Charting the great unknown
Life expectancy has increased, and seniors who are full of vitality may be reluctant to relinquish their hold on the family business. How should the successor generation prepare?
The late Robert B. Wegman may well be emblematic of a shift that is taking place in family businesses across the country. When he passed away in April 2006, Weg-man, then chairman of Wegmans Food Markets Inc., was 87 years old. Until shortly before his death, a company announcement stated, he “kept a full schedule working in the office and enjoying his favorite pastime of visiting Wegmans stores.”
Only the year before, he had named his son, Danny Wegman, CEO and his granddaughter, Colleen Wegman, president of the 70-store chain based in Rochester, N.Y. Robert Wegman had worked in the company for more than 65 years and had been its leader for more than 55 years.
The prospect of Mom or Dad being in charge for more than half a century may not bring comfort to sons and daughters eager to take the reins of a family business. Nevertheless, the reality is that people are living longer, healthier lives, and members of the senior generation who are full of vitality in their 60s, 70s and 80s may be reluctant to relinquish their hold on the family firm. At the least, they may wish to retain a vital connection to it.
Over the last century, the average life span of Americans rose 30 years. An individual born in 1900 had a life expectancy of 47.3 years, but someone born in 2004 could look forward to 77.8 years, according to the National Center for Health Statistics.
While we’re not yet seeing statistics on aging and the family firm, family business advisers are beginning to notice more instances of three generations of family members working in the business.
“Even in families where there are only two generations, I’ve certainly seen people staying a lot longer,” says Paul Sessions, director of the Center for Family Business at the University of New Haven. “And not just because they don’t want to give up control, but because they’re still incredibly able and there’s a need to be -useful.”
Consider some names you might know:
• Sumner Redstone, 84, still chairs New York City-based entertainment conglomerate Viacom Inc., and speculation is that his daughter, Shari Redstone, will be 60 before she gets to run the show. (However, according to a July 20 Wall Street Journal report, Redstone “is no longer confident” that Shari, 53, should succeed him.)
• At 77, Edward C. Johnson III is still the very active chairman of family-controlled Fidelity Investments, the Boston mutual fund giant. Unclear is whether his daughter, Abigail P. Johnson, a company executive and its largest shareholder, will be his successor.
• John H. Johnson, the founder of Johnson Publishing Company, publisher of Ebony and Jet magazines, ran the Chicago enterprise for 60 years before naming his only child, Linda Johnson Rice, CEO in 2002. When he died three years later at 87, he was still the company’s publisher and chairman.
In some families, to be sure, restless successors all but shove the parent-CEO out the door. However, says Sessions, “In the families that are working well together, there’s a real concern in the younger generation for the seniors, and they don’t want to push [the seniors] out.”
When he’s working with next-generation family members who seem impatient to take charge, Sessions tries to help them “reframe things a bit,” he says. “Think in terms of not, ‘We’ve got to get him out of here so we can do what we want,’ but, ‘How can we get to do what we want and give him an opportunity to do what he wants? How can we find useful activity for all of us?’ Not make-work but real stuff.”
Planning the transition
Michael Powell, 67, always expects to have a role in his company—just not the role he has now as the owner and president of Powell’s Books in Portland, Ore. Powell’s, which is nationally known, has eight stores and a sizable Internet operation; it employs more than 500 people.
About five years ago, Michael and his wife, Alice, a psychotherapist and clinical social worker, turned to the Austin Family Business Program at Oregon State University for help in succession planning. Their only child, Emily, was working in another state and it was not yet certain that she would join the family business. She did, however, in 2004, and the Powells were ready for her with a career development plan. The Austin center has also worked with some of the company’s senior managers and even Emily’s boyfriend to help ensure Emily’s success.
Last year, Michael announced that Powell’s Books would stay in the family and that Emily would own and operate the company after a four- to six-year transition period. When Emily takes over, Michael, who says he’s healthy except for knees that are “a little creaky,” will be in his early 70s.
When you’ve run a business for 28 years, as he has, Michael says, you don’t think of a retirement age. “I don’t have any reason to think that 65 is any more magic than 67 or whatever,” he says. “It became more of an issue of when Emily would be ready.”
Only 28, Emily is getting ready as fast but as deliberately as she can. At present, she is the company’s director of used books and is taking advantage of the opportunity to learn from her father and other senior managers. In addition, she is working on an executive MBA in a joint program offered by the University of California, Berkeley, and Columbia University in New York.
Right now, she says, her father’s role is the same as it has always been—“the leader and the visionary.” She sees the next three years as one of “partnering together so that I get the most out of the experience of working with him and learning from him.... It’s really a mentorship as well as, for me personally, just a great opportunity to work with my father, who I’m very close to and who I care a lot about.”
Neither she nor her father knows what role he’ll assume in the future. He might serve as chairman of a yet-to-be-created board or just do some of the more mundane jobs he enjoys, such as pricing and processing books. But one of the main things, he says, will be to “try and stay out of Emily’s way.”
Besides, he’s got a lot to do. He serves on a number of community and business boards and is chairman of Portland Streetcar Inc., a non-profit agency that manages the city’s streetcar development, construction and operation.
