Succession: Whom to Choose

Why your family business needs a disruptive successor

Your plan to pass your business on to the next generation may be derailed if:

• You don't have a future leader with vision.
• You haven't made changes to your business model and have been impacted by the pandemic.
• You aren't thinking about your exit and making progress on a succession plan or sale. 
• You don't think strategically about innovations to your business model or processes.
• You don't have a millennial on your team, providing input on the future of the business.

There's a saying in business and life: You are either growing or dying. And I believe it's true. If you are not aggressively driving the future agenda, then the business may be slowing down. Or, if you are changing too slowly, you will be passed by the competition. According to an old fable, every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn't matter whether you're a lion or gazelle. When the sun comes up, you'd better be running.

We've all heard that few family businesses survive through the third or fourth generation. I know because my grandfather's business was a hugely successful apparel manufacturing company that didn't make it past the third generation. It could have survived, had there been enough interest from that generation, but only a couple of sons-in-law from the third generation seemed to have any interest in the business. Sadly, my father was one of those, but he passed away in 1960 at the age of 35. The family chose not to hire a non-family executive to run the company, so selling the business made good sense. The family sold the company for a fortune in 1966. Family members stayed on in executive roles for the next two decades, until the factory was permanently closed in 1986. Simply put, there wasn't an entrepreneurial successor with a vision to lead the company into the next century.   

If you want to keep your business in the family, what's needed is a successor with excellent leadership abilities and a vision for driving the business forward. If no one in your next generation meets that description, you could hire a non-family CEO, either for the long term or for a shorter period while a promising next-generation family member gains more experience. I believe the future leader in a family business looking to maintain relevancy must be a disruptive successor, if the business is to be scaled up. And since a larger company is usually a requirement to meet a growing family’s  financial requirements, the successor must be as driven and determined as a founding entrepreneur.

What is a disruptive successor?

A disruptive successor is a next-generation leader who sees that they must change the status quo to keep the business relevant and current. They are willing to challenge the preceding generation's way of running the business. They can deliver innovations that may adjust the business model, improve the product/service or update business processes – none of which is easy.

Succession often involves psychological challenges. The senior leader may be reluctant to let go, especially if they are the founder of the business. This may cause conflict with the future leader who plans to disrupt the status quo. Such dynamics can lead to a family fracture if not handled carefully. 

Creating a growth playbook helps to transcend the rivalry that plagues many family businesses. The playbook sets out steps that are needed to unlock the potential of a growing company. By centering everyone’s focus on these concrete action steps, the playbook shifts attention from the family dynamics to the business, reigniting the team’s passion.

The skills needed in a successor

A leader’s top responsibility is to create clarity about where the business is headed and why, and how each person can contribute. Therefore, a leader must have a vision for the business, communicate expectations clearly, organize the necessary resources to enable success, unlock team members’ potential by developing their own leadership skills and inspiring the team to work together.

When Justin White took over leadership of his family’s small landscaping business, he set out to scale the business. Substantial disruption to the family, as well as to ownership and management of the company, ensued.
K&D Landscaping was started by Justin’s father and mother (Kendel and Dawn), Shortly after his promotion, his mother left the company and divorced his father. Over the next few years, at least 75 new employees were hired, and radically altered recruiting methods were implemented to improve hiring effectiveness. Meanwhile, loyal, long-term employees were counseled and repositioned into other roles. As the management team mushroomed in size from a few to more than a dozen, a separate leadership team was split off from the others.

Justin was the oldest sibling in his family business. His bold and decisive style may have been born, but he learned many other leadership qualities, such as continually asking employees for feedback, being a strong financial steward, holding regular progress meetings with key employees and communicating his vision for the future of the business.

Why your business needs a millennial

As much as we current leaders have to teach our children, we must embrace the next generation and respect what they are teaching us. Millennials are the future of business in the United States. They represent the largest generation in the U.S. labor force, making up 35% of it, according to a 2018 Pew Research Center analysis.

A 2019 study by Guidant Financial and LendingClub found that millennials are driven, determined and seemingly more optimistic in their outlook regarding change, innovation and entrepreneurship. They are also earlier adopters and faster learners of software and technology applications, which we are increasingly using to manage our businesses. We need to recognize these promising qualities and support their leadership development.

As the current leader, you must believe in your successor's capability. You must assess whether the successor understands the business and its many nuances. You must evaluate if they truly desire the CEO's role, where they need further development and whether they can grow into the position.

Next, you must recognize that both of you might have significant "blind spots" that must be overcome to move forward together. One blind spot might be overestimating your own strategic capabilities. Ask yourself, "Do I incorporate big-picture thinking into my planning? Is my successor more of a big-picture thinker than I am, or vice versa?" Big-picture strategic thinking and decision making may have to be shared until you and your successor are comfortable in your post-transition roles.

Trust is probably one of the most significant roadblocks during a leadership transition. Everybody must trust the next-generation leader and align with the new style of leadership and management. The current leader must learn to "let go" and release authority, control and power to the successor.

It's a journey for everybody, and hopefully, it can be enjoyed by all.

Jonathan Goldhill is a scaling up business coach, strategist and author of the book Disruptive Successor: A Guide to Driving Growth in Your Family Business (Jon@TheGoldhillGroup.com).
 

Family businesses in historic context

This year marks the 100th anniversary of the outbreak of the First World War, the most horrific war in human history up to that time. For four long years combatants dug in for indecisive trench warfare and industrialized slaughter that claimed 17 million lives. The optimism and faith in progress that had energized Western civilization before the war gave way to disillusionment and the "lost generation" afterward. Out of the rubble of World War I followed a second global war and then a third Cold one. To this day historians debate the causes. Yet this destruction was not the result of some iron law of history; it came about because of leaders' flawed planning and decision making.

Although we think of wars in terms of countries, in many ways the First World War was also a story of family business. Great families such as the Cadburys were split in terms of their view of the great war. Other powerful families, such as the Krupps, were very much a part of military history. And a number of the lead combatants were, realistically speaking, family businesses. Although France was a republic and England a constitutional monarchy, Germany, Austria-Hungary and Russia were family enterprises almost indistinguishable from the names Hohenzollern, Hapsburg and Romanov. In each of these countries the monarch held ultimate war powers. In each of the latter three countries, the monarch disdained legislatures—the national board of directors—and operated in an echo chamber of groupthink. As a direct consequence, none of these three great family dynasties survived the war.

Although family businesses on the domestic front operate on a much different plane than those on dynastic battlefields, some of the same lessons apply. A Deloitte study found that 28% of family businesses do not have boards, and a McKinsey study reported that even when they do, insiders on family boards outnumber outsiders almost 2 to 1. Numerous studies, some involving thousands of companies in North America, Europe and Asia, have generally concluded that companies in which the founder serves as CEO or as chairman with a non-family CEO create value, while those run by the eldest son or grandson of the founder falter. The same studies have found that there is generally a benefit, after the founder is gone, to having more separation between family involvement in both management and governance. Even savvy founders, given the entrepreneur's penchant for risk, would benefit from independent sounding boards. McKinsey concluded that strong boards and a longer-term portfolio management perspective were what distinguished the family companies with longevity from those that fall by the wayside.

One area in which family business boards rate themselves poorly is succession, a topic that can be extraordinarily sensitive. Here again, the parallels to 1914 stand out. Wilhelm II of Germany came to power suddenly at age 29 after his father reigned a mere 99 days. It is not surprising that Wilhelm II was ill prepared for the responsibility. The fact that Nicholas II of Russia had a sole male heir, a young prince who suffered hemophilia, rendered the royal family subject to dangerous influences. The chain reaction of decisions that led to mobilization and bloodshed began with assassination of Archduke Franz Ferdinand, heir to the Hapsburg throne in Vienna.

Almost all companies, large or small, start out as family enterprises. The three largest family businesses in the world—Wal-Mart, Ford and Samsung—illustrate the point. Nearly 80% of all new jobs are created by family-owned businesses and the start-up, which stands at the heart of the American Dream, is often established at the family dinner table and funded initially by "family and friends." The vitality of the American economy is very much tied up in these ventures. A board that brings some outside perspective and contributes a broader cross section of skills and talent can to help ensure the success of family firm. 
 

David W. Wise (davidwwise@outlook.com) spent 15 years in C-level positions in family and closely held companies. He is writing a book on diplomatic history.

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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Augustus' life offers lessons on succession

Empires, like many family businesses, may fail, flounder or prosper, yet most seek to pass ownership to succeeding generations. From the standpoint of continuity and longevity, the Roman Empire was perhaps history’s most successful. And yet its first emperor, Augustus, was an unlikely successor to that of his great uncle, Julius Caesar.

Born Gaius Octavius and commonly known as Octavian, the 18-year-old inherited Caesar’s wealth and name but possessed little else in competing with the Roman Senate and Mark Antony for control of the Republic. However, Octavian not only succeeded and surpassed them and the legacy of Julius Caesar in power but also established an empire that lasted for hundreds of years. He was later known as Augustus, often translated as “that which the gods brought,” or “sacred/revered.” (For simplicity, he will be called “Augustus” henceforth in this article.) The lessons illustrated by his ascension to power, longevity of rule and ability to convey imperial control provide valuable guidance for the family business owners of today and tomorrow.

1. Stick to your strengths, not those of your predecessor. Few children of entrepreneurs possess the same characteristics that enabled their predecessor to succeed. Similarly, Augustus lacked the military genius of Julius Caesar, arguably the greatest military leader in history. Although Caesar, just prior to his death, appointed Augustus to senior military command for the planned but never executed expedition against the empire Parthia, Augustus never led troops in campaign or commanded a battle.

