Mother didn’t always know best
In the wake of a scandal, the downside of a matriarch’s influence on the New York Times.
Much has been written, in this magazine and elsewhere, about the beneficent role played by the late New York Times matriarch Iphigene Ochs Sulzberger, who never held an official job at the Times but nevertheless profoundly influenced three generations of Times publishers: her father, Adolph Ochs; her husband, Arthur Hays Sulzberger; and her son, Arthur Ochs Sulzberger. (See, for example, “The Stradivarius of journalism,” FB, Summer 2001.) Throughout much of the 20th century, Iphigene Sulzberger constituted the glue that held the world’s greatest newspaper together.
But in light of this year’s Jayson Blair scandal—in which an unscrupulous reporter managed to rise through the ranks while Times editors overlooked his howling errors and falsehoods—it’s worth noting the downside of such informal family-style influence.
In 1975 the Times Sunday travel section published a story that was revolutionary by Times standards (even if you or I would find it innocuous today). It concerned an “all-gay cruise” to the Caribbean, and the notable thing about it was its non-judgmental tone: For the first time, a Times article vividly portrayed homosexuals not as perverse misfits but as ordinary middle-class businesspeople, lawyers, teachers and doctors who spent a week partying to hard rock and soft drugs.
Iphigene Sulzberger, who was 82 at the time, was upset by the appearance of such a story in the Times. According to Joseph Goulden in his book Fit to Print, she phoned her son, Times publisher Arthur O. Sulzberger, and gave him a tongue-lashing. Arthur in turn summoned the responsible editors and told them he wanted no more “gay glorification” in the Times. His mother, he said, was an understanding woman, but she was also a lady, and ladies did not like reading such “garbage”—especially on Sunday morning in her own newspaper.
“Above all,” Arthur told one editor, “I don’t want another call from my mother on this point. Understand?”
As a result, according to Goulden, for the next decade or so the Times essentially closed its eyes to a major social phenomenon: America’s gay revolution. Iphigene Sulzberger didn’t want to hear about it, so the Times didn’t write about it.
At most newspapers, a self-respecting journalist would quit rather than accept such a decision. But the Times is not a place that anyone leaves lightly. So its journalists close their eyes to its imperfections and assume their superiors know what they’re doing—at least until some rogue reporter like Jayson Blair smashes that assumption.
In his analysis of the Blair scandal, Dartmouth College business professor Sydney Finkelstein (the author of Why Smart Executives Fail) argues that “companies led by very smart executives fall into disastrous situations,” even though “key executives are fully aware of what’s going on in real time.” Writing in the Wall Street Journal (May 20), Finkelstein cited two examples in addition to the Times: Motorola’s failure to act when the cell phone business shifted from analog to digital technology; and Barings Bank’s failure to rein in its rogue trader Nicholas Leeson, whose huge losses in Singapore—tacitly approved by his superiors in London—ultimately brought down the legendary 232-year-old bank in 1995.
How could executives at such prestigious firms fail to act in the face of clear warnings? “The key,” Finkelstein argues, “is the very prestige that these companies enjoy.” At many blue-chip firms, he says, “leaders choose not to sweat the small stuff because they’ve been so successful for so long, they disregard warnings that would trouble a less confident group.”
What troubles me is that all three of Finkelstein’s examples—the Times, Motorola and Barings—are family firms. For most family businesses, continuity of the sort represented by Iphigene Sulzberger is a priceless asset. But it can also blind such companies as the world (not to mention the company) changes. Let’s hope the Times isn’t the only firm to hear a wake-up call in the Jayson Blair scandal.
Looking out for Number Two
In many successful family firms, the key player is a loyal lieutenant who’s been made to feel part of the family.
One of my favorite family business sagas—Marcia Davenport’s 1942 novel, The Valley of Decision—begins in 1873 with the arrival of a 16-year-old Irish housemaid in the mansion of a Pittsburgh steel dynasty. Over the next 70 years, thanks to a combination of loyal devotion and strength of character, this penniless servant becomes the prime force responsible for holding both the family and its company together. Precisely because Mary Rafferty is an outsider, she appreciates the Scott family’s heritage even more strongly than the Scotts themselves, who tend to take it for granted.
This story isn’t as far-fetched as you and I might think. In many family firms, the key players are not the family members but their faithful retainers. Maybe they didn’t start out as housemaids. But the landscape abounds in real-life Mary Raffertys whose attraction to family firms remains steadfast even though they know they’ll never own the place.
For example:
• Maureen Chiquet started her retailing career as a brand manager at L’Oréal, owned by the Bettencourt family in Paris. Then in 1988, when she was 25, she joined the Fisher family’s Gap retailing empire as a trainee. Over the next 14 years she worked her way up the ranks to the presidency of Gap’s Banana Republic division last year. This year she resigned to become president-elect of the U.S. division of Chanel—another family firm, this one controlled by the Wertheimers of Paris.
