Generation 1 (G1), the wealth creator trains himself or herself to create room for the new and different skills of the children and grandchildren. These succeeding generations develop a framework for working as a team. Spouses and their histories, interests and talents are absorbed and empowered. The growing number of branches within the family nurture common interests as well as independent paths. Paradoxically, all of this must be managed and governed via processes of personal growth, education and consensus building rather than through authoritarian leadership and hierarchical control, which in all likelihood contributed significantly to past successes.

• To stay wealthy, each generation must become risk takers and wealth creators. Assuming that G1 put in place a generous estate plan, G2 and G3 are already wealthy but may be less experienced. They are not only inheritors but also fiduciaries for siblings and cousins. They have a lot more to lose financially and psychologically than their predecessors. Consequently, they should have different risk profiles (and lower risk tolerance) than the G1 entrepreneur. Yet the “leakages” to that wealth due to spending, taxes, fees and a generally growing family, plus the insidious value erosion from inflation, dictate that each generation must re-create the wealth to sustain their financial good fortune. They must put it at risk or it will dissipate. This is simple mathematics. The more you spend and the more quickly your family grows, the greater the risks you must take to maintain your wealth, and the more skill that is necessary to do so. Hiring someone else to manage your assets in financial investments may slow the burn, and it is definitely the right decision for some. But financial advisers aren’t likely to add enough value to sustain your wealth over the long run, net of all those leakages. Long-term wealth creation is tough to delegate.

• Spending capacity demonstrates power in the short run; savings capacity sustains it in the long run. Wealthy parents have a propensity to try to control their children through the purse strings. Ironically, in so doing they can undermine the long-term power of their wealth. As we just stated, growing leakages make it harder to increase wealth. Exerting power through purse strings can have other negative effects as well. Productive discussions of goals, aspirations and ideals of the donor or the beneficiary may be supplanted by counterproductive negotiation over money. In addition, giving money as a cure for bad economic decisions may actually encourage further bad decision making. At unhealthy extremes, these negotiations may be subject to manipulation, or worse. Rather than exerting power through the purse strings, multigenerational families are better served by building personal relationships, growing their human capital, conserving financial capital and focusing on allocation and managerial skills to preserve and grow their family and its wealth.

• To keep a family together, it’s best to set its members free. To remain family, it is necessary to celebrate multiple paths to success, many of which do not create significant financial wealth. We are most likely to flourish if we can succeed at what we do best. Wealth gives us the luxury of choice; we should use it. In turn, as we flourish and feel supported, the energy we have to reinvest in family is likely to be productive, not indifferent or divisive. We know from our experience with hundreds of business owners and their families that even when up-and-comers in the family show promise as wealth creators, it is a mistake to invite them into the family business too soon. It’s good for them to gain experience working in other organizations and building their own tool sets and self-confidence without the added complication of being a family member. Moreover, in this manner they aren’t putting family capital at risk until they have acquired experience and a track record of success. Some of the happiest and most productive wealth owners we know are next-generation family members who have been released from the burden of family expectations. It’s a big responsibility to invest your siblings’ and your parents’ money while trying to enjoy Thanksgiving dinner with them, too. If you don’t have their confidence, you’re all probably better off if you do something else for a living. Family should come before business, even if it means you don’t work in the family business.

Entrepreneurial stewardship

These paradoxes can be managed by the effective study and expression of entrepreneurial stewardship. Entrepreneurial stewardship is the key to the successful entrepreneur earning the G1 designation, and it is the key to families continuing to flourish into G2, G3 and beyond. Our use of this term refers to families’ need to manage the apparent contradictions of conserving their existing wealth while at the same time encouraging entrepreneurship among their members, in order to create more.

Entrepreneurial stewardship is itself a juxtaposition of opposites, an apparent contradiction, a paradox. Yet it represents the challenge that the first, second and ensuing generations in any wealthy family face. A typical entrepreneur has little to lose when starting a business other than reputation and sleep. So “taking risk” has a different meaning than it does for someone who inherits wealth and exposes that wealth to risk. Stuart often wonders whether his great-grandfather, the founder of Carnation Company, would have been encouraged as a second-generation entrepreneur: Before he started Carnation he had three business failures to his name and no successes. How many families would have backed him for venture number four? How can families build a culture that would enable an E.A. Stuart to flourish as a G2 or G3 entrepreneur, to benefit the family, yet to protect the family’s capital from undue risk?

