Power and Priorities

By Carin Rubenstein

Our 1,076 respondents divide according to generation—and gender—on questions of succession, equality of opportunity, and family politics.

HIGHLIGHTS

 

  • Although women comprise more than half of the American work force, they are under-represented in management of family businesses. Those who are involved often complain of sex discrimination, even in the bosom of their own families. Among the reasons many stay on is the flexibility of theirwork hours.
  • Succession is such a thorny subject that, for many, even discussions of it are taboo. Very few founders in the survey have actually chosen a successor; few sons have openly asked the founder to retire.
  • Those of our respondents who are under 35 would, if they dared, advise their elders to consult children about retirement. But those who are actually nearing that age would like to work as long as possible.
  • Improving customer service is seen as the key not just to greater profitability but to survival.
  • Keeping financial secrets from family members in the business is a common practice.


Family business members overwhelmingly agree: Their most important business goals are basic ones — survival and service. A full three-quarters of those responding to our survey say that maintaining profitability is among their top priorities; two-thirds say that serving customers well is also fundamental to success.

"The only way for us to survive is to do what we do better than anyone else, through our service," says 55-year-old Edward Westlake, of Darby, Pennsylvania. Westlake owns and manages several manufacturing companies started by his father 40 years ago, employing 250 people and bringing in $30 million annually. "Serving customers well has always come first," agrees his 28-year-old daughter and colleague, Nancy Westlake. "We don't have a business without it. That's the perspective I've always learned."

Jay Abdo, 38, an accountant who works in one of his father's businesses in Minneapolis, Minnesota, sees things in much the same way: 'To be successful, you have to be customer-conscious. By serving customers well, we'll maintain our profitability and our sales."

In a sense, family business members belong to a values vanguard. Only recently have large American corporations begun to "recognize that they have multiple stake-holders, that customers are as important as investors," says Edward Lawler, a professor of management at the University of Southern California — Los Angeles business school.

Our respondents make it clear that they truly value good service and faithful employees. Executives in public corporations may pay lip service to their "family" of employees, but, says Lawler, "it often doesn't extend beyond themselves and other senior managers." For family businesses, as Nancy Westlake puts it, "the company is the family, and all our employees are family."

Many of our respondents feel a similar responsibility for providing jobs for family and others in the community. One-third say that providing security for relatives is among their most important goals; almost as many say that providing security for employees is one of their top three goals. Says the founder of a closely-held manufacturing firm in the South: "We have the responsibility of providing jobs and keeping people working. It's always in the back of my mind that it's up to me to get the sales to do that." In this $35 million company, the founders take their vacation with everyone else, "during Fourth of July week, when we shut the place down."

Not all family businesses, of course, are humanistic, caring organizations. The real issue is "whether the business has a caste system, in terms of the family and everyone else," Lawler says. "Is it run as a true family, one that includes all family members and other employees?" Although we have no direct answer to this question, we do know that some family businesses try to protect against favoritism by including nonfamily members on their boards of directors and setting them up as watchdogs.

 

The Daughter Track

 

In the best of all possible worlds, sons and daughters in family businesses would be treated as equals and given equal opportunity to manage the company. But in this world, family businesses tend to be highly patriarchal. Wives and daughters often wage a futile battle to gain power.

Of those who responded to the Family Business survey, only 24 percent are women. Among them, 39 percent are daughters or daughters-in-law of founders, 29 percent are wives, 18 percent are founders (compared to 40 percent of the men), and 6 percent are granddaughters. Compared to the men, these women are younger and work in smaller, newer companies with smaller sales volumes and fewer employees. They are significantly less satisfied than men with the way their relatives treat them and with their ability to influence long-term planning. They feel that they have less control over their financial rewards, company policy, and plans for the future. Finally, they are more tense about several important family dilemmas (see 'Tension on the Daughter Track," below).

A 28-year-old daughter-in-law of the founder of a Midwest business says that, as a secretary and bookkeeper, she is paid "barely above minimum wage," even though she's "a magna cum laude college graduate with damn good ideas." She's treated so much worse than other employees, she says, that "I feel like a slave." Having worked outside the family business for several years, she believes that sexual discrimination is more blatant on the inside.

Indeed, some women in family businesses suffer more discrimination than women who work for public companies. This is especially true if there are sons in the family, says Nancy Bowman-Upton, director of the Institute for Family Business at Baylor University in Waco, Texas. Fathers often favor sons over daughters when it comes to carrying on the family business. Those who are grandfathers, Bowman-Upton explains, may be especially negative about allowing their daughters to work. "They say to themselves: 'She's the mother of the grandson named after me; she needs to be at home.'"