• When Alfred Verrecchia joined Hasbro, the major Rhode Island-based toy manufacturer, in 1965, he was a 22-year-old college flunk-out (with a pregnant wife, to boot) who was looking for practical accounting experience before taking another crack at school. “I thought if I could get a job making $10,000 a year after college I’d be in fat city,” Verrecchia recently recalled.
Presumably he harbored no hopes of rising to the top: Since its founding in 1923, Hasbro has been run by three successive sets of Hassenfeld brothers. But in 1993, four years after the death of CEO Stephen Hassenfeld, Verrecchia was made second-in-command to Stephen’s younger brother, Alan. “No matter what we went through, it was always Al who had his feet firmly on the ground,” Alan Hassenfeld explained. “As I listened to different people, more often than not I ended up taking more of the advice from Al than anybody.”
And this year, when Alan chose to retire at age 54, Verrecchia was designated as his successor at age 60. He’s the firm’s first non-family CEO, but, as Verrecchia puts it, “I feel part of the family. I’m not going anywhere.”
• Anders Moberg was born in Almhult, Sweden, home town of Ikea, the world’s largest furnishings group. He joined Ikea at age 20 in 1970 and by age 36 was appointed successor to Ikea’s charismatic founder, Ingvar Kamprad. Over the next 13 years Moberg and Kamprad formed a remarkable partnership, overseeing Ikea’s rapid international expansion. Moberg left Ikea in 1999 to head the international division of Home Depot, but he’s now back in the “family way” as the new CEO of the Dutch retailer Royal Ahold (known as the Albert Heijn supermarket chain before its name change in 1973).
• At Comcast, the Roberts family’s giant cable TV combine, Julian Brodsky was founder Ralph Roberts’ top lieutenant for 40 years and remains the company’s vice chairman at age 69. Comcast’s current CEO—Ralph Roberts’ 43-year-old son, Brian—seems to have found a similar non-family consigliere in Stephen Burke, 44, president of Comcast’s cable division for the past five years. Burke is actually a second-generation Number Two: His dad, Daniel Burke, was the longtime right-hand man to Thomas S. Murphy, who ran Capital Cities/ABC for 28 years.
“I will never be CEO,” Stephen Burke told the New York Times in March. “But Brian makes my job more fun than if I were CEO. I looked at my dad and saw his relationship with Tom Murphy was pretty special. Tom made my dad feel like it was partly his company. Brian has voting control, but he has made me feel that I am a big part of his thinking about Comcast.”
Hmm. Conventional wisdom holds that family firms, lacking the carrot of ownership or the CEO’s chair, can’t compete for top managerial talent. But as these examples attest, family firms hold a few good cards of their own in this poker game. Since most everybody needs a family, sometimes the best way to attract good people is to treat them like family. And as Alfred Verrecchia’s experience at Hasbro suggests, sometimes they do reach the top even though nobody planned it that way. Which is precisely Mary Rafferty’s story in The Valley of Decision.
Would you hire Murray?
For further reassurance about family firms’ ability to compete for managerial talent, I offer a parable by Fortune magazine’s pseudonymous corporate chronicler, Stanley Bing. It’s the true story of an itinerant executive called “Murray,” who, as Bing tells us, has “just been named to a top job at one of the biggest corporations in the world.” (See Fortune, May 12.)
Murray, as Bing describes him, “has no qualifications other than a lifetime of meandering about looking quizzical. His one possible talent is finding tough, vicious operatives to do the work.” Nevertheless, each time Murray departs from a CEO job, leaving disaster in his wake, some other board of directors—“torn by ignorance and indecision”—hires Murray “because he’d had the top job before some place” and “because they saw in him what they wanted to see.”
Bing suggests that Murray is a common phenomenon in large corporations. But I would suggest that the Murrays of the world rarely gravitate to family-owned firms. They flourish mainly at companies whose owners lack a long-term stake in the firm’s welfare.
He who laughs last…
A follow-up:
In “The little bookstore that could” (FB, Summer 2001), writer Jane Biberman related the uplifting story of Philadelphia’s family-owned Joseph Fox Bookshop, which survived and even flourished after the nationwide Borders chain opened a giant unit just around the corner. Fox’s hidden assets in battling its large rival, Biberman noted, included ingenuity, resourcefulness, lack of bureaucracy, genuine knowledge of its products, a loyal base of customers and suppliers, and ownership of its real estate.
This last item has turned out to be perhaps the most critical of all: This past spring, Borders’ Philadelphia store lost its lease and was forced to move five blocks away.
The apparent moral: When a big competitor moves in on you, don’t cut and run. Stand your ground and examine your assets. You may possess more staying power than you think.