One of the biggest challenges for many highly successful people is shifting their mindset from being in control to enabling others to take control. The senior generation must come to terms with giving up power and crafting a new relationship with wealth; viewing personal wealth as family wealth and viewing one’s legacy as residing in the actions of descendants and beneficiaries, rather than in one’s own actions. A great irony of successful multigenerational wealth management is: The more powerful your family legacy grows, the less your descendants depend on your money.

In most non-family-run businesses, retired CEOs depart. But in family-controlled businesses retirement can be a relative thing. Sometimes the family leader tries to manage a controlled transition: helping the next generation to gain more experience while risking other people’s capital as entrepreneurs or business leaders before being tasked with managing family capital. Other times the leader’s success results in an overly confident belief in his or her infallibility. Up-and-comers in the next generation can be viewed as a threat if they are independent minded, or their ambitions can become constrained in order to fit the worldview of the leader.

The very nature of inherited wealth involves living in the shadow of a successful predecessor. This alone can raise doubts and undermine the self-esteem needed to be a successful entrepreneurial steward. Here again, seniors can be in a position to set the tone for ensuing generations by helping their children to develop power independent of their parents. This doesn’t come naturally to most wealth creators who have thrived with control. Yet investing in succeeding generations—by listening, encouraging independence and accepting failure—will bear fruit.

Entrepreneurial stewardship suggests that knowledge transfer should precede wealth transfer. Enlightened leaders, preferably in G1, but essential in G2 and beyond, should embrace non-defensive communication, letting diverse family members share their opinions and ask candid questions. Yet rules are also important. If your family is a meritocracy, explain it. If accountability and transparency are important, explain why. If the business demands certain talents and not others, explain it. Explain the difference between operational management and family governance. If family leaders don’t feel equipped to handle such a process on their own, then outside facilitators can help create a mutual exchange.

A benefit of open communication is the clarification of which family members want to work for the family business and which want to create another path for themselves. Family members have varying talents; the unit will function better if all members feel valued. If parents treat all children with equal affection while recognizing differences in talent and aspirations, the children are more apt to like each other and thus be better positioned to collaboratively manage their fortune when the transfer arrives.

There are often benefits to pooling resources to maintain a family business, but if business is the only affinity that family members share, it is insufficient to maintain a healthy family culture. Successful multigenerational families apply the culture of entrepreneurial stewardship as much to the management of their families and the reinforcement of family values and goals as they do to the management of their business interests.

Flourishing family

The family culture should be stewarded and shaped every bit as much as the business culture. As families grow across generations, numbers grow through birth, adoption and marriage. The range of interests and histories broadens. The affinities that define the family can become fewer and progressively diluted. Yet it is possible to find shared interests among all, or most, family members and to invest in them. When you find them, invest the time and effort to sustain them and enable them to evolve.

To be sure, many of us can relate—for better or worse—to vacations with multiple generations at the family home. It’s comforting to reminisce about the person who made the home possible, if not about all the idiosyncrasies of your cousins! At the same time, we must remember to embrace different career paths and positive life choices, coaching the scientist-cousin and the author-nephew as they embark on their respective personal journeys. Individual talents create a mosaic that adds texture to family life.

Entrepreneurial stewardship encourages each individual to flourish, and it devalues a sense of entitlement. It’s also a mindset for letting go, enabling children and grandchildren to spread their wings. And it creates the foundation for enticing them back to share their talents with the people who cherish them most. That’s the best way we know of to resolve the paradoxes of family wealth.

Stuart E. Lucas is chairman of Wealth Strategist Partners LLC and author of the book Wealth. He teaches the Private Wealth Management course at the University of Chicago (www.wealthstrategistpartners.com). David Lansky, Ph.D., is a principal with the Family Business Consulting Group Inc. (www.efamilybusiness.com) and advises families on issues related to family governance, succession, communication and conflict resolution.

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