Although he never tested his abilities on the battlefield, Augustus knew his predecessor’s strength did not transfer to him. He relied on the best military minds he could find, primarily that of Marcus Agrippa (most famously in the battle of Actium against Mark Antony in 31 b.c.).

Augustus relied upon his strength of conciliation rather than Caesar’s strength of confrontation. For example, the standards of Roman legions, considered sacred, were lost many years earlier when the army under Marcus Crassus was defeated by Parthia in the Battle of Carrhae. The return of the standards was paramount and worthy of battle. Yet Augustus accomplished their return through diplomacy, an essential skill he possessed. Leadership, a key to succession, requires the optimal use of an individual’s unique skill set, regardless of the predecessor’s talents.

2. Learn from your predecessor’s mistakes. Julius Caesar’s fatal flaw was his desire to be recognized as a monarch. Rome had experimented with monarchy years before, ending with the murder of its last king, Tarquin. The Roman people in Caesar’s era, despite his immense popularity, still possessed a strong republican spirit.

Caesar ac-cumulated unprecedented powers and privileges while testing the tempers of society. He had his likeness minted on a coin (reserved for divine beings). He sequentially held the office of consul and the titles of tribune (which offered him immunity despite being traditionally forbidden to patrician family members) and high priest (pontificus maximus).

The final straw for many conspirators, including their leader, Brutus, was the incident at the feast of the Lupercalia. In a carefully arranged episode, Mark Antony offered the monarchy to Caesar before the assembled crowd through the presentation of a diadem (a purple ribbon reserved for kings). Three times Caesar refused the offer, but the event was perceived as staged with an unexpected outcome (since the crowd favored his refusal rather than the offer).

Soon thereafter, Caesar secured the position of dictator perpetuo, abandoning all temporal limitations typically associated with the position. Neither Caesar’s unmistakable intent nor the momentum toward his accumulation of total power could be further borne or tolerated. Within months, the assassins struck.

Perhaps, had Caesar proceeded more slowly, he might have achieved his royal objective. Augustus, seeking the same goal, moved with greater subtlety and patience in securing total power without royal symbolism, titles or trappings. Likewise, successors should critically reexamine the strategic, operational and financial policies of their predecessors no matter how powerful or beloved the previous generation(s) may have been.

3. Act carefully in implementing change. Always adhering to his motto, “make haste, slowly,” Augustus sought power while meticulously observing legal technicalities. For example, at one point Augustus surrendered all powers he had accumulated to the Senate, which technically restored the Republic (although all such powers were immediately restored to Augustus by vote). The Senate, no longer dismissed or neglected but rather consulted as a partner by Augustus, rewarded him accordingly. Titles (short of the royal or the divine) and power were bestowed without demands until Augustus became the de facto emperor.

Augustus carefully manipulated public perception as much as he did Roman law. Although the Senate granted numerous titles, he preferred princeps (“first citizen”). While he allowed himself to be recognized as divi filius (“son of a god,” from his adoption by the deified Caesar), he avoided any direct worship. Likewise, he abstained from a lavish lifestyle and never built a palace.

To avoid tragic missteps and to minimize the likelihood of resignations by key employees, succeeding business owners should “make haste, slowly” until they possess a clear command of the business’s strategic, operational and financial goals and constraints.

4. Avoid leadership by committee. Many business owners, fearing the perception of favoring one child over another, will implement egalitarian or vague management or ownership structures. Such measures often hamper the operational or strategic goals of the company. Augustus, before securing imperial power, encountered a similar situation with Mark Antony after they jointly crushed the forces of the senators who wished to restore the Republic after Caesar’s assassination.

In the Treaty of Brundisium, Antony and Augustus divided the empire along geographic lines, with Antony taking the east (Greece, Egypt, etc.) and Augustus the west (Gaul, Italy, etc.). To cement the relationship and in order to bind the two most powerful men in the empire together, Antony married Augustus’ sole sister, Octavia. Despite the separate geographic realms, each possessed the same authority and responsibilities, which inevitably led to tensions building between them until Antony’s eventual defeat at Actium. This battle’s modern-day business ownership equivalent, a shareholders’ dispute between relatives, can also be devastating but potentially avoided by establishing clear divisions of responsibilities and overall leadership.

5. Choose your successor wisely. Augustus here serves as an example of what not to do. Originally, Augustus had many heirs from whom to choose. However, either through bad luck or foul play, each potential successor met an untimely death or was exiled: Marcellus in 23 b.c., Aggripa in 12 b.c., Lucius in 2 a.d., Gaius in 4 a.d., and Postumus in 7 a.d. (exiled).

Augustus’ wife, Livia, convinced Augustus to name as heir her son Tiberius (from her former husband). Although he never personally liked Tiberius, Augustus had no choice but to agree with Livia’s suggestion. While an effective general, the morose Tiberius is infamous today because of his sexual perversions and cruelty.

Business owners should always consider developing succession plans prior to or soon after founding or buying a company. In addition to drafting a plan, they should take steps to select and develop candidates.


From togas to ties

Upon crossing the legal boundary marked by the river Rubicon and illegally marching on Rome, Caesar is quoted as saying alea iacta est (“let the dice fly high”)—a reference to the huge risk he had undertaken. But if business owners look to the example of Augustus instead of Caesar, they can greatly minimize risks in pursuing a successful succession. The substitution of togas for ties does not change the nature of man—the understanding of which, at its most fundamental level, is the key to succession planning. The seeds of successful or failed business succession remain constant throughout time.

Christopher P. Casey, CFA (chris.casey@windrockwealth.com) is a managing director at WindRock Wealth Management LLC.

 

 

 

 


 

 

 

 

Copyright 2013 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

 

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Passing on the torch without blowing up the family

I often refer to myself as the “illegitimate” third generation of Ostbye & Anderson, the Minneapolis jewelry manufacturer founded by my wife’s family in 1920. My father-in-law never liked being a part of the company and discouraged me from joining. Yet after 12 years in other jobs and industries, I brought my experience and skills into the family business in 1978.

As an only child, I naturally became self-sufficient, which developed into independent thinking and a do-it-yourself (DIY) attitude in business. These character traits continued to serve me well as I became company president and majority stockholder in 1988. I built a new factory, made a significant acquisition in 1993 and grew the company from a regional to national player.

But in 2001, our business and industry took a major hit and I wasn’t sure where I saw myself in the future. I wanted the company to recover but was unsure if I had the energy or the passion to build it back up. My independent streak had hit a roadblock.

Unbeknownst to me, a DIY succession process started in the fall of 2002 as I neared my 60th birthday. I had no exit plan at that time and no clue that things were about to start happening on their own. After learning a series of lessons—the hard way—I realized the DIY approach was no longer useful. Ultimately, pleasant surprises occurred in the process of passing the torch, but only after I opened myself up to professional help and peer guidance.

Lesson #1: Those privileged to be part of a family business can’t ignore the family.

My initial mistake was not recognizing the business as part of our family, whether or not anyone in the family was active in the company. In retrospect, I did not know how to incorporate the business into our family without sending a message of entitlement or expectation. I wanted my children to work elsewhere. It was important to me that both my sons had freedom to find their own careers, passions and independence. Because both my sons had developed highly successful and financially rewarding careers with multinational corporations, I assumed that neither would want to come into the business, which effectively cut off the possibility of a family succession plan. Too bad I never asked!

Advice to other family business owners: Do not assume you know what your children think about the business. You have to ask. Engage family members in direct conversation or have an outsider conduct interviews.

All family members must understand that discussing the family business does not guarantee any specific outcome for either the children or the business. I believe very strongly that it can be stifling for children to come into a family business immediately after school, before they have some “real world” experience and have gained a degree of confidence and independence. That background also allows them to bring some skills and knowledge into the family business. Equally important, this helps raise the problematic child/parent/boss relationship up a notch to the still challenging adult/parent/boss relationship.

Surprise #1: A successful son says, ‘Make me an offer.’

In the fall of 2002, as I started having concerns about what to do with the business—sell it or work until age 90—I had a fateful lunch with my son Craig, then 34. He had recently been named U.S. Salesman of the Year at his company (among a sales force of 1,100) and was considering new opportunities. We met to talk over his résumé. As I reviewed it, I said something like, “Our business needs a sales manager with your qualifications.” His response: “Make me an offer.”

I was taken aback, flabbergasted and totally shocked that Craig had considered working in our family business. (Again, I never asked!) This lunch was a pivotal moment for me. I was excited, but terrified, about bringing him into the business. I wrestled with this emotional conflict and internalized the decision. I didn’t discuss it with my wife—a major mistake! I never reached out for help and didn’t consider the effect of the decision on our company, its management team or our family, especially Craig’s younger brother, David. Only much later did I learn that David had always hoped that he would ultimately take over the family business.

Advice to other family business owners: Before you decide to bring a family member into the business, create a family council—even if you don’t think you need one yet. A family council provides a framework for educating the family about the business and addressing and resolving conflicts. It also offers an open forum to discuss opportunities, qualifications and desires. The goal is to prevent unintended consequences that, most likely, will have negative ramifications for other family members. It also can be a way of creating some fun family events.

Lesson #2: Family members and company managers get upset when owners make significant operating decisions independently.

A few months after my lunch with Craig and before the announcement of his new role as national sales manager, I came face-to-face with the guardian of our family’s relationships—my wife, Lynne—and knew I was in trouble. My son David and his wife were visiting for Christmas on the day that Craig and I had reached our agreement. I casually mentioned to Lynne that I was “thinking” of bringing Craig into the business. She was astonished and quickly asked, “What about David?” She was loud, stong and clear: “You may be responsible for the company, but don’t blow up the family.”