Even though he announced his plans to step down several years in advance, Michael says he isn’t having any regrets about the prospect. “I have always thought that the important thing was the success of the company, its stability, and its survivability,” he says, “and it occurred to me that the best thing for the company—not for me personally —is to have fresh eyes and fresh hands on the reins.”
Longevity’s advantages and challenges
You have no doubt noticed that most of the successors or prospective successors mentioned in this article are women. That’s because two major trends are converging —longer, healthier life spans and the emergence of women as business leaders. In family businesses, the greater longevity of the senior generation works to the advantage of daughters who want to raise their children to a certain point before joining the family business or taking on a significant leadership role. Once their child rearing is done, they still have ample time to make a meaningful contribution to the business, and someone in the senior generation is still available to teach them the ropes.
Curtis L. Carlson, founder of the Carlson Companies, named his daughter, Marilyn Carlson Nelson, CEO of the Minnesota-based travel empire on its 60th anniversary in 1998, the year before he died at age 84. “If I would have retired at age 65, we wouldn’t have gotten to where we are today,” he once told Family Business Review, a professional journal.
In the same article, Nelson, who joined the company after raising a family, said one benefit of her father maintaining his leadership position for so long had been “to give my sister and me a chance to develop a more mature relationship.… I think my sister and I are now much more capable of providing the leadership and stewardship for the Carlson family and our family enterprise.” Nelson’s sister, Barbara Carlson Gage, heads the family’s foundation.
Healthy longevity can offer many benefits to a family firm, including the wisdom and experience of the senior generation. And having several generations in one business can help a family stay connected and can provide the enterprise with a variety of useful perspectives. “It’s really fun to have three generations working together on a daily basis,” Colleen Wegman told a newspaper reporter not long before her grandfather died. While her father and grandfather shared the same values, they approached things differently, she said, adding, “I think diversity of thought is so important for our success.”
But there are downsides and challenges as well. As her father grew older, Marilyn Carlson Nelson told FBR, “he became less willing to take some of the risks that had helped him build and grow the company.”
A major challenge that longevity poses is financial, according to Bonnie Brown Hartley, president of Transition Dynamics Inc., a family business consulting firm in Venice, Fla. The oldest baby boomers are now entering their 60s and, Hartley points out, they stand a good chance of becoming centenarians. The question boomers need to be asking, she says, is, “Will we be financially safe until we’re 100?”
Multiple generations in a family firm can also present communication difficulties. For example, Hartley says, the younger generations dislike meetings and would prefer to use e-mail or text messaging. Members of Generations X and Y work hard but, unlike their parents and grandparents, Hartley suggests, they’re not going to be as eager to work 80-hour weeks. They want more balance.
Despite the differences, Paul Sessions is optimistic. “A lot of it is about the willingness to communicate,” he says. Where there’s willingness and generosity of spirit, family members “find ways to connect.”
Longer, healthier lives are wonderful, but they do raise new questions for families in business. When do we retire if not at 65? What do I do if my parents don’t retire? How do we fund all those extra years and manage our health? It’s uncharted territory, and today’s generations must start crafting the maps for those yet to come.
While Robert Wegman had to answer some of these questions for himself, he never had to deal with the issue of extended longevity of the generation before him. Quite the opposite. His father, Walter, and uncle, Jack, were the founding partners of Wegmans. Robert was only 18 when his father passed away and just 31 when his uncle died. He would probably agree that a longer, healthier life span is a good thing.
Sharon Nelton has been writing about family business issues for more than 20 years. She is a former board member of the Family Firm Institute.
For further reading The Dynamics of Aging Families: A Handbook for Both Aging Parents and Adult Children, by John W. Gibson and Bonnie Brown Hartley. Offers information and tools to help different generations understand one another and interact effectively. Available from www.cambiopress.com. To see an excerpt, visit www.transitiondynamicsinc.com.
Facing up to extended lives Tips for older family members:
1. If you plan to hang on to leadership, make it clear to your children so they can make choices for their own lives.
2. Enlist several trusted individuals who will tell you when it’s time for you to let go of control. Don’t put the business at risk by staying on when it needs fresh leadership.
3. Find a meaningful way to stay connected to the business without running it. Be a mentor or an ambassador to the community, or engage in work you enjoy.
4. Retire to something, not from something. Some former CEOs run for political office, become engaged in philanthropy or teach.
5. Plan well ahead how you are going to fund a longer life—and let your family know your plans.
Tips for younger family members:
1. Consider the advantages of having members of the senior generation stay in the business longer—the value of their experience and their relationships with customers, for example.
2. Hire a consultant or enroll in a family business program to help you and the senior family members deal with issues of aging and planning for an eventual transition.
3. Help aging but healthy family members find meaningful ways to stay connected with the family business, if that is their desire.
4. Be honest with yourself and with a senior family member who won’t relinquish the reins. If you find it unacceptable to wait another ten years before taking over, perhaps it’s time for you to move on.
5. Begin to plan now for your own extended life.