The ritual dance of succession

Gradually father and son realize they can no longer co-exist in business. With a nudge from the son, the father finally steps aside. At this insurance agency, each plays his role to perfection.

By Mark Fischetti

Paul Mazonson came to work at his father’s insurance agency in 1975 mostly because he didn’t want to go to graduate school. He had just finished a psychology degree at the University of Vermont, and with no compelling drive to continue, joined Eigner & Mazonson in Lynn, Massachusetts.

His father wasn’t that keen on hiring him, either. “Paul had gone to school to ‘find himself’ and have a good time,” says Barney Mazonson. “He worked very hard at both.” Still, he was glad his son would have a job.

Ambivalence was perhaps the best foot on which father and son could have started what would become a gradual succession process; neither had any false expectations. But after five years, as Paul realized he liked the insurance game, his relationship with his father changed. “I had gotten good at the business,” Paul says. “I knew there was much more I could do. I wanted to see how big an organization I could grow. That’s what got me juiced.”

Barney had a different model in mind. “My objective was conservation,” he says. “I wanted to run the business at slow-growth, low-expense, no-risk, high-profit...sort of coast along. I had made good money and I wanted to preserve it.” The tension between their agendas sparked more and more disagreements.

Despite the turmoil, Barney managed to give Paul just enough room to master the agency on this own. He didn’t consciously engineer Paul’s rise, but swallowed hard as he let Paul make larger decisions. Barney’s enlightened approach enabled his son to become a worthy successor. But when Paul was ready to take over, Barney wasn’t ready to go. Paul had to turn his new-found command of the agency against his father, forcing him to leave. The decision was necessary for Paul truly to take over—and for Barney truly to retire.

Opposing agendas

Barney had run Eigner & Mazonson with his partner, David Eigner, since 1954. He became sole owner in 1971 when David died. His brother, Joe Mazonson, had joined along the way, becoming a top salesman.

Barney had no intention of favoring his son when he arrived for his first day of work. Paul felt his salary should be set at $150 a week, just because he was the boss’s son. Barney felt $125 was quite sufficient. That’s what Paul got.

After five weeks at insurance school, Paul was put under Joe’s wing for on-the-job training. The two made a good team. When Joe left in 1980, Paul took over his accounts. He was also signing on new clients, often without Barney’s prior approval. Barney let this go, but drew the line on other matters. One involved the agency’s location. “I was trying to hire people,” Paul explains, “but I couldn’t find anyone willing to work in Lynn. The city was a hole and rapidly going down the tubes. I had been reduced to interviewing the dregs of society, and even they didn’t want to work there. I told my father we had to move. He said no. I pressed the issue. He said, ‘When it’s your company you can move it wherever you want.’ That was that.”

The incident was the first strong evidence that father and son had two opposing agendas. “Paul was really functioning on his own,” Barney says, “with little call on my time or energy. But I had not yet begun to think of him as my successor. I loved the insurance business, the satisfaction that comes from making a sale, from solving a problem. I expected to work until I died, with the hope that I could staff up to provide me with more free time.”

To make that possible, Barney ran the agency cautiously. “My father wanted to preserve the business,” Paul says. “I wanted to grow it. My father was a child of the Depression. All he had ever wanted out of life was to have his family, have a small business, and make $100,000. He did that. Making it big was not what he was striving for. His strategy was to limit expenses so he could keep making that kind of money.”

Neither Barney nor Paul openly accused the other of blocking his own approach to the business. The tension, however, caused more conflicts. One day the pair met with an important client in the agency’s conference room. “I was all charged up,” Paul says. “I got up in front of the meeting and said, ‘I’m going to do this for you, and I’m going to do that.’ After they left, my father called me into his office. He was angry. He said, ‘Don’t you ever use the singular pronoun, ‘I,’ around here again. I’m not dead yet!’”

Learning to talk

Paul recalls that, “After I got over being mad at him for telling me off, I began to realize that the tension between us was surfacing in bad ways. I also realized that how I spoke to others, and how he and I spoke to each other, was important. Even though I knew at that point I was going to be the successor, I still needed to respect his role. I began to monitor not only what I said, but how I said it.”

Paul and Barney also agreed to hire a consultant, Will Calmus, a psychologist, management consultant, and principal of Calmus Associates in nearby Chestnut Hill, to help them learn how to talk to each other. “My father and I met at Will’s office for an hour, about once every two weeks, for two years,” Paul says. “We didn’t get into Freudian things about a father and a son. We simply talked about what was happening at work. In that meeting, when my father said, ‘Don’t use the word I. I’m not dead yet,’ there would have been no way we could have had a conversation. When he said that to me it just ticked me off. I thought, ‘I don’t want to hear that. I know what to do.’

“But when we met at Will’s office, off-site, away from the company, with no other incidents or agendas taking place, then we were much more able to communicate. I would say how I felt about something, and he would say how he felt about it. By doing that, we started to understand each other’s point of view. We also started to learn that what we said was often different from what we meant. We had to look past our words to our meanings.”