David did not take the news well. He was highly qualified, but the reality was that his strengths mirrored his brother’s in sales and marketing. Within our small company, there wasn’t another opportunity for him. David was hurt, disappointed and angry. Simply put, David was devastated not to have even been asked. I have very few regrets in my life, but this one tops the list. I could have —and should have—handled this decision so much better. It’s a lesson I leaned the hard way, and I share the story often with family business owners as a way to help make amends.

I also agonized over announcing Craig’s appointment to our top managers. They had assumed my two sons were not coming into the business. During a managers’ meeting, I said I had hired a new national sales manager whom I felt was well qualified for the job. I passed out Craig’s résumé with the name removed. As managers were reading the résumé, one of them said, “Wow! Is this Craig?” The general reaction was favorable; however, one individual, who might have been a candidate to take over my position as president, felt threatened and was visibly upset. That individual never adapted to Craig’s being in the company and left within a year.

Advice to other family business owners: Whether succession is a DIY or a planned process, it will be an uncomfortable time for everyone. Lack of communication and trust will further erode family and company harmony. Once the family’s plans are in place, simply announce this to key managers and employees.

Since 2002, David has moved from telecommunications to GE Healthcare, where he has worked for the past six years. He is very proud of his success with GE and is well recognized within the company for his accomplishments. Although they live in different states and have very busy professional and active family lives, David and Craig have maintained a good relationship, including a shared interest in running marathons.

Surprise #2: My son’s leadership helped the business meet economic and industry challenges.

Our industry was going through challenging times in the post-9/11 era, but our struggles had started before that. People buy jewelry when they feel good and optimistic. We saw a 30% revenue decline in 2001 due to fear and uncertainty. What’s more, intensifying competition from global companies had eroded profitability, and the impact of the Internet was growing each year.

I was delighted to see that Craig contributed not only leadership skills, but also big-picture thinking to guide the business to perform at a higher level. One of his first action steps was to develop a long-range strategic plan, which the company had never had before. This replaced my DIY approach, which had landed us squarely in survival mode.

Steve Coleman of Platinum Group, a business consulting firm, helped Craig and me to work more effectively together and map out a strategic plan for long-term growth and profitability. This process identified a need for experienced managers in finance and manufacturing, and we decided to engage a search for “A” players.

To address rising competitive forces, we opted to narrow the company’s focus to strengths in mature markets. This strategy, in addition to investment in new technology and distribution channel resources, became the driver for change that would generate profitable new growth.

Advice to other family business owners: The DIY approach saves money in the short term but will cost you in the long run. Ask for help before it’s too late, especially if you are at the point in life where your focus is on conservation and comfort in your own lifestyle, rather than investment and risk-taking for the company’s sake.

Lesson #3: Transition is a natural, healthy event that can be good for the company and its leadership.

During this strategic planning period, Craig became involved in aspects of the company beyond sales, and I became aware that he was capable of running the business. A conflict developed between the two of us based on his higher expectations for the company vs. my comfort level.

I wanted to suppport Craig’s efforts but quickly realized that I didn’t want to take on more work at this stage of my life. Although I still had not planned an exit strategy, I started to attend a business transition group out of curiosity—not thinking it would affect me. Other owners shared their transition experiences openly. It took me a year to go from spectator to player as I gave myself permission to consider a transition. At some point I realized that transition is not a weakness and does not signal the end of life; it’s a natural progression that’s necessary for a company to survive into the next generation. Once I started, I never looked back.

Advice to other family business owners: Be open to resources and suggestions from experts in the field. You don’t have to go through transition alone. Find a peer group where there is open, honest discussion about taking the next step. It can bring clarity to your succession planning, as well as encouragement.

Surprise #3: Planning a sabbatical can be a helpful tool to test your management team’s readiness to ‘step up’ in the organization. It also can be a positive step in a business owner’s succession plan.

I initially decided to take a five-month sabbatical from the business in 2007 and return as an active chairman in the business. But I struggled with what to do on my sabbatical. I found myself building a long list of things I “should do” that became overwhelming. A peer suggested I instead think about what I “could do,” which took a lot of the pressure off and helped me become comfortable with enjoying myself.

As I prepared to leave, I became more committed to not returning to the business. I was now getting more and more excited about the best transition for the company. It became apparent that my sabbatical was the blueprint for elevating Craig to president and moving him into my office. I would not come back in a formal role or have an office in the building.

Craig had earned the respect of our employees, customers and suppliers; it was important to me that everyone see him as in charge. We called a company meeting (including local family members) on a Thursday and announced Craig’s promotion to president, effective the next day. The short transition period was painless and could not have been more successful. There was no time for staff to speculate or question “who was in charge.” In fact, there was enthusiastic support immediately. The company moved forward and never missed a beat.

Advice to other family business owners: A sabbatical can help your management team to “step up” to new responsibilities. At the same time, the senior leader who “steps out” of the company can get a new perspective and can plan new opportunities beyond the family business.

Also, remember that business owners’ decisions have a huge impact on the employees. When announcing a transition, be sure to send a strong message about the sustainability of the business and ensure that everyone knows who is in charge.

Surprises continue: Moving from daily operations to ownership presents new options.

The sabbatical provided a runway for my next stage of life. In fact, my life had come full circle: I began work in 1965 with American Airlines at O’Hare and now I volunteer at the Minneapolis/St. Paul airport with the Travelers’ Assistance Program. I am also exploring other ways to give back to the community. In addition, I still enjoy consulting with Craig on business issues as needed and attending periodic company meetings as well as traveling, gardening, reading and spending time with our five grandchildren.

After a 40-year career, I’m enjoying being an owner without the concerns of daily operations. The business, now led by the fourth generation, is well positioned for success in the years to come, and we eagerly anticipate the company’s 100th birthday in 2020. The recent recession has been devastating for some businesses, but Craig’s energy, focus and leadership have resulted in revenue growth, product diversification and continued profitability for our company.

While I proudly celebrate my accomplishments in the family business, I am grateful for the freedom and flexibility I now have to pursue other passions and opportunities.

Jack MacBean (JackMacBean@gmail.com) is the owner of Ostbye & Anderson, a family-owned manufacturer of bridal and related jewelry serving independent jewelers throughout the U.S. and Canada.

 

 


 

 

 

Mapping out a productive transition

 

There are six dimensions to the journey.

 

By Steve Coleman

 

“What’s next for me?” It’s a common question among today’s Boomer business owners and leaders. The key to mapping a productive experience in any transition is to know where you’re going—to identify the next stage in your life and work.

Based on the experiences of many leaders in transition, Platinum Group has identified six dimensions of life that can help point the way.

1. Family. Involve your family in the transition decision, and consider their needs. Action steps: Form a family council, hold family meetings and engage in long-range planning.

2. Finances. Balance wealth management with succession planning to meet family lifestyle needs going forward. Action steps: Obtain a business valuation, develop a buy-sell agreement, get tax-planning assistance and plan your charitable giving.

3. Business. Assess your business’s readiness for transition by evaluating its stability and predictable cash flow. Action steps: Develop business plans with timing and budgets.

4. Successor. Evaluate internal candidates and/or conduct an external search. Action steps: Plan to transfer leadership and inform key stakeholders of your decision.

5. Lifestyle. When planning how to spend your time and energy after the transition, focus on your passions. Action step: Start by planning a sabbatical. This will also enable you to test internal candidates’ readiness for leadership roles.

6. Community. Give back to leave a legacy. Action steps: Consider various ways to support the charities and causes you are most passionate about, through financial contributions and volunteer opportunities.

Steve Coleman is a partner in Platinum Group, a business consulting firm based in Minneapolis (Steve.Coleman@thePlatinumGrp.com).

Copyright 2012 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

 

 

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A team approach to succession

Most family businesses can note a specific moment when one generation steps back from management and the next takes over. But at Chicago-based manufacturer and distributor Magid Glove & Safety Manufacturing Co. LLC, the generational transition has been going on for seven years —and it’s not over yet.

The company has no CEO: It’s run by an executive committee that currently consists of two members of the third generation and two members of the fourth. The very gradual leadership transition has involved changes to the company’s governance—all of which illustrate both Magid’s unconventional structure and its stability.

Magid has been manufacturing gloves in Chicago since its founding 65 years ago by Sam Magid, his son-in-law Abe Cohen and Abe’s brother David Cohen. The company started out selling the gloves it made to distributors and wholesalers. But early on, Magid began offering its products directly to users. Today Magid, which generates annual revenues of more than $150 million, manufactures and imports personal protective equipment, including hard hats and glasses as well as gloves. The company now has two manufacturing facilities in the Philippines in addition to the one in Chicago. It employs about 1,000 people worldwide, about 450 of whom are based in the U.S.

“I like to think of us as the Walgreens of safety products: You can buy the brand name or the Walgreens brand,” says Adam Cohen, 40, one of four executive vice presidents at Magid.

Co-founder Sam Magid retired after a few years, and the Cohen brothers jointly owned and ran the business. All six of their children eventually joined the company, though one was later bought out. Today, five branches of the Cohen family own the company. The fourth generation is coming into its own; seven of that generation’s 12 members work at Magid.

Navigating new territory

The company’s management structure has its roots in its first big management transition, which occurred when Abe and David Cohen’s children joined the business.

Four of those children lived near each other and commuted together during the gas crisis in the 1970s, says Gigi Cohen, 52, the daughter of David, who is also an executive vice president at Magid. “They talked business, and things started getting decided in the car.” To keep the brother who didn’t live near them—as well as their fathers—in the loop, the family members started lunching together twice a week. These informal discussions led to the creation of an executive committee, which consisted of all the family members who were active in the business.

