What Your Kids Must Know That You Never Did

By Leon Danco

At what point do authority and expertise become blinders to what is going to happen in the future?

In my consulting career I have worked with many business owners who came from poor immigrant families and knew what it meant to be hungry. Most were not very well educated, but through a lifetime of hard work and economic sacrifice, they and their spouses had built their businesses and become wealthy. What was often hard to get across to these successful founders was that if they wanted their business to continue after them, they would have to devote considerable time and resources to accomplishing that goal.

They would have to identify their successors and be responsible for seeing that the next-generation leaders received proper training—even if it meant “making more money” would be their second priority for a time. They would have to be patient mentors and tolerate errors by their successors that might be costly. They might have to go together to seminars on succession planning, accept additional advisors, seek objective outside directors. All this could not be accomplished without gut-level commitment: “I want this business to continue!”

For succession to work, continuity thus has to become more important than current income during the planning period. Planning requires lifting one's eyes from the business deals of today in order to concentrate on the strategic needs of tomorrow.

Builders of successful businesses don't usually think about a future that does not include them; they are not big on “the vision thing.” The danger in this Maginot Line mentality is that new ideas are resisted until it is too late, and the business is then blindsided by new developments and new technologies.

Not long ago I read in Forbes (Feb. 28, 1994) about the decline of the Encyclopedia Britannica. It seems that this 225-year-old institution has lost its market dominance because in the Computer Age people are not as willing to pay $1,500 or so for a 10-foot shelf of books, even the beautifully bound Britannicas, when they can get several other good encyclopedias on a single compact disc for $99 to $395. Apparently Britannica's top management has lagged behind competitors in moving into electronic media. Much of the opposition has come from a powerful sales force that would not make large enough commissions from selling CDs.

Parents who are now approaching a transition in leadership probably hit their business stride during the 1960s. Much of their success may have depended on good luck and good timing as well as hard work. Yet many of these parents still assume that the training and experience that was good enough for them will serve their successors just as well. “Come to work with me, my child,” says Dad. “I'll make you my assistant and you can watch me work.”

Time, new technology, and a changing environment will eventually overtake the most successful companies. In a sense owners today must be willing to put themselves out of business every day in order to maintain their company's momentum. I myself worry about becoming the Encyclopedia Britannica of family business consultants. Could I be replaced by two videos and a CD-ROM? How much of what I have learned in the past is now as outdated as the Gutenberg press?

For example, many of the textbooks I used when I earned my MBA at Harvard, after a war almost 50 years ago, had been written at the tail end of the Depression. One sentence from a textbook chapter on market research still sticks in my mind: “If a domestic should open the door, you may safely assume a household income level in excess of $6,000.”

In my small field, I am considered an authority. But at what point do authority and expertise become blinders to what is going to happen in the future? How does one tell a CEO who has made millions and is convinced he's a reincarnated Midas that his or her experience is no longer relevant?

Now that I have passed my 71st birthday, I am not reluctant to make such a statement. I have told a few complacent owners: “I have more than a couple of years on you and can recognize that much of my experience is virtually useless. What makes you think yours is so much more valuable than mine?”

To avoid being blindsided by change, successful business owners must be open to new ideas and innovations. They must rely on people I call “agitators with love”—outside board members and truly committed advisors who will prod them to look to the future instead of looking back. They must constantly ask themselves how attitudes, society, and their markets may be changing, what new technologies are coming along, what skills their successors will need to lead the company.

Just as ol' Dad may have had a local company with 10 employees that grew over his lifetime to 100 employees, the company under his successors may increase tenfold again, to a global enterprise with 1,000 or more employees. Larger scale will surely mean increased complexity. Successors will need managerial skills and knowledge of a far greater order of magnitude than those of their parents.

They will have to be multi-level communicators —which many of their parents never were—with both written and oral skills. In the second and third generations, they will have to face the reality of many more family members—siblings, cousins, nieces, and nephews. They must be wise and compassionate in the uses of power. Functional expertise in sales, finance, or technology must be combined with the ability to inspire people, to move the employees, managers, directors, shareholders toward a vision of what the company can become.

The best preparation for this role could be a college education liberally sprinkled with courses in history, geography, languages, science, and then five years or so of work experience at one or more well-managed, publicly owned companies. My own undergraduate degree in these classic subjects has served me well in understanding the human dramas I confront every day. In fact, most graduate schools of business these days are trying hard to defunctionalize their curriculums and include more courses that emphasize broad cultural understanding. A business school education can be a worthwhile experience for successors, as long as the MBA is not pursued just for its résumé value or as a holding pattern for the uncommitted.

Marshall McLuhan, the great communicator who wrote Understanding Media, once told me, “A great man is not someone who does great things. He is someone in whose presence great things occur.” That certainly seems to apply to business leadership. It is a talent that the senior generation should look for in their successors, and hope they find.

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

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Summer 1994

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