As tensions started to ease, Barney was able to take a more objective look at his son’s progress. Paul was making much of the money for Eigner & Mazonson. Another employee, Tom Goode, who had joined Barney back in 1971, was also contributing substantially. The agency had grown from about $1 million in billings in 1975 to $4.8 million by 1982, largely due to Paul and Tom. “I became aware that the growth of the business was now more the result of Paul and Tom’s efforts than mine,” Barney says.

The conversations at Calmus’s office, he says, also “made me very aware that Paul and I were on two different tracks that conflicted with each other. I began to rethink my plans—or lack of plans—for retirement. There was still a low level of tension between Paul and me, and I knew I couldn’t fight him every step of the way. He had to have the opportunity to run the business his way if it was going to succeed.”

Barney didn’t tell Paul of this realization, because he felt Paul still had to prove himself a worthy successor. Conflicts still arose, although they were more tolerable. Often, when they did, Paul thought of leaving, but he didn’t. “Without inertia,” he quips, “the world would fall apart.”

Looking back now, Paul recalls there was another reason for staying which he didn’t realize then. Barney was deliberately giving Paul opportunities to succeed, and Paul was attracted to the challenges. “For example,” Paul says, “I was pushing my father to let me hire a salesperson. He didn’t really like the idea, but he told me I could look around. I tried for a while but didn’t find the right person. Then one day I happened to be discussing all this with my old college roommate, Bruce MacDougall. I found that I wanted to hire him for the job. My father thought it was a bad idea. We had a financial consultant working for us, who had described the kind of background the new salesman should have. He also said we shouldn’t hire my roommate, because he didn’t have the right qualifications. But I went back to my father and said this was who I really wanted. In the end he said okay.”

The best part of that story, Paul continues, “is that Bruce is now one of our two executive vice presidents. He’s my friend and I love him, and he’s done wonderful things for the business. All because my father gave me some room to carry out a decision that he didn’t agree with. He gave me the opportunity to create my own space within what he had created.”

A sudden proposal

Paul’s performance continued to impress Barney. He knew, however, that he would have to step aside if Paul was going to really grow the company. He appeared suddenly in Paul’s office and said he wanted to begin to plan for the future. He told Paul that he would sell him the business in five years, on April 9, 1987, his 68th birthday. He also said that the sale price would be the 1982 value of the company, and that any profits after 1982 up until the sale would be split three ways between him, Paul, and Tom.

“I proposed the profit-sharing plan, and based the sales figure on the Dec. 31, 1982, value,” Barney says, “because I wanted to acknowledge the fact that any growth in value from that time on would be more the result of their efforts than mine. It was not difficult to establish the sales price because there are good guidelines for appraising an insurance agency. It was not intended to be a sweetheart deal because I needed the proceeds for retirement. As it turned out, it was a sweetheart deal, because the agency’s billings had increased to $10 million by 1987. I was happy, and Paul and Tom were happy.”

Paul was floored by his father’s sudden proposal. “It was a very loving thing he did,” Paul says. “He saw that the two of us could no longer co-exist. But he didn’t say it in that way to me. He said he wanted to begin to plan for the future. And so we started to discuss how myself and he and Tom could set a sales price, and each get one-third of future profits. Setting the transfer to take place five years down the road was also smart. He created time for us to adjust.”

Paul admits, however, that he didn’t immediately see his father’s wisdom. “Even though we discussed the sale, my father said, essentially, ‘I’m going to sell the business to you and this is how the sale will go.’ I felt empowered by it at first. But then I thought, ‘Well, I better do my homework and figure out what the price really should be.’

“When Will Calmus found out I was going to do this, he gave me a strong warning. Will had picked up on something that I, at that age, hadn’t. He saw that the deal wasn’t about money. It was really a way for my father to get himself to leave. Will told me, ‘Don’t counter your father’s offer. Just accept it and say thank you. Keep in mind the bigger goal is to give your father a way to commit to retiring.’

“I could have ignored Will, gotten a high-priced lawyer to figure out how much more money I could’ve gotten, and presented that to my father. But my father could’ve sold the business in a heartbeat to a competitor. The insurance business is very liquid. Companies are bought and sold all the time because the assets are very concrete. In fact, my father could have gotten more money by calling up a competitor. They could’ve had a done deal in 30 days. If I had pushed him, that’s probably how he would have pushed back. He would have said, ‘Well, I’m just going to sell it to someone else, then, and we’ll be done with it.’”

Asking Dad to leave

Barney, Paul, Tom, and their dozen employees worked in relative harmony through the early 1980s, until it came time for Barney to retire. Originally, the plan was to pay off Barney in installments over 10 years, starting in 1987. But a 1986 change in the capital gains tax laws made it advantageous for Barney to receive a lump sum before Jan. 1, 1987. The business had grown so well in comparison to its 1982 value (and hence sale price) that Paul and Tom were able to borrow 100 percent of the money against the business, and pay Barney.

The one-time payoff was also psychologically beneficial, father and son later realized. “It eliminated the potential for further conflict,” Barney says. “My concern for safety over the payout period could have resulted in my looking over Paul’s shoulder and curbing his desire to invest for growth. If I had no ongoing financial stake in the company, it certainly would be less likely that I’d be hanging around giving unsolicited advice.”