Because the number of people involved in the company’s first significant leadership transition was fairly small, it was possible to keep it casual.

When Rusty Cohen, now 61 and one of the executive vice presidents, joined Magid in the early 1970s, the company had just 40 employees. He recalls visiting the office as a child with his siblings on Saturdays. “We would cut the elastic for the back of the gloves,” says Rusty, the son of David. “We would play in the piles of leather.” In the summers, as they got older, they worked in the warehouse.

The company is no longer so simple, and neither is the current transition, which began when Greg Cohen joined the executive committee in 2004. The third and fourth generations had a dozen potential executive committee members—far too many to make streamlined decisions. The boundary between the generations was blurring, as well: Gigi is nine years younger then the next-oldest member of her generation, and nine years older than her eldest niece.

For the family, choosing leaders rather than simply making everyone a leader was new -territory.

“We didn’t even know how to talk to each other about each other’s kids,” Gigi says. “People were asking, ‘How do you get on the executive -committee?’”

The solution was a process akin to making partner at an accounting or law firm: Members of the third generation created a list of the characteristics they wanted in executive committee members, then rated the members of the next generation who were old enough to be candidates. Parents did not rate their own children.

“Then we could actually start to have a conversation about, ‘Do we want to add this person to the executive committee or not?’” Gigi says. They were also able to give feedback to those who had been evaluated. And they set limits on the executive committee: It may have no more than ten members, and retirement at age 65 is mandatory.

The process wasn’t always easy, since for the first time not everyone would be able to serve on the executive committee, notes Adam Cohen, son of David’s son Harvey. “It’s been tough,” says Adam, who has an MBA and was running the manufacturing division when he was asked to join the executive committee in 2005. “Like in any company environment, if you don’t get a promotion you desired it can be frustrating. In our parents’ generation, everyone was promoted to the [executive committee], so the fact that this practice has changed for our generation inevitably makes it more difficult for us.”

“But I think people are accepting of it,” Gigi says, “because we were all part of the process to put it together.”

Today, the executive committee has four members: the youngest two members of the third generation (Gigi and Rusty Cohen) and two of the older members of the fourth generation (Adam and Greg Cohen). Four more fourth-generation members are working full-time at the company.

The family has taken steps to smooth the transition. “When we were 13 we started having family council meetings—big family meetings where we talked about the transition,” says Lee Cohen, 31, director of corporate initiatives, who is one of a set of triplets—the children of Rusty—who all work for the company.

As part of his work toward a potential executive committee seat, Lee has had an initial 360-degree evaluation.

“Since I’ve been working in the business, I’ve known it’s not an automatic seat,” he says. “I believe it’s a very fair process.”

The feedback he got was that he needed more experience managing larger groups.

“They want to see that I can manage people,” Lee says. But he has not been left on his own to prove himself. “They’ve always outlined a path for me to get there: ‘Take over this region. Prove that you could be a high performer while managing this region and continue to wear these other hats. Show that you can balance a lot of work.’”

Gigi was the driving force behind the move to run the company with a “business first” focus, as opposed to “family first.” She became a student of family businesses and talked with consultants about best practices.

As a result, the company has created numerous policies. A participation policy states that family members who want jobs with the company must first work outside the business for at least two years, and they must be qualified for an existing job. In-laws are not permitted to work at the company.

“You learn a lot of theories in school, but working the two years somewhere else probably did help me,” Lee says.

The company also has a new policy that clarifies when and how a family member’s shares will be bought out, as well as a dividend policy.

The Cohens are also finding ways to improve communication within the family. Some family members who work in the company meet twice a year after work to address issues. There is also a conference call every other month for all shareholders, whether they work for the company or not. (Two adult shareholders don’t work for the business, and one works part-time. One shareholder is in graduate school.)

“We try to be very inclusive,” Gigi Cohen says.

A company without a CEO

No one at Magid holds the title of CEO. The four executive committee members all hold the title of executive vice president. Adam’s father, Harvey Cohen, who has retired from the executive committee, holds the honorary title of president.

Having a CEO is “not in our DNA,” says Rusty, one of the original executive committee members.

“People ask us, ‘How do you function as a leadership team and not have a single person with the final say?,’” says Gigi Cohen. In Magid’s case, the system generally works well, company stakeholders report. Each executive committee member oversees certain areas and makes many decisions involving those areas.

“I think it’s good and bad,” Rusty says. “There are some things that take longer to decide because now four people are deciding it rather than one. But on the other hand, four heads are better than one.”

“Sometimes decisions don’t get made in as timely a way as we’d like,” particularly regarding the strategic planning process, Gigi acknowledges. “We’re working on that.”

For those who have grown up with the company, Magid’s organization chart is perfectly normal. “I was never in a company” that had a CEO, says Greg Cohen, 37, a fourth-generation executive committee member and a grandson of David. He joined the company in 1998, after a stint at Arthur Andersen.

As an Andersen consultant, Greg helped Magid decide to automate its warehouse. “This was the largest overall capital project Magid had done in its history to that point,” Greg says. He came on board full-time to supervise the transition. In 2004, he was named a member of the executive committee.

One challenge, Greg says, is that many family members aspire to serve on the executive committee. “There’s obviously some comfort in a group; more people want to be part of it,” he says. “If you had a CEO, I don’t think as many people would want to be CEO. There’s more pressure involved in that.”

Although the executive committee now has an even number of members, Gigi Cohen says she can’t recall any 2-2 deadlocks. Were that to occur, she says, the committee would probably consult their council of advisers for help in resolving the impasse.

Despite its unconventional leadership, Magid is moving toward more formal management structures, as well as a formal strategic planning process. The company has added a layer of management underneath the executive committee: experienced managers, some brought in from outside the family.

“The executive committee is smaller and the business is bigger,” Greg says. “We’re requiring more key positions that are not filled by family members, which has been a transition as well.”

“They recognize that even though there are many family members involved, they can’t do it all,” says one of those non-family managers, Andrés Maldonado. “It’s definitely a cultural change, but I think they’ve made great strides,” says Maldonado, the director of marketing, who joined the company three years ago.

Magid lacks the politics that are typical of public companies, says Ron Podgurski, the non-family director of purchasing. Podgurski reports to two family members, replaced one family member when he came on board and is currently mentoring a fourth family member.

The flip side of a family business is the tendency to resist change, Podgurski notes. “In many ways, they’ve been doing business the same way for a long time,” Podgurski says. “Even though the family is committed to change, it has been challenging at times for them to do so.”

Overall, Gigi Cohen says, the business is evolving to become “a little more structured and businesslike. I think the culture has been very stable, family-oriented, casual and comfortable. In the old days, the building was closed at 5 p.m. so my dad and my uncle could be home for dinner at 6.”

Today, the building stays open until 6:30, though employees do sometimes arrive earlier in the morning or work later in the evening. “If you’re not able to get your job done and have a life, then we need to take a look at what’s on your plate,” Gigi says. Employees appreciate the work-life balance, she reports: “That’s one way we attract and retain some really capable people.”

Planning for the future

As Magid looks to the future, one issue is unresolved: how family and company governance will adjust to respond to the growing number of shareholders who are not part of management —including family shareholders who don’t work for the business at all.

“Ten years ago, every shareholder was on the executive committee,” Gigi points out. “Ten years from now, most shareholders won’t be on the executive committee. How do we structure that governance process?”

The company is working to design a structure that keeps shareholders informed and also gives them a voice in governance: “If management starts to do something they don’t want, is there a mechanism to stop it?” Gigi says. The company does not have a separate board of directors, though it does have an advisory council that includes three outside advisers.

One question that will need to be answered, Gigi says, is whether the company can continue without one person in charge or whether it will name a CEO at some point.

For now, though, Magid’s success speaks for itself.

Though the company suffered in the recent recession —“If people aren’t working,” Adam points out, “they’re not wearing safety gloves”—no layoffs were necessary. “We survived quite well,” Adam says. “We’re very proud of the fact that no employees lost their jobs.”

“The business being successful definitely makes the family part easier,” Greg notes.

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

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Four landmarks of a healthy succession landscape

In my travels around the family business transition landscape, I have come to recognize four landmarks that indicate a succession plan going well. Especially in the third or fourth generations, when the power of the founder’s personality has mellowed and expectations of six-figure salaries have become the norm, it helps to take a look from the 30,000-foot perspective.

I have identified four landmarks of a healthy succession landscape: integrity, innovation, competence and collaboration. The accompanying grid provides a framework for assessment and further discussion. 

Integrity is generally considered the most essential successor attribute. In a 1998 Canadian study of 485 family businesses by J.J. Chrisman, J.H. Chua and P. Sharma, integrity and commitment to the business were the most important criteria cited. Family members expect honesty above all (especially from those watching the till). Successors must be committed to the well-being of the business and all its shareholders, not just what’s best for them personally.

Innovation means a recognition that the business will not be sustainable if the successor runs it exactly the way Dad did. The typical life cycle of a U.S. business is about 25 years, corresponding roughly to one generation. To beat the odds and become a multigenerational family firm, the company will have to be reinvented by the second or third generation, as market conditions, technology and society itself are continually transformed.

Competence must override primogeniture. The myth that the eldest son must inherit the kingdom is a relic of the past. Especially during tough economic times, businesses that survive and grow are those that choose the most competent leadership available, whether from within the family or beyond it. The skills required to manage a $30 million company (or a $100 million company) are very different from the entrepreneurial mindset needed to run a startup. What competencies are necessary to take your company to the next level?

