By Danny Miller and Isabelle Le Breton-Miller
Harvard Business School Press, 2005
310 pp., $29.95
Reviewed by Barbara Spector
Estée Lauder. Hallmark. S.C. Johnson. Levi Strauss. Coors. Nordstrom. New York Times. Wal-Mart. Anyone who reads the business press knows that these companies rank among the world's largest family businesses.
In Managing for the Long Run, husband-and-wife authors Danny Miller and Isabelle Le Breton-Miller analyze what has made these and other large family-controlled firms successful. (In an appendix, they cite Family Business’s lists of the largest family businesses in America and the world among the sources they used to identify “truly accomplished” family companies.) The book is a report of their multiyear study of practices at long-thriving family companies that have risen to prominence in their industries.
Though major family-controlled businesses “outperformed nonfamily peers on many performance dimensions of interest, and vastly outsurvived them as well,” they write in their introduction, “[a]s a class they have been dismissed as role-models, written off as obstacle-ridden, old-fashioned, and rife with conflict. [Family-controlled businesses] that defied this description might have lots to tell us.”
According to Miller (a professor of strategy at Montreal’s Ecole des Hautes Etudes Commerciales, chair in family enterprise and strategy at the University of Alberta and author of The Icarus Paradox) and Le Breton-Miller (a human resources consultant and senior research associate at the University of Alberta’s Center for Entrepreneurship and Family Enterprise), these companies “demonstrated four driving priorities or passions,” which they refer to as the “four Cs”: command, continuity, community and connection. The authors also cite five strategies—brand building, craftsmanship, operations excellence, innovation and deal making—which they contend are achieved and sustained “by tailoring and blending the four Cs.”
Miller and Le Breton-Miller devote a chapter to each strategy, describing how four to six large family firms excelled because, according to the authors, they related the “Cs” to their strategic objectives.
For example, “brand builders” like Estée Lauder, Hallmark and S.C. Johnson “emphasize continuity—a dream and commitment to build an enduring brand; and community— the cohesive culture that unites the organization behind it.” At Corning, Fidelity Investments, Motorola and other “innovators,” command and community are priorities. “Command liberates family leaders from the short-term constraints of financial markets. It promotes generous, farsighted investments in conceiving and exploiting innovation to renew the firm and its products. At the same time, innovation is complex, requiring creativity from experts and teamwork among diverse functions. This happens in a clanlike organizational community....”
In an appendix entitled “Assessment Grid and Checklist,” the authors propose an exercise that enables readers to compare their own companies’ “four C” practices with those of a large family firm that follows each of the five strategies.
One chapter offers an analysis of several companies’ missteps, which Miller and Le Breton-Miller attribute to mismanagement of the four Cs. Levi Strauss’s loss of market share, Coors’ refusal to aggressively market or revamp its product lines, Nordstrom’s de-emphasis on customer service and incorporation of unfamiliar merchandise, Tyson and Wal-Mart’s insensitivity to community interests, Motorola’s focus on overly complex technology at the expense of marketing, Corning’s overly narrow focus on optic fiber, and Bechtel’s risky emphasis on nuclear and oil businesses are examples of failure to balance major organizational priorities with complementary priorities that offer balance, the authors contend. Also included is a discussion of a failed family business, Olympia & York Developments Ltd., which declared bankruptcy in 1992 after gambling on a grand plan to construct an office tower in a shabby section of London.
This chapter on strategic blunders notwithstanding, the authors devote considerable space to lavish praise of their subjects. Levi Strauss is “the quintessential socially conscious corporation.” Coors “turned somersaults trying to improve its beer.” Bechtel “is meticulously honest in its dealings, many times delivering more than it promises.” Some black marks in the companies’ histories are not reported, such as Blue Mountain Arts’ lawsuit against Hallmark for violation of the Lanham Act, unfair competition and copyright infringement (see the review of Blue Mountain: Turning Dreams into Reality in FB, Summer 2005).
