When Old Soldiers Don't Just Fade Away

By Leon Danco

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

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

The successor, however, is likely to have a wholly different picture of the way things are going. Thesales figures his father cites may be, in his view, only a temporary blip in a strategy designed tobring the business into the modern world. The rumors about unpaid bills and employee unrest may becoming 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 theircompanies to rescue them from what they see as dire straits. In his book about retiring CEOs, TheHero's Farewell (Oxford University Press), Jeffrey Sonnenfeld of the Emory Business Schooldescribes a type of ex-CEO called "the General" who never really is able to retire and itches toreturn to power.

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

Good succession planning, of course, can avoid the need for parental heroics. If the successors havebeen properly trained, if the business has an able, professional management team and a truly objectiveboard of outside directors capable of exercising independent judgment — in short, if the parent has doneeverything 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 havingto give up power and position. That can twist their interpretation of the "facts" that they receiveabout the status of "their" business. Boredom is also a major factor for retired owners who have notfound 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 inretirement, when he hears of a problem in the business, or of what he perceives to be a problem, he'sready to charge in and solve it.

The founder may sincerely believe that the business is in trouble. In one company a father who hadturned the running of the business over to his two sons saw signs that the company was going to hellin a handbasket. Yet by any objective measures, the sons were doing a great job. Profits were neverbetter, market share was never higher. Management was becoming much more professionalized, newproducts were being introduced, employment was up, and an atmosphere of exciting change pervaded thecompany. Yet the father, who still retained a controlling stock interest "for tax reasons" continuallycomplained to his board that "We're not paying attention to the things we used to." At every meetinghe 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 itsemployees because "the boys" (ages 36 and 33) had established performance goals for the company anddemoted some senior people unwilling to upgrade their professionalism.

The sons had also taken away some customary perks. For example, they had eliminated privileged parkingspaces at headquarters, taken away a company car from a purchasing agent who never traveled, and solda 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, canoften trigger a founder comeback, or provide an excuse for one. Many business owners facing retirementdon't want to sell their companies because they feel a strong obligation to the employees and thecommunity to retain the company's strong "family atmosphere" and values. When their own familysuccessors seem to be betraying that very legacy, old-timers are ready to mount their horses and comeback 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 fullyinformed of what's going on in the business. If there is an outside board, Dad should be encouraged toattend 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 themajor shareholder informed. If the stock has been transferred to you, you may legally ignore your Dadbut still be remiss in your duty as a son. The worst thing you can do when your father is concernedabout a specific issue is to keep him in the dark, to ignore his concern and say: "Don't worry, I'mtaking care of it."

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

Obviously, if the company has truly installed an impartial board, the directors are the best source ofcounsel. If there is no outside board, the major stockholders should create one, even if it's onlyadvisory. 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 disputeand turn family members against one another.

If a fair, impartial group of people determines that the successors are truly incompetent, that theyare steering the ship into an iceberg, then they may well have to be dumped. If the successors don'ttake 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 realdesire to strengthen the next generation's chances for success. Successors, in turn, must have astrong sense of self-worth and an appreciation of the parent's experience and interest in preservingwhat he has built.

When parents and successors feel their relationships are worth preserving, problems get solved. Whenthere's a willingness on both sides to work together to fix problems, they usually get fixed. It isnever too late to build a working partnership between parents and children, based on love, trust, andmutual respect.

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

Article categories: 
Print / Download
Issue: 
Autumn 1992

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