Collaboration is required as soon as more than one family member is hired or owns stock. Team building, in management as well as within the ownership group, can be learned, though it sometimes must be learned the hard way. Can your potential leader attract strong talent to the business and develop new collaborative solutions with other team members, solutions that no one would have conceived alone? Will other family participants feel sufficiently included to wholeheartedly support new business initiatives?

Acquiring leadership competencies

Given these tough expectations for future family business leadership, how do you build integrity, innovation, competence and collaboration into the chromosomes of third- and fourth-generation members? Typically, the company at this stage is larger than their grandfather’s ever was, and successors have been raised with expectations that Grandma never imagined.

Here are some suggestions for checking up on these four competencies for potential successors, including some challenging tasks to help fill in the missing links.

1. Integrity: Does this individual tell the truth—the whole truth— especially about money, particularly when the facts affect others? Is there sufficient attention to detail, so that glitches in financials will be tracked down and resolved? When a problem surfaces, will the next-generation member accept responsibility for it? Are perks, like NFL tickets or BMWs, shared fairly with peers?

Proposed task: Take leadership of a department or project with full responsibility not only for meeting budget, but also for achieving specific profit targets, with a bonus depending on outcomes. Report failures as well as successes. Use a 360-degree review for feedback on the project from all sides.

2. Innovation: When was the last time this potential successor came up with a solution to a problem that didn’t just echo Mom’s ideas? Can this person disagree respectfully, even with seniors, to advance ideas that may lead the company in a new direction? Does this person ever carve out a Saturday morning to tackle a stiff problem and come up with fresh alternatives? Is he or she ready to change behaviors, to try a new approach, to work more successfully with other team members?

Proposed task: Develop a new sales strategy for reaching an untapped customer base. Provide the “right” research that indicates the likelihood of success. Develop a concrete written plan outlining the resources required and the timeline to make this strategy a reality.

3. Competence: Based on objective assessments, define this individual’s readiness for leadership, based on where the company will be heading in the next ten years. Develop an individual growth plan or map a systematic sequence for acquiring the competencies that are lacking. If financial analysis is a weakness, the next-generation member might take appropriate courses. If the individual needs to develop sales effectiveness, he or she could partner with the firm’s top sales representative or sign up for a sales training program.

Proposed task: Write down goals for developing missing competencies, and identify an executive coach who can walk the candidate through the right gates. Develop a sequence of responsibilities in different parts of the company, even including cleaning out the warehouse, to develop a bottom-to-top perspective.

4. Collaboration: How often does this potential successor build teamwork by complimenting others’ work, and sometimes letting others take the bow? How often does this individual volunteer for less glamorous assignments, and complete them exceptionally well, even motivating others to grab a paintbrush and pitch in, as Tom Sawyer did?

Proposed task: Invite members of the third generation to a weekend retreat featuring some challenges, such as a ropes course, river rafting or a ribs-cooking contest. Ask the siblings and cousins at the end of the weekend what leadership qualities they observed and which ones they believe can be transferred to the family business. These real and potential owners, who have a significant stake in the future of the company, know a lot about whom they trust, and who can gain the respect of the team.

Preparation starts early

This kind of assessment process makes sense if second-, third- or fourth-generation successors have been prepared all their lives through…

• positive messages—if not excitement—from both Mom and Dad about the potential of the business.

• sharing lots of experiences that involve laughter and build teamwork with siblings and cousins.

• summer or part-time stints working in the business to instill a solid work ethic.

• an introduction to the value of money and the ability to add and subtract it, if not multiply it.

• autonomy, or some track record of success that does not depend on one’s last name.

• an appreciation of their heritage and the hard work required to provide the lifestyle they enjoy.

Integrity, innovation, competence and collaboration: four landmarks for the future. Can you see them within the landscape of your family? What will it take to build them?

Ellen Frankenberg, Ph.D., is a consulting psychologist and family business adviser (www.frankenberggroup.com).

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Accentuate the positive

One of us (Dan) recently found himself working with the designated successor of a family business, helping her develop additional leadership skills that would eventually allow her to take over the reins of the company. This successor (we’ll call her Mary) had prepared herself well. She had earned an MBA at a prestigious business school and then worked for five years at another company, garnering professional expertise.

In the first phase of her preparation and prior to Dan’s engagement, it had been decided that Mary should be introduced to all facets of the family business’s operations. This company had a modest number of employees but was extremely profitable and had been for more than 20 years. Eager to contribute, Mary launched into her orientation with a passion.

As the days went by, she began to notice things that in her opinion were operationally “wrong.” She shared her perspective with employees and met with her father from time to time to discuss how to fix the problems she had observed. Mary expected to be received with open arms and was surprised to encounter push-back from the employees. Even her father wasn’t nearly as pleased as she had anticipated.

When Dan assessed the situation, he determined that Mary was looking at her family business from a rather limited perspective. While she had identified some legitimate problems, Mary had failed to realize that there were rational reasons for doing things the way they were being done. In many cases, there was a long-term history behind certain operating practices.

Intending not to dampen her enthusiasm, Dan asked Mary to do three things:

1. For every one thing she found problematic, identify three things about the company’s organization and operations that were working well.

2. Study the factors and dynamics that had contributed to her company’s success.

3. Consider how she might use her understanding of what was working well in the company to help create a plan for the future.

Once Mary started inquiring into what was working well, and using that information to improve operations, her leadership orientation experience took a decided turn for the better. Employees were happy to share their knowledge and insights with her. Mary’s father was also far more receptive to her input because she had recognized what it really took to run a successful company.

Dan’s successful intervention with this family business was based on his work in the field of positive psychology. His advice was based on his knowledge that when humans practice “appreciation,” they stimulate the neocortex and frontal lobes of the brain, which, in turn, enhances listening skills, creativity, innovation and the ability to successfully connect with other people.

Many family businesses spend considerable time, effort and money in search of long-term sustainability, but only a small percentage make a successful transition to the next generation. We believe that an entirely new planning paradigm is required to bring authentically positive results—as measured by a family’s health, happiness, and business success—to family businesses. We believe that new paradigm is rooted in the science of positive psychology.

A positive psychology primer

Historically, the field of psychology has been predominantly focused on diagnosing and treating mental illness, including depression, phobias, anxieties and other disorders. The founder of positive psychology, Dr. Martin Seligman, posited that rather than focus on pathology, faults and dysfunctions, psychology should concentrate on the study of positive talents, strengths, virtues and character to help people and organizations better understand such subjects as “what is working,” “what is right” and “what is improving.” Positive psychologists argue that strengths and virtues should be cultivated in order to help people and organizations flourish.

Positive psychology is not a Pollyannaish discipline that ignores problems. It emphasizes that the answers to questions relating to optimizing performance and quality of life are to be found in the best examples of human performance, not in the study and focus of its problems. Similar to philosophy’s logical and conceptual approach to consideration of the “good life,” positive psychology seeks to identify the key(s) to living a good life as demonstrated not simply by logic, but through rigorous scientific study based on empirical evidence.

Our work with family businesses suggests that there are important new applications of this developing science that can transform family business dynamics both to improve the quality of family relationships and to increase the likelihood of creating stronger and more sustainable enterprises. The insights of positive psychology suggest that those family businesses that seek to identify and capitalize on their competitive possibilities—and convert them into reality—will have better and more satisfying outcomes and experiences. Business culture fares far better when driven by a focus on transforming possibilities into reality. Work cultures in which problems are the main driver of interaction—in which people are constantly engaged in pointing fingers and taking defensive stands—fare far less well.

Because the application of positive psychology to family business is a brand-new initiative, much work remains to be done; many exciting possibilities and approaches can be further considered and explored. Nevertheless, there are some applications of positive psychology that can already be brought into service to help improve family business dynamics.

Suggestions for family businesses

Here are some tools and approaches suggested by positive psychology that can help family businesses improve the likelihood of finding sustainable happiness and success.

1. Allocate more time and resources to study your successes. Recognizing what helped create your successes (instead of focusing on fixing the problems in your organization) may improve the chances that those successes can be replicated from generation to generation. In the problem-oriented model, leaders frequently blow right by successes. They rationalize, “That’s how things ought to be.” Family members may intuitively or incidentally know some of the reasons why success was achieved, but they often miss material variables.

2. Conduct talent assessments, which measure an individual’s competencies, to help ensure that people are working in the roles and capacities that are most likely to result in personal satisfaction as well as maximum contribution to the organization. Family members (and non-family employees) who find the right “fit” in the business tend to be more energetic, passionate and innovative in their work, thereby enhancing their performance.

3. Use databases on leadership skills, which offer instructive insights on whether an individual makes “principled” decisions and other factors, to help identify qualified successors.

4. Conduct emotional intelligence assessments to measure an individual’s interpersonal skills, also an important factor in identifying a successor. Some people, for example, may have great financial skills but poor interpersonal skills. While placing such a person in a financial role will likely result in a satisfied and productive employee, offering a leadership post to this person could be destructive, both to the individual and to the organization. Emotional intelligence assessments can also be used to help teach an individual to more satisfactorily relate to others, manage the stressors in the work environment and build stronger and higher-performing teams.

5. Identify your great communicators via communication assessments. Individuals who recognize the importance of listening to others often are great leaders. Family members can be coached to be better listeners (not simply good talkers) by reducing, for example, their references to “me,” “I,” “my” and “mine.”

6. Harness the power of appreciation. For example, begin family meetings by asking participants to share something that they appreciate about being a member of the family. This is not simply a “touchy feely” exercise; it engages the highest functioning, most recently evolved portions of the brain, known as “the executive brain.”

