Nine strategies to preserve your company as a family business
Will future generations be able to keep your family business in the family? As a reader of Family Business, you probably already know that the odds are against this. Still, Frank Perdue had some ideas that can help you beat those odds.
Perdue Farms is now in its fourth generation, and to get there, the Perdue family had to get a lot of things right. Frank Perdue, the driving force behind the company's initial growth, wanted to see the company stay in the family. As Frank's wife, and now his widow, I got to watch how he consciously worked to create a culture that supported keeping the business in the family.
I was particularly interested because I had seen how my late father, Ernest Henderson, founder of the Sheraton Hotel chain, did none of the things that my late husband did to preserve the company as a family business. Because my father left it to chance, the Sheraton Hotel chain, which was a family-owned company prior to his death, quickly slipped out of the family's hands. The company lasted only to the second generation and then was sold.
Because I wanted the Perdue family to avoid some of the disappointment and sadness that comes when succession isn't handled as well as it could be, I was beyond delighted to see how seriously Frank took this part of his career. Here are some of the things he did that my father didn't do. They're things that you might consider for keeping your family business in the family.
1. Hire a family business consultant. Almost a quarter-century before his passing, Frank hired John Ward from the Family Business Consulting Group. Frank recognized that he didn't have the necessary expertise on his own and, as was his pattern, he was willing to call on experts.
2. Attend family business conferences to learn from others. Frank attended these or occasionally invited me to attend on his behalf, and he always paid avid attention to the notes that I shared with him. He valued these conferences because he was a big believer in the adage that "one good idea can change your life."
3. Plan for family vacations—even after you're gone. While Frank was alive, he arranged for family vacations, but even more, he endowed a marital trust for the purpose of continuing these family vacations even after his passing. The trust pays for travel to the chosen destination for all family members, including engaged couples, and it pays all expenses while they are there. That way, even distant cousins get to spend time with each other and build their relationships.
4. Create a family newsletter. In our case, this was easy because I'm a writer, but the benefits of keeping the family informed are so great that it's worth it to hire a writer if a family member isn't available. Initially our newsletter consisted of my interviewing Frank about his values and attitudes. I'd ask him questions such as how he felt about spending income and not principal, or what he thought of pre-nups (he was in favor of them). Later on, the newsletters began to cover family events such as engagements, weddings, births, awards or graduations, or basically any family news.
5. Develop an employment policy for future generations. Over the years, Frank changed his mind about employing family members. Initially, he was against hiring family because he was against nepotism. However, he saw many advantages to being a family business, including that we can make investments that might not pay off for a decade while non-family businesses have to worry about the next quarterly investor report. He began cherishing having family members in the business, as opposed to discouraging them. As a result, he instituted a program in which each family member could have a job with the company, but once employed, they'd be expected to pull their weight as much as any non-family member. To my astonishment, Frank actually fired his own grandchild, so he really meant the part about family members having to pull their own weight.
6. Form a family council. This is important because families are a little like countries: When you have a participatory democracy, everyone can feel that their views are heard, disagreements can be handled, steam let off and ruptures prevented. It's inevitable that family members will disagree, but a governance plan can help resolve disagreements. Decide early on whether decisions are to be made by a simple majority or by, say, a two-thirds or three-quarters vote.
7. Institute a covenant culture. The culture Frank encouraged was, "It's OK to disagree, and to disagree as strongly and as vocally as it takes to get the issues out on the table. However, problems are to be solved within the family. Anything else is 'something we don't do.' "
8. Develop a written document that expresses your values. In Frank's case, he spent days creating a document outlining ten values he cherished, such as "Be a person whom others are justified in trusting," and "If you say you will do something, do it." The purpose of the document is to transmit ethical values from one generation to the next. Each family member has a framed copy. It's a deep part of our culture.
9. Take time to cherish each family member. Frank put into practice what the great American psychologist William James wrote more than 100 years ago, "The deepest principle in human nature is the craving to be appreciated." Busy as he was, Frank would write long, personal, encouraging birthday letters to his children, grandchildren and great-grandchildren. He took the time to know what was going on in each of their lives, and they knew that he loved them and that they were all-important to him.
The bottom line is, try putting as much effort into keeping family members engaged with each other and with the family business as you put into keeping your employees engaged. Planning, education, knowledge and commitment can help you beat the odds and have your family business stay a family business.
Mitzi Perdue, widow of Frank Perdue, is a public speaker, author and businesswoman (www.MitziPerdue.com).
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