In Bowman-Upton's recent study of 50 second generation businesses, 42 percent of men and women say that opportunities for success come more easily to men. About half of those responding feel that men and women have equal opportunities; yet even in these businesses, only half actually employ women family members. Of those employed, almost all are in lower-level jobs, many as secretaries, bookkeepers, or saleswomen. Of this survey group, only two women have executive positions — two sisters in the same firm.

"The most frustrating aspect of being involved in a family business is sex discrimination," maintains the 33-year-old daughter of the founder of a construction company. This Northeast firm brings in more than $10 million annually and has more than one hundred employees. "Although I have a civil engineering degree, I really believe that my father still thinks I will decide to be a stay-at-home mother, like my mother and younger sisters. By standing my ground and saying I want my share of the firm, he can no longer just turn the business over to my younger brother, who also has a fifties male mentality. I even have to fight for the same medical benefits as the men. Since I have had children, I find that my father tries to schedule my life so that it follows his priorities, not mine. I don't get the choice projects, because I might have a child emergency."

Other women in family businesses, however, accept this kind of discrimination as the price they have to pay for being able to combine career with family. Compared to men, our women respondents work fewer hours (41 hours a week versus 50); 78 percent work full time, compared to 90 percent of men. Elissa Arencibia, 25, works in the family security business in part so that she can keep her four-year-old daughter with her all day. "I don't feel as guilty as when she was in day care from 8 a.m. to 6 p.m. Although she does get bored at the office, I know she is happier here with us, and all the employees love her."

Many more women than men (37 percent versus 24 percent) say they value the flexible hours offered by the family business. Fewer women than men, though, see job security, money, or independence as major benefits. In turn, fewer are disturbed by retirement difficulties, jealousy, or problems of succession.

When it comes to succession, daughters are most likely to succeed if there are no sons, says Bowman-Upton. Even in these cases, she says, the chance that a founder will pass on the business to a daughter is slim.

A woman in the most tenuous position is one who has taken time out to have children, while a brother has continued to work at the family company. By the time the woman returns to work, the son "has been on the succession track for five or ten more years, has made contracts and political alliances," says Bowman-Upton, "and the daughter has a lot to overcome."

It was not until the official document was completed that 34-year-old Karen Cowart, of Russellville, Arkansas, discovered that the family construction business she had been working in for six years was to be passed on to her brother. "He was brought up to take it over," she says. "I was supposed to get married." Cowart does clerical work in the accounting and payroll departments; her brother is vice president of the company. "He's the only son, so he's favored," notes Cowart. "It would be competition if I was a corporate officer." As it is, "everyone here is my boss, and they're all my family. It makes you feel like a child again."

 

Rites of Passage

 

Succession is among the thorniest problems of working in a family business. Yet talk of it is often taboo. The majority of our respondents say that their business has no succession plan in place (see "Future Indefinite," below).

While succession planning is not a high priority for chief executives of public companies, CEOs of family businesses are even less likely to tackle the problem. In a 1987 study of 609 chief executives of Fortune 500 companies, the market research firm Yankelovich Clancy Shulman found that only about one-third had devoted some time to planning for succession. Among our respondents who are founders, only 7 percent say that they have chosen a successor. Among the second generation, only 9 percent have asked a parent to retire.

For 30-year-old David Roberts and his brother, who work for R. N. Roberts & Associates, their father's oil business in Eustis, Florida, the issue of succession is a mystery. "We don't know if he's going to sell, or what. Sometimes he doesn't let go." Jay Abdo, of Minneapolis, works in one of his father's businesses along with six relatives. They haven't discussed succession because "nobody's been concerned. We're a young family and we don't look upon my father as elderly. He's only 59."

This reluctance to discuss the future may be evidence of what psychologist Ivan Lansberg, editor of the professional journal Family Business Review, calls the "succession conspiracy." It's in the best interest of each member of a family business, he says, never to discuss succession. The entrepreneur doesn't want to lose control of his company, nor does his wife want to lose the benefits of ownership; children feel ashamed to bring up the topic.

Succession may be more of a concern in larger companies. Among our respondents whose annual sales are less than $5 million, only 28 percent have a succession plan. But in firms with more than $5 million in annual sales, 60 percent have a succession plan.