These and other positive psychology tools complement the traditional tools used to build stronger families. For example, many families have established the practice of meeting together on a regular basis, whether as part of a family council or less formally. Anecdotal feedback over the years suggests, however, that too many of these meetings, often structured to identify and solve “problems,” are counterproductive and can create or exacerbate family conflict. Positive psychology could be brought to a family council meeting, allowing the family to frame their discussion around appreciative inquiry, exploring possibilities, etc. The melding of traditional planning tools with positive psychology holds great promise, and we look forward to further investigation on such initiatives.

Positive reinforcement

Family business leaders often avoid planning because they see it as an emotional minefield. This avoidance merely compounds organizational deficiencies. Positive psychology can provide tools and processes for planning that emphasize strengths, family values and a desire to provide all members with an opportunity to contribute based on their talent and motivation.

The new science of positive psychology offers important insights that can benefit all family businesses, large and small. If an organization is prone to look for problems, then problems are what will be found. We suggest that families spend more time on positive organizational initiatives, such as clarifying and promoting core values; defining roles based on individuals’ passions, skills and talents; and engaging in appreciative conversations. The application of positive psychology to family-owned businesses could help build stronger families and stronger businesses. We look forward to helping bring this new paradigm into practice.

Scott E. Friedman (sfriedman@lippes.com) is a managing partner at Lippes Mathias Wexler Friedman LLP in Buffalo, N.Y. He is the author or co-author of numerous articles and four books related to family business, including How to Run a Family Business (with Michael Friedman) and The Successful Family Business. He is the creator of the Family Business Scorecard, the Successful Family Business Roadmap and a decision-making model known as P/E Max. Dan Baker, Ph.D. (dbakerconsulting@windstream.net) is the author of numerous articles and four books related to family business, including What Happy People Know, What Happy Companies Know, and What Happy Women Know. He was the founder of the Healthy Families in Business Program and the Life Enhancement Program at Canyon Ranch in Tucson, Ariz.

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A succession caste system fosters business dysfunction

Family life, even under the best of conditions, is difficult. Business, even under the best conditions, is difficult. Combine the two and life can become extremely stressful. In fact, business problems do not simply add challenges to family relationships. They intensify family problems, often bringing out latent ill feeling within the family unit. In mathematical terms, business challenges have a multiplier effect on family conflicts. Stated another way, business challenges A and B and family problems A and B don’t just add up to four problems; they interact with each other, creating closer to 16 dilemmas.

For example, if brother #2 always resented the perceived favoritism of his father toward brother #1, the formula for resentment over distribution of power (or perceived power) within the business is set. Now the issue of favoritism is no longer subjective. It involves money, authority and prestige. Even worse, other family members may take sides, so the brothers’ conflict begins to devour the entire family. It is no longer brother vs. brother amid a quiet resentment of the father. Now it is mother vs. father and his perceived lack of fairness, and sister vs. one of the brothers, and perhaps brother-in-law vs. the entire family and its dysfunctional state.

What is at the core of these blowouts? Family members play out their familial conflicts on the stage of the business. Sibling rivalries, marital conflicts, and nuclear vs. extended family rifts often become open wounds in the pressure-packed cauldron of business.

In one large printing company, for example, Terry, the president and older brother, started lording it over Marlin, the younger sales manager, pretty much by the time they crawled on their first teeter-totter. And he hasn’t stopped since. The fallout is obvious. Terry and Marlin have gotten locked up in a lose-lose posture on issue after issue. In addition, the salespeople do not respect Marlin, because Terry consistently overrules him. Marlin, of course, finds it difficult to support the overall company direction, because he sees Terry as a one-man gang. And so it goes.

The problem with primogeniture

Whenever we hire non-family people for key positions in our companies, we look for the best performers. We assess the skill demands of a given position and try to fill it with someone possessing those talents. With family, however, often it seems the determining attributes are gender and birth order. Male family members still “man” the critical power roles. Female relatives are often assumed eventually to marry and have children and thus are passed over for long-term, critical business roles, which are considered incompatible with motherhood.

The oldest male often is appointed to lead the business, without regard to whether he is the most qualified person for the position. Think about the potential negative consequences of that. First, the family may not be passing the reins to the most competent heir. Hence, on a coldly objective basis, this may be a major business blunder. Possibly compounding the problem, this style of succession can be devastating to a younger sibling’s enthusiasm for the business.

This succession caste system can result in a dysfunctional family business structure. Here’s an example.

Joe, the older son in a longstanding family communications company, was regularly agitating his father, Dan, to work with the company lawyer on a succession plan. What was most important to Joe was holding the title of president. But Joe’s younger brother, Kris, didn’t think this was a good idea. It wasn’t a matter of ego; Kris didn’t feel Joe was capable of making sound, rational business decisions. He feared for the long-term survival of the company if conservative Joe remained in charge. Moreover, many in the company felt Kris was the better horse to bet on.

Kris, wondering about his and the company’s long-term future, did what he could to stall the succession process and wondered whether he should even stay in the industry. It was an arduous task for me to help them work through their issues.

Working toward a solution

What can be done in such situations? Let me first cop out a bit by saying that no two companies are the same, so a simple one-size-fits-all formula does not exist. Nevertheless, there are some things that can help.

First, all family members should see themselves as trustees of the business, charged with the task of doing what is best for the company, not for any individual member.

It is often very helpful to assemble an advisory board, consisting of people acceptable to all (or at least most) family members. In critical areas the owner-president can call on these advisers for assistance in making key determinations. The value of such a group is obvious. Its members can offer far more objective input on a critical decision than a parent can. What’s more, the business leader can sidestep a good deal of the heat if the verdict was determined (or at least vetted) by an outside group.

An objective perspective can go a long way toward resolving conflict. Too often a parent will make a succession or leadership decision largely on the basis of how a family member (or members) may feel about the decision, not on the basis of what is best for the business. Often the parent’s inclination to go with the “feel” criterion is driven in part by the fear of being resented for the decision.

The current business leader must assess carefully the talents of the children (as well as qualified non-family employees) in determining who will be doing what in any succession structure. The appointment need not be permanent. The new leader could have a three-year term, leaving the door open to a change if necessary. Leadership could even be rotated among some or all of the children.

There is a flip side to this. While decisions must be based on what is best for the business, no family member should be ostracized should he or she decide to leave the company. The company will be healthier if the door swings both ways.

Finally and above all, there should be regular management meetings, during which all family managers act as responsible trustees of the business. If necessary, have an outsider lead the meeting, but whatever you do, make it an exercise in what’s-best-for-the-company thinking. There is no substitute for consistent practice to move people away from the wrong stage of self-interest and family strife toward sound business decisions that contribute to the health of the family.

David Claerbaut, Ph.D., is a sales and management consultant and the author of 15 books (www.claerbautconsulting.com).

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Planning a smooth succession

About 20 years ago, Paul C. Darley, his brother Peter and his cousin Jeff joined eight non-family managers at a management meeting for W.S. Darley & Co., a manufacturer of fire trucks and firefighting equipment based in Itasca, Ill. They waited for Peter and Paul’s father, Bill Darley, the president, CEO and patriarch, to arrive.

“He walked into the room and said, ‘I’m the ghost of Bill Darley. Bill was killed in a car accident driving up here today. What are you going to do?’” Paul Darley recalls. “It caught us off guard.”

It may have been the first time his management team had considered what would happen when Bill was no longer running the company, which is based in Itasca, Ill., near Chicago. But the subject had been on Bill’s mind since several years earlier, when he had emergency triple bypass surgery.

Bill had woken up after the operation and seen the sunrise from his hospital room window. “I thought I was in heaven,” says Bill, now 80. “At that point I realized that if the Darley Co., including my family and employees, was to survive, I’d better implement a succession plan.”

Bill got to work on the succession plan, but he took his time—and came up with an unusual approach.

W.S. Darley & Co. had grown and changed since Bill’s father founded it in 1908 and it sold its first fire truck, in the mid-1920s, for $690. The company had been through transitions before: When Bill Darley was seven years old, his father died. Bill’s mother didn’t sell the company; instead, she turned its management over to a non-family member until Bill took over in 1960.

Under Bill, who graduated from Purdue University in 1950 and went straight into the family business, the company grew. Today, it has 200 employees, 11 of whom are family members. The company celebrated its 100th anniversary in 2008 and expects $100 million in sales in 2009. More than one-quarter of its sales come from overseas.

“We feel really good about the type of business that we’re in, the fact that we’re selling fire equipment,” says Stephen Darley, 52, Bill’s oldest child and the company’s customer service manager. “You’re helping people,” says Stephen, who is also chairman of the family council. “We’re passionate about the business.”

But passion wouldn’t be enough to get the company through this transition. After their mother’s death, ownership of the company had passed to Bill Darley, his brother and one of his sisters. (A second sister sold back her shares.) Although Bill regularly updated his brother, Reg, and his sister, Patricia Darley Long, he was responsible for the direction of the company.

“The second generation was Bill Darley leading the business with support from Reg and Pat,” says James Long, 46, a board member, vice president and son of Patricia Darley Long. “All three of them set a very good example for the third generation of how to work together.”

This meant Bill had to consider not only who could take his place, but also how the dynamics of the younger generation might be different.

“I don’t want all hell to break loose when I die,” Bill asserts. He became a member of the Family Business Center at Loyola University, where he and other family members learned about best practices for family businesses. His research led to the creation of a family council and a family constitution (see sidebar). It also led to an unconventional way of choosing a successor.

