But most analysts see culture, vague as the term is, as the fundamental and often invisible underpinning of a company, anchored by the founder’s core values and guiding business decisions like Adam Smith’s “invisible hand.”

“Those values provide the foundation for any company’s culture, particularly in family-owned businesses,” says Paul Karofsky, executive director of Northeastern University’s Center for Family Business in Boston, Mass. “They can be explicit or implicit, and speak to long-term strategies or even how the employees are treated by management in terms of benefits and salaries.”

Cultures can be highly disciplined or wildly entrepreneurial, open or closed, greedy or benevolent. But strongly defined cultures are always crucial to a company’s success and can be, if they do not evolve, the authors of its downfall. Carol Lavin Bernick, vice chairman of Alberto-Culver’s Consumer Products Worldwide division, which has seen a dramatic turnaround in its business prospects, gives sole credit to its renewed corporate culture. “Everything at Culver relates to the culture, and how strongly our people believe in and implement our values,” she says, adding that the company has worked hard toward a more open, inclusive environment where everyone shares responsibility for the company’s successes. “Every decision we make is seen as an opportunity to support or undermine the culture we want.”

Values and Value
Culture may be taken for granted or driven underground at some companies, but when it comes under siege, during a potential merger or acquisition, IPO or even generational succession, many people come to realize how valuable it truly is. Whether one can protect it, or whether it will be lost as soon as the new owner takes possession, depends largely on where the company ends up.

“The failure rate of mergers is quite significant,” says Ernesto Poza, author of the just-published book Family Business and professor at Case Western Reserve University in Cleveland, Ohio. “Many times, acquiring firms won’t do due diligence on the culture and don’t realize how important it is. They want to create a new financially driven culture and throw away whatever was of value that was embedded in the old culture.”

This approach, say the experts, has led to failed acquisitions and ruined companies. There are hundreds, if not thousands, of horror stories of family businesses being swallowed by larger corporations and falling victim to gross mismanagement, eventually closing their doors.

But the outlook for family businesses remains hopeful, observes Poza, because a growing number of acquiring companies understand the fiscal value of a strong, dynamic family culture and go to great lengths to keep it functioning. “Berkshire-Hathaway, for one, recognizes the cultural impact on the bottom line of family owned companies, and creates incentives for owners to stay,” he says. “That’s much different than just sending in the shock troops and clearing out top management. It shows respect for the culture.”

Pat Mullen witnessed this more enlightened transition of ownership firsthand when the Grand Rapids, Mich., TV station he had managed for 18 years, WXMI, was sold to Tribune Broadcasting six years ago. “Dudley Communications, a privately held family company, owned the station then,” he says. “They pretty much gave me free rein to run the station since our monthly numbers were good. Their philosophy was to hire strong managers and hold them accountable for local markets, but not micromanage.”

In 1998, says Mullen, the Dudleys sold the Grand Rapids Fox station and another in Seattle. “Dick Dudley asked me who among our suitors made the most sense,” he says. “We both said, ‘Tribune.’ They’re a conservative Midwestern company with a philosophy that was very consistent with ours. It puts values very high on the list of management skills. A handshake is everything.”

As it turned out, the marriage of like-minded cultures worked. Mullen stayed with the acquiring company, moved up the Tribune ladder, and is now president of its broadcast division, charged with 26 stations in 22 markets. “We really haven’t changed the corporate culture in any of the stations,” he says. “We try to get the right people in place and leave them alone. We figure someone in a local community will have a better handle on the situation than someone sitting in Chicago or New York.” Mullen points out that turnover, often a good barometer of an imploding culture, has been almost nil at his old station.  

Opposites Attract 
Brunswick, a $4.2 billion publicly traded company based in Lake Forest, Ill., held to the same strategy last year when it acquired Navman, a $50 million marine and consumer electronics manufacturer from New Zealand. The marriage of these two presented a potential clash of cultures—one company a 157-year-old Fortune 500 company with over 23,000 employees, and the other a privately held electronics upstart still run by its founder. Would Brunswick simply swallow Navman’s more entrepreneurial culture or do something more creative?

After all, here was a company from Down Under that had come from virtually nowhere to dominate the Australian and New Zealand electronics markets, and was making aggressive inroads in Europe and North America. Brunswick, though it has been quietly reinventing itself, is seen as a fairly conservative corporation, not known for radical business plans. Would this be the corporate version of The Odd Couple?

“If it ain’t broke, don’t fix it,” quips George Buckley, Brunswick’s chairman and CEO. “We’ve left Navman alone since it already had what we wanted—able, energetic and creative people. The company’s also a key part of a long-term Brunswick strategy.” Buckley recognizes that new electronic-oriented companies like Navman, with short product-cycle times and an obsession with cost control and product reliability, operate under different rules than Brunswick, which manufactures boats, engines, fitness and bowling equipment. But he admires Navman’s culture so much that he plans for it to eventually be adopted by the parent corporation.