In an exploratory study of 178 family businesses, Bowman-Upton found that firms with higher annual sales volumes tended to have the largest proportion of owners who intended to transfer ownership to the next generation. Among those who were not planning a transfer, the majority said that it was because their children were not interested.

In our survey, one-third of the respondents say that children should join the family business whenever they want. Half say that they should do so only after college or other work experience. Only 12 percent of parents say that they don't want their children to join at all. Six in ten claim that they are not worried about having no child willing to work in the business. If his two children weren't in the family business, says Edward Westlake, "I'd take the money and get out." His attitude would be very different if his children hadn't chosen to work with him. But because they will takeover someday, he says, "it's a driving force for me, to make the business more successful, to make it grow and keep it growing."

The general lack of a sense of urgency may be because succession is not an issue until the precise moment of transition, typically when the founder dies. "In Western society," explains Bowman-Upton, "we never discuss what's going to happen after a parent's death." Nancy Westlake says that therewas no succession plan for her family's conglomerate of five companies "until the day my grandfather died at the age of 82." Her own father, now in charge, insists that he intends to make plans, as soon as his father's estate is settled. Anyway, Westlake argues, "every entrepreneur procrastinates."

 

Playing Family Politics

 

The conventional wisdom about family businesses is that only 30 percent survive beyond the first generation. As a family business grows and becomes more diversified, it begins to resemble other kinds of large corporations. With size and complexity comes politics: infighting, outwitting, and tactical maneuvering.

Unlike simple corporate politics, in a family business there's the extra twist of real family history that complicates relationships. Sons under 35, for instance, are especially likely to be plagued by sibling rivalry at work. About one-fourth of our respondents have had to keep financial secrets from family members. A son who is closest to his father, for example, doesn't reveal to his younger brother the truth about company profits; a daughter doesn't tell her parents how much the company spends on expense reimbursements; a daughter-in-law senses that the founder keeps her and her husband in the dark about company taxes. Other actions, which may be legitimate business decisions, may reek of family politics: 17 percent of our respondents, for example, have not hired a relative who wanted a job, and 13 percent have had to fire one.

The second son of six children of the founder of a large manufacturing firm in the Midwest requested anonymity in describing his family politics. He believes that his "older brother is taking the reins, even though the probability of finding a successful new leader might be greater with some of the other children." Nonetheless, he asserts that he is content with his own challenges. Complaining about his father's conservatism, tunnel vision, and stubbornness, he has learned how to manipulate his father. "When I try to track him down and convey something to him in a sentence or two, he says it's a bunch of bullshit and he's gone. So I wait until he can't get up and walk away, when he's in the presence of people, like at a board of directors meeting." It has become routine, he says, to "create an agenda for the board meeting and send it to him one day before. That way, he has a chance to think about things a little, but not enough time to say he doesn't want to talk about something and take it off the agenda."

 

Planning for the Future

 

Who should take the reins, and when, is often seen very differently by founders and their heirs. It is also a matter that is rarely discussed, perhaps due to the different agendas of the different generations.

The oldest family member, usually the business founder, tends to reap the greatest psychological benefits from work. Among our respondents, those who are over 55 are most satisfied with work, their financial security, how relatives treat them, and their ability to influence future planning. These elders are most likely to say that their long-term plans involve working as long as they can. More of our younger respondents say that the older generation should consult with children about retirement (see "The Generation Gap," below) .

Many of our respondents seem uncertain about their business's future. Asked about the ultimate objective for the company, one-third say they're not sure; half say that it should be kept in the family (see "Where Do We Go From Here?", below). If a potential buyer were to make a lucrative offer for the firm, one-third would not sell. But 44 percent say that they might and another 23 percent say they would. Unlike the people who work in public corporations, however, most of our respondents feel that they have a great deal (50 percent) or moderate amount (36 percent) of control over the firm's plans for the future.

Control may not contribute to vision, though. We asked our respondents to imagine what their businesses would look like 100 years from now. Most did not answer, or wrote in a question mark.

A few, however, were willing to speculate. David Roberts, the Florida oilman, believes that he'll have to change his business completely, "because 100 years from now there won't be any oil jobbers left in the United States." Gerald Mauro, 65, founder of a medical laboratory in Albany, New York, predicts that in a century, "machines instead of people will provide the service, and the third or fourth generation of our family will operate the business." And Jay Abdo predicts that the computer and publishing company founded by his father will be acquired by Time Warner, and his grandson, the as-yet-unborn Joseph Abdo IV, "will rise to the top."

