Leadership from within

By Rob Lachenauer

When the controlling owner of a multimillion-dollar family business in the financial services industry died suddenly, nobody predicted that Gabriel would want to deliver the eulogy. Gabriel—the patriarch’s eldest son and himself the CEO of a publicly traded insurance company—had left the family business after a vicious falling-out with his father. So when Gabriel insisted on writing and delivering the eulogy, the family agonized over what he would say. The middle sister, considered by other family members to be the family’s go-to leader, insisted on reading the eulogy before the funeral. Gabriel refused to let her. The siblings exchanged bitter words. “Forget it!” the sister shouted. “You may be a CEO, but you are not the CEO of this family.” Gabriel angrily capitulated and let her read and edit his remarks.

This story illustrates the need for what I call leadership from within. In planning to deliver a eulogy without first attempting to reach consensus among his siblings, Gabriel was overstepping his authority. He was leading from above, a leadership style that is common in non-family businesses, where organizations tend to be hierarchical. The values governing business families, on the other hand, are more likely to be equality, respect and fairness.

By telling his family, “I’m the boss, and I’ll do what I want to do,” Gabriel was seizing power in a sphere where he had far less authority than his sister did. When confronted by his sister, he found himself isolated and humiliated. The showdown could have been avoided if only he had demonstrated just a little humility—if he had led from within.

Those who lead from within are modest enough, and competent enough, to align their interest with the interests of other members in the family business system. This leadership style is key to success in family businesses, especially those involving siblings, where there is a presumption of equality. Those who are condescending, haughty or arrogant—or who are perceived as such—are quickly cut down to size by others, privately if not publicly. (Firstborns are often accused of thinking they are more important than their younger siblings.)

When a business reaches the sibling or cousin stage, the business family system has grown more complex. The family, business and ownership systems have evolved into separate realms. The founder’s leadership model—often an autocratic one—must be adapted. In the long term, leading from within proves to be more successful than leadership by fiat because it builds on collaboration and mutual respect.

The leadership triangle

Leadership from within has three components, and thus can be diagrammed as a triangle (see figure). The three components are humility, competence and alignment of one’s personal interests with those of other key stakeholders. Let’s look at a few examples.

We were engaged recently by a family that owns a large publishing house in Denver. Jonathan became the heir apparent to the $1 billion family business when his father fired his elder brother Saul, who felt entitled to take over the business despite a lack of commitment to both the family and the business. When Jonathan protested to his father that he had neither Saul’s experience nor his knowledge of the business, his father assured him he would rapidly learn the ropes. Jonathan worked long hours as his father’s apprentice and attended an MBA program at nights and on weekends.

Unlike his brother, who lived the high life, Jonathan asked for his first raise only after having spent a full year in the business—and that was to help defray the costs of a nanny for his children because Jonathan was spending extra time at work. For someone slated to gain control of a $1 billion business, this was a rather humble request, and it provided further evidence for his father that he had made a wise choice. What’s more, thanks to his genuine self-effacement, family members began to confide in Jonathan, and he developed better business judgment as a result of their input and feedback. The family respected Jonathan because he communicated the message that “I work for you.” This is humility of the highest order.

While humility is necessary for someone to successfully lead from within, it is not sufficient. Competence is also is a crucial component.

We are currently working with an Asian family in the silk business. Manjari is the only daughter in a family of five sons, and she epitomizes competence. Although she could easily have become an invisible woman in the family business system, Manjari has spent a lifetime devoting herself to learning about the family and its business. She attends family governance meetings and has read the essential books on family business. She can tell you the legal ins and outs of shareholder agreements. She is very knowledgeable about how various parts of the business are run. Manjari is highly gifted, motivated and ambitious. Other family members defer to her expertise even though she doesn’t have a formal position in the business. She has created deep ties of loyalty and trust, and through sheer competency she has earned her position of authority in a family that is not always welcoming to women.

The final leg in the triangle, alignment of interests, grows organically from humility and competence. Let’s go back to Jonathan for a moment. Although he was tapped to become sole owner of the business, Jonathan was humble enough, and competent enough, to see that ownership should be shared with his siblings, including his potentially disruptive older brother. He took steps toward creating a family foundation that would involve everyone in the family. This alignment of his interests with those of his family built solidarity across the family business system. One concrete result: Family members who had moved out of state rejoined the family and returned to work in the business.

Contrast Jonathan with Matt, the CFO of a multibillion-dollar family business in real estate, who had long advocated for a new ownership structure to replace the business’s antiquated ownership agreement. For years Matt had presented the financial rationale for the change, but his words always fell on deaf ears; nothing he said seemed to win over family members.

Then Matt’s siblings raked him over the coals during a birthday roast that got out of control. Even nephews and nieces unleashed a storm of pent-up frustration and anger. To Matt’s credit, he tried not to get defensive, but he was clearly hurt. Reflecting later on what had happened, he decided that during the next family shareholder meeting, when the ownership structure was being discussed, he would not take his usual place at the head of the table. Instead, he quietly took a seat in a back row, tucked between his great-aunt and the newest family shareholder. He put away his computer, on which he customarily took compulsive notes, and he listened rather than -lectured.

Matt’s symbolic actions signaled that he had begun to align his interests with those of the family. More progress was made in that meeting than had been made in the previous four years. Recognizing that Matt had gotten the message that he was not above them but with them, other family members stopped resisting his suggestions and engaged in the necessary work at a much deeper level.

If you’re wondering whether you have what it takes to lead, just ask yourself, “Am I humble enough?” “Am I competent enough?” “Am I willing enough to align my interests with those of others in the family business system?” If so, then you have the right stuff to become a leader from within, which is what well-developed family businesses are in most need of today.

Rob Lachenauer is partner and CEO at Banyan Family Business Advisors (http://banyan-fba.com).

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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March/April 2013

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