“It will serve as a model for Bruns-wick’s New Technologies division, with increased emphasis on materials science, electronics, and software-driven products,” says Buckley. “That, in turn, will be a model for the Brunswick of the future. I’m a believer that electronic technologies are what will differentiate us from our competitors.”

Navman, says Buckley, will benefit from Brunswick’s powerful balance sheet and some of its discipline. But he adds, “We don’t want to break it by meddling too much. When you hire or acquire good people, you need to trust them to get along doing what they do best.”

What does Peter Maire, the man who founded Navman 17 years ago in his Auckland bedroom, think a year after his company was acquired on “B-Day,” as he calls it? “We were all pretty worried about it initially,” he says. “These things always look great during the engagement. But after the wedding, it’s not always so pretty. But it’s been even better than we expected.”

Navman, in hyperexpansion mode when Brunswick bought a majority stake last March, saw 100 percent revenue growth last year (and 220 percent in 2002), and its workforce of 440 has essentially doubled in two years. “It’s business as usual—times 10,” says Maire, who has no plans to step down as president. “We could’ve kept up this pace on our own, but we wouldn’t have had the same confidence without Brunswick. Now that we’ve expanded beyond marine electronics into the far bigger consumer electronics market, it can be a scary, competitive place.”

And the culture he created? “It hasn’t changed at all,” he says. “If anything, we can be more entrepreneurial now that we have deeper resources.”

Gary Furst has seen cultural changes firsthand in two family businesses that were acquired by larger corporations, with mixed results. When he sold American Brush, his family’s fourth-generation $20 million business to Stanley Tool in 1992, he stayed with the company for three years. “They did some restructuring, but were pretty good to our people,” says Furst. “They liked the business and recognized we were very entrepreneurial, something they wanted to emulate for themselves, since they realized we made quick, effective decisions. They tried to hard to keep much of our culture intact.”

That culture included an open-door policy for employees to meet Furst, dedication to quality products, and a good dose of fun. “You show your employees you’re human and not afraid to admit when you made mistakes,” says Furst.

Furst says a similar pattern emerged after he took over as CEO of Kryptonite. The Boston-based lock manufacturer, owned by the Zane family, had brought him aboard in 1995 with the idea of eventually selling. They finally did sell in 2001 to the behemoth Ingersoll-Rand, but not before Furst had instilled a more open culture at Kryptonite, including “town meetings” at which the finances, failures and successes were discussed.

Despite Ingersoll-Rand’s best intentions to keep Kryptonite’s youthful and dynamic culture alive, the attitude adjustment has been difficult for some Kryptonite insiders. “Going from 50 employees into a company with over 45,000 involves culture shock,” says Furst, who still consults for the company. “You go from being small, nimble and able to make quick decisions to a place where you have to go into committees for simple answers.” Ingersoll-Rand has done a good job in letting Kryptonite’s entrepreneurial culture survive, concedes Furst, since it wants to use it as a model for its other businesses. “But it’s just not the same as when you’re a private company.”

As for American Brush, the story has a not-so-happy ending. After running the division for three years, Stanley Tool sold it, and Furst watched the old name get tarnished. American Brush was cited in 2000 by the Occupational Safety and Health Administration for violations of OSHA standards; the case has since been settled.

Furst is philosophical about the unfortunate U-turn in his old family business’ culture, and believes that once you sell the business, the culture and inherent values belong to the new owner. “Someone else bought the house, and they’re allowed to redecorate it—even if it’s a color you don’t like,” he says.

Principles or Payoff?
But is the possibility of an offensive new color—or culture—enough to keep one from selling the family business? “There are things more important than culture,” says Northeastern’s Karofsky, “and it’s called survival of the family. You may be in a position where it makes financial sense to sell, or the business isn’t viable anymore. The culture should take second place to that.” He recalls working with one family business that placed equality at the core of its culture. “Every family member got the same-sized office and same leased car,” he says. “It got to the point where they couldn’t afford to go on like that. They had to sell.”

Don Silver wrestled with value-laden questions about the future of his family’s third-generation family business, Penn Ventilation, as it was being acquired by rival Hart & Cooley in 1999. What about the family legacy? Would its corporate culture survive? How would the acquisition impact the workforce?

Silver knew it was time to sell the business; consolidation was overtaking the industry, and though Penn’s sales were strong, Silver says he “could feel my competitors breathing down my neck.”