Bill started by observing all the family members and non-family executives at the company. He narrowed the choices to two of his five sons, Peter and Paul, and his nephew Jeff. He created an executive committee that consisted of the three candidates.

In June 1989, Bill told the three that he wanted each of them to write up a business plan indicating where he would take the company if he became president upon Bill’s death or retirement. He gave them nine months to work on their plans. “None of us shared ideas,” Jeff recalls. “We all did it independently.”

Peter and Jeff wrote plans that were about 20 pages long —“nice and to the point,” Jeff says. Paul’s ran more than 300 pages, including detailed business plans for each of the three core divisions and a plan for a new division.

They turned in their plans in the spring of 1990. Then years went by, during which they heard nothing. “I definitely asked him about it,” Paul remembers. “When he finally gave it back to me, it had a total of eight handwritten lines on it.” Bill’s uncharacteristically brief—though positive—comments indicated the extent to which he was struggling with choosing a new leader for the company.

Finally, in 1995, he made a decision—of sorts. “I realized I couldn’t pick a successor,” he explains. The closeness of the family and the importance of each family member’s expertise made the decision too difficult and, he felt, it would be unwise for him to impose a choice on the company.

Instead, he clarified the roles of the three executive team members. And he gave them a new task: choosing who would take his place. They could rotate the presidency, have co-presidents or select a single president.

The non-decision didn’t surprise his sons and nephew. “It was very clear to us that he did not want to make that decision, nor did he want to be very influential in how the business was going to be run in the third generation,” Jeff says.

Now it was Bill’s turn to wait for an answer. Initially, the team had two years to make a decision, though the deadline ultimately was extended to July 1, 1998. “Months went by with no word on who they had picked,” he says.

The three potential successors were not idle during that time, however. They spent hours researching and talking about how a family business could operate with three leaders. “We spent hundreds and hundreds of hours discussing the structure,” Paul Darley says. “We really had to check our egos and our boxing gloves at the door.”

Every time the executive team met, the succession plan was the main topic of “casual but intense” conversation, Jeff says. In addition to discussing the structure, they made lists of each team member’s strengths and weaknesses.

This willingness to look for new ways of doing things can help a company sustain itself through transitions, says John Ward, professor of family enterprises at Northwestern University’s Kellogg School of Management, who led the Family Business Center at Loyola when the Darleys were learning about succession. “It’s very impressive to me, and very striking, how curious they are. It’s an attitude that ‘We don’t know everything and we want to learn.’”

But for all the discussions, it took a final deadline to push the three to a decision. They had decided early in the process that they would share the role of chief operating officer. Money was another relatively easy decision: They would all receive the same base salary, though bonuses could vary.

The management structure was “the biggest struggle,” Paul says. Finally, they concluded, “It was important that the company have one primary spokesperson—to the company, to the industry, to our customers—who would serve as president,” Paul says.

Days before the July 1 deadline approached, Jeff left his home in Chippewa Falls, Wis., where the company’s manufacturing operations are based, to meet his cousins at the corporate headquarters. His interests tended more toward operations, and he had removed himself from consideration as president a few months earlier.

One evening, the three met at the hotel where Jeff was staying to hash out the final critical details. The biggest question: which of Bill’s sons would be president. Late that night, they agreed that Paul’s communication and organizational skills made him the best candidate.

“We came to our decisions and slept on it,” Jeff recalls. The next morning, they reconvened in a conference room at headquarters. With no second thoughts, they called Bill to give him their unanimous recommendation: Paul (who today is 46) would be president and chief operating officer. Peter (now 52) and Jeff (now 50) would each hold the title of executive vice president and chief operating officer.

“It was a wonderful decision,” Bill says.

Having the three main candidates choose the next president could have caused a rift in the family. Paul says the decision was well-received because the company is now a so-called cousin consortium, which depends on consensus to run smoothly. “It’s important that the management style fit the ownership structure,” he says.

It’s ironic, Jeff says, that the process ended up with the youngest of Bill’s five sons (and the sixth of seven children) as the new president. “Typically when the baby gets promoted to be the top dog, you’re going to see all the brothers and sisters saying, ‘You’ve got to be kidding me,’” Jeff says. But he says his cousin had impressed the family with his business savvy, education (Paul had a bachelor’s degree in business and has since earned an MBA) and community involvement. “There isn’t tension there.”

Outside observers concur. “Bill Darley just did a wonderful job of letting the process determine his successor,” says Steven Rogers, Gund Professor of Entrepreneurship at the Kellogg School of Management at Northwestern University. “Nothing was forced on the family. Paul’s leadership was embraced, and he was empowered to be the leader by the people who would normally be his greatest competitors.”

The decision was not without costs, however. “We had spent so much time on it that we took our eye off the ball of the running of the business,” Paul says. The first year Paul, Peter and Jeff were negotiating the succession plan was the only year the company has lost money.

However, Paul says, “If it doesn’t kill you, it makes you stronger. That whole trying process proved to be a very wonderful thing for our company.” The decade since then has been the most successful the company has had, the family reports.

For those outside the executive committee, the succession process was a bit more mysterious. But Jeff’s sister Regina Bollaert, 53, says her brother reassured her.

“When talking with my brother, he always made me feel like all three of them had a part of making that decision,” says Bollaert, a nurse practitioner in Moline, Ill.

The succession plan has helped the company in several ways. The strong executive committee is an advantage, says the Kellogg School’s Rogers, who serves as an independent director on W.S. Darley’s board. “There are few companies out there who are as prepared succession-wise as this company is,” he comments.

At board meetings, Rogers is impressed by the way the family members can argue without carrying the disagreement beyond the issue at hand. “Disagreements are allowed,” he notes. “All of them have the ability not to take things personally as family members.”

This has positioned the company for the future. Bill Darley remains as CEO and Paul as president. The board recently decided to expand the company’s operations in China, and W.S. Darley is now selling water purification equipment in the U.S. Growth helps create career paths for family members.

Bill Darley says he had seen other family businesses fail as the leader aged and the company failed to change with the times. “I didn’t want that to happen to our company,” he says. “It’s a changing world. It’s just so wonderful that [next-generation family members] are part of what the future is, not the past.”

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

 


Sustaining a family connection

W.S. Darley & Co. recently ran an ad in a trade magazine that featured company president Paul Darley’s home telephone number.

“We’ve really billed ourselves as ‘the family business,’” Paul Darley says. “That translates into trust, great service, longevity—that’s not easily replicable by our competitors.”

The company has worked on several levels to sustain the connection with the family:

• It recruited independent board members. Steven Rogers, Gund Professor of Entrepreneurship at Northwestern University’s Kellogg School of Management, is one of three independent directors on Darley’s ten-person board. The board must “look at what’s in the best interest of the company combined with what’s in the best interest of the family,” Rogers says. “It’s not just black and white —there’s gray.”

• It developed a family constitution and participation plan. Family members know that as more of them become involved in the business, the potential for disagreement increases. The company’s family participation plan, created in 1995, outlines what qualifications family members must have if they want to work for the company. “It’s part of going from a mom-and-pop business to a professional business,” Paul Darley says.

The family constitution, which was approved in 2008 by both the board of directors and the family, outlines how the company would handle a serious disagreement: They would get outside professional help.

“Sometimes growth comes from diversity and different opinions,” says Stephen Darley, chairman of the family council. “We don’t want to have the kind of conflict that breaks up the family.”

• It created a family council. The entire family gathers every other year, usually away from the business’s offices. The family constitution came out of these meetings, which are also a way to introduce the fourth generation to the business.

A recent meeting included team-building activities with people from different generations and branches of the family. “It’s a real interesting dynamic, because we have people in their 70s and people that are seven,” says Regina Bollaert, a family member who does not work in the business. “It really makes you feel cohesive and helps you get to know extended family members.”

— M.S.

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Spring 2009 Contrarian's Notebook

Money isn’t everything

What the Dillards, Boscovs and Redstones
could learn from Curtis Carlson.

“Any enterprise requires three components,” the late relentless Minnesota entrepreneur Curtis Carlson (Gold Bond Stamps, Radisson Hotels, TGI Friday’s restaurants, etc.) once remarked to me. “You need a good idea; you need the talent to execute the idea; and you need the capital to pay for it. Of those three, raising the capital is the toughest part of the equation.”

This perception that capital is scarcer than ideas or talent (at least in today’s marketplace) explains many things. It explains why bankers are paid more than artists or teachers. It explains why orchestras, sports franchises and publications are almost always created by businesspeople rather than by musicians, athletes and writers. It explains why, in Michael Milken’s heyday as a junk bond purveyor in the 1980s, his waiting room at Drexel Burnham Lambert was always crowded, even at 5 a.m. on a Sunday.

But amid this preoccupation with raising capital, corporate executives sometimes forget that ideas and talent matter, too—as three recent family business situations remind me:

• Boscov’s, a 49-unit department store chain based in Reading, Pa., fell on hard times after the founder’s aging son and son-in-law turned the 97-year-old firm over to the family’s third generation in 2006. Amid last year’s credit and consumer crunch, Boscov’s filed for Chapter 11 bankruptcy protection last August.

But four months later, in what the press hailed as “the miracle that saves his father’s legacy,” the family’s 79-year-old patriarch, Albert Boscov, came out of retirement with an ingenious financial package to rescue his family firm from bankruptcy. The deal includes $20 million in equity from Albert Boscov himself, $30 million in equity and loans from two of the chain’s landlords, $47 million in state and federal economic development loans, and $210 million in high-interest credit lines from banks attracted largely by these aforementioned loans and investments.

