When old soldiers don’t just fade away

What really motivates retired owners who come back to “rescue” the business? And can they succeed?

By Léon Danco

It's every successor's nightmare. Dad has been calling nearly every day from Palm Springs. He's heard through the grapevine that sales are down and inventory is piling up. He's been told suppliers are complaining about unpaid bills. Employees are in revolt over the new marketing plan. "Son, maybe I left too soon, before you were ready," Dad announces. "I'll be back in the office next week to help get things back on track."

The successor, however, is likely to have a wholly different picture of the way things are going. The sales figures his father cites may be, in his view, only a temporary blip in a strategy designed to bring the business into the modern world. The rumors about unpaid bills and employee unrest may be coming from some old-timers who are adamant in resisting the new order.

We read many stories in the Wall Street Journal about retired CEOs who return to their companies to rescue them from what they see as dire straits. In his book about retiring CEOs, The Hero's Farewell (Oxford University Press), Jeffrey Sonnenfeld of the Emory Business School describes a type of ex-CEO called "the General" who never really is able to retire and itches to return to power.

What is the truth in family companies? What impels a retired business owner to come out of retirement and take back command of "his" ship — a drastic step that has caused long-lasting, bitter divisions in some families? Is it ever justified? Can it ever work?

Good succession planning, of course, can avoid the need for parental heroics. If the successors have been properly trained, if the business has an able, professional management team and a truly objective board of outside directors capable of exercising independent judgment — in short, if the parent has done everything right — Mom and Dad should be able to sit poolside without a care in the world.

But some business owners never quite get over the blow to their pride and egos that comes from having to give up power and position. That can twist their interpretation of the "facts" that they receive about the status of "their" business. Boredom is also a major factor for retired owners who have not found satisfying, challenging new interests. Idle minds fill up with a thousand imagined terrors. Concerns about money may be only rationalizations.

All his life the former CEO has been a problem-solver, and old habits are hard to shake. Even in retirement, when he hears of a problem in the business, or of what he perceives to be a problem, he's ready to charge in and solve it.

The founder may sincerely believe that the business is in trouble. In one company a father who had turned the running of the business over to his two sons saw signs that the company was going to hell in a handbasket. Yet by any objective measures, the sons were doing a great job. Profits were never better, market share was never higher. Management was becoming much more professionalized, new products were being introduced, employment was up, and an atmosphere of exciting change pervaded the company. Yet the father, who still retained a controlling stock interest "for tax reasons" continually complained to his board that "We're not paying attention to the things we used to." At every meeting he questioned the wisdom of letting his sons run the company.

What upset the father most were reports that the company no longer seemed to care as much about its employees because "the boys" (ages 36 and 33) had established performance goals for the company and demoted some senior people unwilling to upgrade their professionalism.

The sons had also taken away some customary perks. For example, they had eliminated privileged parking spaces at headquarters, taken away a company car from a purchasing agent who never traveled, and sold a lodge where inactive shareholders liked to spend their vacations.

These profound changes to a leaner management style, so usual when a new generation takes over, can often trigger a founder comeback, or provide an excuse for one. Many business owners facing retirement don't want to sell their companies because they feel a strong obligation to the employees and the community to retain the company's strong "family atmosphere" and values. When their own family successors seem to be betraying that very legacy, old-timers are ready to mount their horses and come back to slay the Philistines and restore the status quo.

 

What can a successor do to avoid this melodrama? The answer is to keep the retired owner fully informed of what's going on in the business. If there is an outside board, Dad should be encouraged to attend the meetings and participate in discussions of major policy issues.

When the parent still controls the stock, you are remiss, dear successor, if you fail to keep the major shareholder informed. If the stock has been transferred to you, you may legally ignore your Dad but still be remiss in your duty as a son. The worst thing you can do when your father is concerned about a specific issue is to keep him in the dark, to ignore his concern and say: "Don't worry, I'm taking care of it."

Some founder comebacks, however, may justifiably involve close calls. The first task of the retired parent who's genuinely worried about what's happening in the business should be to ascertain the facts. The parent who wants to do the right thing must understand, first of all, that his own motives may be mixed. He needs to seek the advice from the best people possible to help provide an objective view of the situation.

Obviously, if the company has truly installed an impartial board, the directors are the best source of counsel. If there is no outside board, the major stockholders should create one, even if it's only advisory. What parent and successor should avoid is turning to attorneys to resolve their differences. Lawyers are accustomed to taking adversarial positions on most issues and may well deepen the dispute and turn family members against one another.

If a fair, impartial group of people determines that the successors are truly incompetent, that they are steering the ship into an iceberg, then they may well have to be dumped. If the successors don't take advice willingly, they should be replaced quickly by leaders who will.

A founder's re-entry into the business can work if it is viewed as temporary help, motivated by a real desire to strengthen the next generation's chances for success. Successors, in turn, must have a strong sense of self-worth and an appreciation of the parent's experience and interest in preserving what he has built.

When parents and successors feel their relationships are worth preserving, problems get solved. When there's a willingness on both sides to work together to fix problems, they usually get fixed. It is never too late to build a working partnership between parents and children, based on love, trust, and mutual respect.


Léon Danco is the founder of the Center for Family Business in Cleveland, and the author of four books on family business.