Still, he had his share of sleepless nights and doubts. “I must have had every emotion during that acquisition,” reflects Silver. “I felt disappointed, guilty. There was a point at which I was concerned about losing the family legacy and disappointing the memory of my grandfather.”

Seller’s remorse is a common sentiment during the sale of any family business, say consultants, especially if that involves a shift in culture in what could be a move away from the family’s core values.

“A family business is a very emotional system," says Jane Hilburt-Davis, a Lexington, Mass., consultant and author of Consulting to Family Businesses. “There are a lot of passion and loyalty issues. Often, the family and business roles get mixed up.”

But in Silver’s case, his father Bob, who had run the company before him, put the notion that Don was abandoning the family business into sharp focus: “Your grandfather’s dead, Don,” he said. “He doesn’t care.”

“Looking back, that helped me get some perspective on the situation,” recalls Don. Since 1999, Silver has enjoyed life away from the family company, and realizes the strain it put on him. “Hardly a day goes by where I’m relieved not to have 650 people and their families dependent on me, not to mention my own extended family,” he says.

He also rediscovered a long-dormant relationship with his father. After Don joined the company in 1984, at age 28, he says that “barriers came up that I never expected to see” between his dad, then CEO, and himself. “It was hard to separate him from the boss.”

That’s not an uncommon family dynamic, and generational succession can turn into cultural warfare at times. “Succession typically involves two people whose time horizons and outlooks on life are very different,” says Poza. “It’s often a parent and child in their 60s and 40s, respectively, having passionate discussions about how to move the business forward. It’s a predictable point of conflict, and can be very useful if it’s functional in helping to change the business.” Hilburt-Davis says 90 percent of the problems she encounters with client businesses have to do with the family’s inability to separate family and business in an appropriate way. She recalls one family she worked with recently. The son was slated to take over the firm, but the mother, as president, knew he was ill-equipped for the task. “She knew he wasn’t right for the role,” says Hilburt-Davis, “but as a mother, she wanted him to succeed.”

Cultural Revival
Still, many families have passed the corporate baton and watched the younger generation successfully transform the company’s culture while holding on to core values.

Carol Lavin Bernick instituted a major cultural overhaul at Alberto-Culver’s North American operations. “In 1994, when my husband and I took the reins of the business my father and mother had built, we faced flattened sales and slipping margins on our best-known consumer brands,” she wrote in a Harvard Business Review essay called “When Your Culture Needs a Makeover.” Employee morale was flatlining along with sales, and turnover was twice the industry average.

“We were in the midst of the most difficult period in our company’s history,” wrote Bernick. “As I looked around me, I realized that the North American organization was not equal to the challenge.”

Bernick described what was essentially a closed, paternalistic, but extremely caring, culture at Culver. Her mission was to change that to one in which the employees had a sense of ownership and urgency around the business, to welcome innovation and take risks.

She notes that Alberto-Culver is not a family business, but rather a family controlled, publicly traded company. “But whether I was in a family controlled company or not, I believe everything relates to the culture and the way it affects the people,” she says. “Brands don’t sell themselves. People do. Everything we have done to this business to change performance—which has been so dramatic in the last 12 years—has been directly related to our people. It’s about how strongly they value our values and how they implement them.”

Unlike some companies, where the values are implicit, Culver managers must memorize its 10 cultural imperatives: honesty, ownership, trust, customer orientation, commitment, fun, innovation, risk taking, speed and urgency, and teamwork. To implement them, Bernick created a Growth Development Leader (GDL) system, in which one manager mentors about a dozen employees. Bernick has a GDL team of about 90, from various levels of management, with whom she meets every six weeks. “They are the catalysts for change in the culture,” she says. “We draw up a list of priorities for change. We then act on those and get results.”

Ten years after laying the groundwork, Bernick says Culver has hundreds of people involved in decision-making rather than the 20 executives in charge when she first took over. “Our people are far more engaged than in ’92, turnover is way down, and we have a much higher-caliber team,” she says. “We went back to the values my parents started with—openness in communication and a can-do attitude—and it has paid off.”

The numbers bear that out. In 1995, her consumer products division had sales of $475 million. By 2003, sales were up to $915 million, with pretax profits up 16.8 percent over the previous year. “It was so successful that we’ve merged our international unit with the North American division, and that has helped us improve sales abroad,” Bernick says. “Everyone gets our 10 values, and frankly, if they don’t, they don’t stay with the company long.”

Poza points out that the key to passing the family firm from one generation to the next is that the culture must be strong but flexible. “The younger generation must be uniquely capable of respecting the past success that the business enjoyed, but also be the agent of change if the business is to succeed,” he says. “It’s a judgment call, but there are plenty of companies that have done it successfully.”  

Illustration by Lisa Franke