In effect Albert Boscov rescued his family firm by leveraging funds from two sources—landlords and government—that would suffer disastrous losses in rents, taxes and property values if Boscov’s closed.

In announcing the deal, the funders spoke eloquently about supporting the community and stepping up to the plate in a crisis. But they said nothing about making future profits from this investment. Would it be churlish of me to suggest that the sort of ingenuity Albert Boscov demonstrated in attracting this capital is what’s needed to figure out how to entice shoppers back to Boscov’s stores?

• Dillard’s, the 70-year-old department store chain based in Little Rock, Ark., operates 318 stores in 29 states, with annual revenues of about $7 billion. But its sales have declined over the past two years in the face of more creative competition from discounters like Target and Wal-Mart, not to mention specialty apparel chains like The Gap and Abercrombie & Fitch. Dillard’s has tried to respond by reinventing itself as a more upscale specialty store, but its most creative step in this direction appears to have been a change in its corporate name, from Dillard’s Department Stores to Dillard’s Inc.

Although Dillard’s stock is publicly traded, the company has long been run as a private family firm. (Its executives only recently began talking to securities analysts and the press.) The Dillard family’s control is assured by its ownership of the firm’s supervoting Class B shares. That two-tier stock arrangement may well represent the high point of the family’s resourcefulness.

• And of course there’s the continuing soap opera involving 85-year-old Sumner Redstone, his love-hate relationship with his restive daughter Shari, and their family’s controlling stakes in Viacom and CBS.

In the course of half a century, Sumner Redstone built his father’s National Amusements chain of drive-in movie theaters into a vast media empire that gained a controlling interest in both Viacom and CBS. But as I’ve suggested before, for the past decade or two the Redstones seem to have expended their dwindling supply of ingenuity on financial maneuvers aimed at jockeying for control rather than expanding the pie. (See this column, FB, Spring 2007.)

Although the Redstone empire was valued at $8 billion last year, last fall’s stock market crash suddenly revealed that National Amusements was carrying a heavy debt burden —as much as $1.6 billion, by some accounts. Under pressure from his lenders, Sumner announced plans to sell $400 million in Viacom and CBS stock in order to comply with loan covenants.

Such a move would reduce the Redstone family’s holdings in both media giants by about 20%. But since all the shares being unloaded are non-voting stock, the Redstones will keep their control of CBS and Viacom intact through their voting stock.

In some quarters, I suppose, this would be considered a brilliant strategic tactic. But in the two months following this announcement—that is, two months after the big market meltdown—Viacom’s shares (voting and non-voting alike) lost 40% of their value. Would it be impertinent to suggest that Sumner Redstone and his family would do themselves, as well as CBS and Viacom, a big favor by selling their controlling interest to someone more inspired?

This situation reminds me of another business family who ran out of ideas long before they ran out of capital. Under the McLean family’s stewardship, the Philadelphia Bulletin became the largest afternoon paper in the U.S. But after the rival Philadelphia Inquirer was acquired by the Knight-Ridder chain in 1970, a third generation of McLeans seemed helpless to respond to the competition’s journalistic innovations.

As rumors of the Bulletin’s impending demise swirled through its newsroom in the late 1970s, its publisher, Robert Taylor (a McLean in-law), called a meeting to assure the staff that the family had no intention of selling the paper. His intended pep talk was interrupted by a gutsy and incisive young reporter named Ashley Halsey.

“I don‘t think you understand,” Halsey told him. “We want you to sell the paper. That’s the only way it will get better.” The Bulletin was indeed sold subsequently, but by then it was too late: The paper folded in 1982.

Years ago I was moved to observe: “At any publication, when the writers begin expending more creativity on internal memos than on the publication itself, that publication is in trouble.” The recent adventures of the Boscovs, Dillards and Redstones suggest a corollary: In any business, when the controlling family begins expending more creativity on financial maneuvers than on the company’s product line, that company too is in trouble.

 

 


 

 

The youngest son also rises (if you let him)

There’s gold at the end of the family line.
Are you making the most of your youngest children?

Two years ago a McKinsey & Co. survey suggested that, other things being equal, a firstborn son may be the worst choice to run your family business. (See this column, Summer 2007.) At that time, you may recall, I was researching a book about the Pony Express superintendent Jack Slade (1831-1864), which led me to speculate that youngest siblings may be the best choice to run your family business.

The book has since come out (Death of a Gunfighter, published last fall by Westholme Publishing), and I offer Slade himself as my case in point. As a wagonmaster and stagecoach mail superintendent in the 1850s and 1860s, Slade organized mobs of unruly men and animals into efficient teams capable of defying floods, droughts, blizzards, outlaws and hostile Indians. In a land devoid of courts and law enforcement (present-day Nebraska, Colorado and Wyoming), he functioned as a benevolent prairie feudal lord, almost single-handedly protecting settlers, emigrants, stagecoach passengers and the U.S. mail. He remained on the job for four years at a time when other men burned out within months. In the process he helped hold the Union together on the eve of the Civil War.

The question naturally arises: If Slade was such an effective and courageous administrator, why was he denied any role in his family’s businesses back home in Illinois?

The answer: He was the third son of a third son of a third son.

“At least the first 200 years of American history were largely driven by younger male siblings,” I suggested here two years ago. “These were the men who were motivated to cross the Atlantic and then to cross the continent—because they lacked an automatic inheritance at home. To survive, they had to try harder than their older brothers, and very often they did. And still do.”

Consider my grandfather, Marcus Rottenberg—the youngest of nine children. Of the three brothers in his family, the oldest and youngest were dynamic, while the middle brother was soft and gentle. Marc started out in the family knitted-goods business, but he and his oldest brother proved too stubborn for each other, so Marc went off on his own, where he flourished as an old-fashioned captain of industry for, oh, some 75 years before he finally retired at age 96.

You’d think such track records would teach family businesses to take a closer look at those younger siblings. But the number of youngest sons or daughters running family firms can be counted on the fingers of barely two hands.

Let’s see. David Rockefeller, youngest of five brothers and six children, became CEO of Chase Bank—but the Rockefellers were only nominally the dominant family at Chase. Walter Annenberg, youngest of eight children, succeeded his father at Triangle Publications—but then, Walter was the only son. Arthur O. Sulzberger, youngest of four children, succeeded his brother-in-law as head of the New York Times in 1963—but then, he too was the only son. Both Katharine Graham of the Washington Post and Brian Roberts of Comcast were the fourth of five children—but they were also the only children who demonstrated interest in their father’s business.

You get the idea. Other examples of “young siblings” who’ve headed family firms may exist (and if you think of any, please tell me). But by and large, most family firms still follow the 19th-century pattern set by the great retailer R.H. Macy & Co and the great banking house of Drexel & Co.: The two oldest brothers ran the place, while the third brother functioned more or less as their emissary.

If Jack Slade’s example won’t persuade you to look more closely at your youngest kids, perhaps the singing von Trapp family will. The Baron von Trapp had ten children—the last three by his second wife, Maria, who was immortalized in The Sound of Music. The family fled Nazi-occupied Austria for the U.S. in 1938 and subsequently opened an inn in Stowe, Vt. The baron died in 1947 and Maria in 1987. At that point 32 von Trapp family members held stock in the lodge, but none of them wanted to run the place.

So who stepped up to the plate? The tenth and youngest sibling, Johannes von Trapp, now 69. Johannes had a master’s degree in forestry and pursued an academic career in natural resources in British Columbia and Montana. But when his siblings dropped the ball at the lodge, he returned to Stowe in 1994.

“I honestly resented the fact that none of my older siblings could’ve took over the business,” Johannes told the New York Times last December. “Then I could’ve run off and done whatever I wanted to do.”

Apparently his conscience didn’t let him. Good thing for the von Trapp family legacy that his parents didn’t stop after their ninth child.

 

 


 

 

A modest proposal

In the face of revenue declines and impending debt payments at the New York Times Co., members of the Ochs/Sulzberger family have reaffirmed their commitment to the great newspaper they’ve controlled since 1896. Instead of selling, the family will conserve cash by slashing the Times Co.’s quarterly dividend by 74%.

“They believe in the editorial independence of the journalism that is produced each and every day,” said Times Co. CEO Janet Robinson in announcing the reduction in the dividend.

“The dividend is a weighty issue for the Times,” the Wall Street Journal reported, “because it is the chief source of income for many members of the Ochs-Sulzberger family.”

That raises a question: Are these dedicated family members—these stewards of independent journalism—incapable of supporting themselves?

It was Adolph Ochs, the family patriarch, who in 1896 conceived the famous Times motto: “All the news that’s fit to print.” Perhaps the family’s motto today should be: “We’ll do anything for the Times, except look for work.”

 

 


 

 

It’s as clear as….

Germany’s Porsche Automobil Holding SE last fall sharply increased its stake in Volkswagen AG to nearly 75% in a “domination agreement” that would give Porsche access to Volkswagen’s cash flows. The takeover initially caused a rift between the interrelated Porsche and Piëch families, who between them own 100% of Porsche’s voting stock.

Ferdinand Piëch, chairman and former CEO of Volkswagen, had abstained from a crucial Porsche board vote on this matter, to the surprise of his cousin, Porsche chairman Wolfgang Porsche, who also serves on Volkswagen’s supervisory board. In addition, one report explained, the abstention “caused confusion about plans of the Porsche and Piëch families.”

I dare say it caused confusion within the Porsche and Piëch families as well. As I’ve suggested here before, business families aren’t monoliths. (See this column, FB, August 2006.) Notwithstanding the popular notion that some families are good and others are bad, the variations within families are often greater than the variations between families.

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