The quotes and anecdotes used to back up the authors’ assertions are citations from news accounts and other books, many of which have been frequently quoted elsewhere, like The Trust: The Private and Powerful Family Behind the New York Times, by Susan E. Tifft and Alex S. Jones, and The Nordstrom Way, by Robert Spector and Patrick McCarthy. Although Miller and Le Breton-Miller note that they interviewed principals at ten of the firms, they don’t quote their interviewees by name. “Given the secretive nature of many family firms and our sensitive questions on strategic decisions and mess ups,” they write, “we assured most of our respondents confidentiality.” But in light of the lengthy, excessively detailed discussions of the companies’ triumphs, it seems plausible that company representatives might have agreed to put at least some direct quotes on the record.
Miller and Le Breton-Miller’s main thesis is that leaders of these thriving companies “have succeeded by using a different paradigm of management”—one that envisions their enterprises as “businesses with a heart and soul; feeling institutions that stand for something, have moral fiber, look after all their stakeholders, and are there for the long run.” The authors’ comparisons and contrasts of their subjects’ strategies for achieving this goal make for interesting reading. And they write evocatively; they open Chapter 1, for example, with a description of the Michelin tire plant in the “sleepy French town of Clermont-Ferrand” with its “ancient red-roofed buildings, winding roads, and people dressed in the garb of another century”—not a typical lead paragraph for a research study. Perhaps if they had approached their fact-finding and analysis as journalists rather than scholars, they might have yielded greater insights.
Lennick and Kiehl advise family business leaders to assess the answers to eight questions to determine the moral intelligence of their company:
1. Do all the members of my family tell the truth?
2. Do they hold themselves accountable for their decisions and personal choices?
3. Do they actively care for the people who work here—family as well as non-family employees?
4. Do they keep their promises?
5. Do they admit their failures and mistakes?
6. Do they let go of others’ mistakes and failures as well as their own?
7. Do they embrace the responsibility of serving others?
8. Do they act consistently with the principles, values and beliefs we say are important to us as a family and a business?
Lennick is managing partner at Minneapolis-based Lennick Aberman Group, which specializes in business performance enhancement. Kiel is co-founder of KRW International Inc., a leadership development firm in Minneapolis. They note that morally incompetent businesses generally do not survive over the long haul.
It is possible for a courageous family member to challenge the status quo and bring about the needed changes, Lennick and Kiel say. But they caution that change is usually painful and difficult and often requires help from someone outside the family system. They advise those who see the need for change to begin talking with family members—and assume they, too, want the company to thrive and become the best business it can be. It may be necessary to work behind the scenes in order to gain the needed consensus to engage a change-management adviser, they note.
1. Start today. Successors should be identified long before they are needed. Five years in advance is good; ten years is better. Talk about succession with your family business colleagues early and often—not only contingency plans for the leader’s sudden death or eventual retirement, but also development and preparation of emerging and future leaders (family and non-family).
2. Establish a team. Include your attorney, your accountant and other key professionals. Advisers can provide insight into the strengths of emerging leaders in the company, and opportunities for these people to develop their skills.
3. Identify key positions. There should be a succession plan in place for all critical positions, including roles that are key to the success of the organization (e.g., key account managers) and individuals who retain valuable “company memory.”
4. Define competencies. Document the skills, knowledge and characteristics needed for success in critical roles. This is frequently accomplished through job descriptions. A concise set of competencies helps people understand the behaviors expected of future leaders.
5. Identify candidates. You may want your children to take over the business, but do they have the competencies, skills and motivation to do so? Assess individual strengths and weaknesses in an objective and data-driven manner, and identify individuals who are most likely to succeed.
6. Groom the successor(s). Once candidates have been identified, create individual development plans for each. The plans should be a combination of formal training, self-study, mentoring and performance management. Provide opportunities for them to fulfill their personal and career goals, including possible employment outside the family business as appropriate.
7. Discuss your plans with all parties involved. Eliminate surprises by letting your family and management team know the general details of your succession plan, such as who will take over and why. The more you disclose about your succession plan, the easier it is to deal openly with high-potential employees’ concerns about their career opportunities.
8. Review and update succession plans regularly. Succession plans should not be placed on a shelf to gather dust. They should be modified to account for changes in family members’ and employees’ lives, the culture of the business and the external business environment. If you have had a major change in your personal life, revise your succession plan immediately.