Paul says the transaction “gave me the freedom to do my own thing. I could make decisions without my father still having oversight because he still had ownership. It also gave my father the freedom to retire without worrying that my decisions could undermine his retirement.” In October 1987, only 10 months after the sale, Paul moved the company to Peabody, Massachusetts. “We went from paying $23,000 a year in rent to paying $120,000,” Paul says. “If my father still owned the company, he would have had a heart attack.”

Since the lump-sum deal created a more abrupt transition than the Mazonsons had planned, they agreed verbally that Barney could keep an office at the company and come in several days a week. “My father needed a place to go,” Paul explains. “Sometimes it was sort of comical, though. He would pack up his big fat briefcase at home, put on a bow tie, and come into the office. Then he’d get on the phone for an hour and call around to banks to find out where he could get better rates on his certificates of deposit.”

Within two years, however, Barney’s presence began to disrupt Paul’s activities. “It wasn’t so much that he was looking over my shoulder,” Paul says, “but he came from the old school, where employees were there to serve the boss. That’s fine as a model, but that’s not the model I wanted. I wanted to build an organization of people who are here to serve clients first, in whichever way they see as best, as long as it is succeeding. My father’s presence in the office created conflict between those two models. If he happened to get a call from an old client, after he’d hang up he’d bark out orders and expect everybody to drop what they were doing and march.

“So I went to him and said, ‘I know I agreed that you could have an office for the rest of your life here if you wanted it, but it’s creating disruption in the company and it’s becoming a difficulty for me.’ Giving up that place was painful for him. Yet he was wonderful about it. He didn’t really see the difference between serving customers and serving the boss. He said, ‘I don’t really understand the problem, but if you feel strongly that you need me to be out of here in order for you to succeed, I’ll do it.’ ”

Barney was slowly preparing to depart when he had an unnerving experience. “One of my original clients came to the office,” he explains, “to review his insurance with one of our employees who was now handling his account. I joined them. He was interested in business-interruption insurance. I suggested extra-expense insurance instead, which I thought was better. After the client left, the employee politely explained to me that both types of products were now one in the same. I realized I could be a liability rather than an asset. That’s when I stopped going in.”

Barney’s final exit gave Paul a stronger feeling that he was the real leader of the company. “Ironically,” he says, “I think the staff already perceived me as the leader. I was the one who was taking longer to grow into that role. Even after I changed the name from Eigner & Mazonson to Mazonson Inc., still, when I walked in each day I felt like I was walking into his company. Having him move his office out was part of what helped me get over that. The rest was just getting older, having more experience, having my own children, and just letting the time pass.”

Buying out a partner

Feeling freer than ever before, Paul set his sights on growing the company at a fast clip. However, new resistance developed.

When Barney first proposed selling the company to Paul, he had suggested Tom Goode buy in also. “I went to Tom,” Paul explains, “and said, ‘Maybe you and I should be partners. But I want to know that you’re going to commit to growing the business.’ He said that he was.” Tom took a minority interest of 25 percent. After several years, though, Paul realized that he himself was the only one growing the company. “Tom was servicing clients and doing that well, but he wasn’t generating new revenue or opportunities for new revenue,” Paul says. “I decided that I should buy him out.” After some discussions Tom agreed, leaving in 1991.

In retrospect, Paul says, taking a partner was a double-edged sword. “My father felt responsible for Tom’s 18 years of service, but I’m the one who ended up paying for it. In the end, it cost me more money to buy out Tom. But it was good to have Tom in the beginning, because I wasn’t fully ready to take over on my own, and I couldn’t actually have focused on growing the business if I would have had to service the clients as much as Tom was doing.” Paul thinks now, however, that it would have been better if he had purchased the whole company and found another way to reward Tom so that he would stay on.

Love and fulfillment

Mazonson Inc. has since grown to $40 million in billings and 40 employees, up from $10 million and 15 people when Paul bought the agency 11 years ago. More important, commission income—analogous to profit—has risen from $1 million to $4 million. Paul, now 47, is president and owns 90 percent of the company. Bruce MacDougall owns 5 percent, and another executive vice president, John Greenbaum, owns the remaining share. The firm offers a full line of insurance, from commercial property and casualty coverage, disability, and medical plans, to life insurance and homeowner’s and automobile policies. Barney, 78, continues to live during the summer in Marblehead, Massachusetts, and spends his winters in Florida.

Father and son are now closer than when they worked together. “One of the things I’m most grateful for in the outcome of all this,” Paul says, “is that I have an extraordinary relationship with my father. I am so blessed that he had the foresight to create the space for me to make decisions and grow into the successor role, and that he was willing to step aside.”

Paul feels fulfilled in his work, too, because “I love what I do. That’s what I now tell my own son, who’s 11, and my daughter, who’s 15. I tell them that the challenge in life is to find what you really love and to do it. It doesn’t matter if you make $20,000 or $200,000. The happiest people I know are doing what they love. The rest works itself out.”