 

Carin Rubenstein holds a doctorate in social psychology and is coauthor of In Search of Intimacy, a book based on her research on loneliness in America. She has written articles and conducted editorial surveys for many national publications, including Money, Redbook, and Psychology Today.

 

Who Answered the Survey?

During the summer of 1989, the editors of Family Business mailed an in-depth questionnaire to members of 3,414 family businesses, asking about the rewards and frustrations, the hopes and fears, of their work lives. About one-third replied. We compiled their responses, analyzed the data, and reported the initial results in our premier issue.

Three-quarters of those who responded were men; on average, the respondents were 44 years old. Half had worked in the family business for more than 12 years. More than a quarter of the businesses had an annual sales volume of at least $5 million, and half reported that they employed more than 20 people.

For the majority of our respondents, working in a family business is more than just a job. They reap the rewards of independence, a sense of accomplishment, and a good paycheck from their position in the family's firm. But they also pay several penalties; no separate homelife, succession problems, and plain old hard work. In particular, many of those in two-generation businesses are embroiled in father-son battles that engender tension and mistrust.

Common Values, Practical Visions

There is an overwhelming consensus among family business owners that survival and service are their top two priorities. Their responsibility for providing job security, they say, is third.

What are the three most important family business goals from your point of view?

Maintaining profitability 76%
Serving customers well 65%
Providing security for family members 37%
Providing security for employees 30%
Keeping business in the family 18%
Keeping respect for the family name 15%
Creating continuity of generations 14%
Keeping family together 14%
Doing good for the community 12%
Keeping the company private 11%
Taking the company public 1%

 

Figures total more than 100% because respondents gave more than one answer.

Tension on the Daughter Track

Women more often work in smaller, newer companies. On average, they have worked in the family business fewer years than men have, and work fewer hours a week. Perhaps because they suffer from both subtle and overt discrimination, women are significantly more tense about their work.

How tense do you feel about each of the following possibilities?

Future Indefinite

The majority of family businesses do not have a succession plan. Among founders, only one-third say they have a plan; of those in the second generation, half say they have such a plan.

Does the company have a succession plan in place?

Yes, for ownership and management
20%
Yes, for ownership only
18%
Yes, for management only
6%
No
56%

 

Where Do We Go From Here?

Our respondents harbor a great deal of uncertainty about the future of their businesses. Although about half would like to keep the firm in the family, one-third are not sure what they might do.

What is the best long-term objective for the company?

Sell all of it
10%
Take it public
5%
Sell part of it
5%
Keep it in the family
46%
Not sure
35%

 

Note: For all tabulations in this article, numbers may not total 100% because of rounding.

What's In a Name?

About half (48 percent) of our respondents say that they use their family name as part of the company name. These businesses have survived, on average, a bit longer than those who don't use their name (28 years compared to 24 years). Family members who work in family-named businesses feel no different than others, however; they are not more satisfied with their work, they don't feel a greater sense of control, nor are they any less tense.

As we expected, those who use the family name in the corporate title are more likely to assert that keeping respect for the family name is an important business goal. Some 20 percent of those in family-named businesses chose "keeping respect for the family name" as one of their three top priorities, versus 9 percent of those in companies with nonfamily monikers.

Using the Family NameCertain types of businesses are more likely than others to use the family as part of the company name.

Construction
75%
Financial/insurance/real estate services
58%
Wholesale/retail
49%
Manufacturing
41%

 

Telling the Public

Those who use the family name as part of the company name are more likely in their advertising to make special note that they are a family business.

Family-named business 59%
Nonfamily-named business 34%

 

The Generation Gap

When it comes to doling out advice about retirement, elders are inclined to believe in the work-until-you-drop ethic. Younger respondents, however, think that children should be consulted about parents' retirement.

What advice would you give to the older generation in a family business like yours?

Under 35 years
Consult with children about retirement and succession
61%
Work as long as you can
27%
Retire early
10%
Retire at 65
2%

 

 

36-55 years
Consult with children about retirement and succession
55%
Work as long as you can
33%
Retire early
9%
Retire at 65
3%

 

 

56+ years
Consult with children about retirement and succession
43%
Work as long as you can
45%
Retire early
7%
Retire at 65
5%

 

—C.R.

Article categories: 
Print / Download
Issue: 
February 1990

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