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| Your Family's 100 Year Plan Part III |
After The Diaspora
Suzanne McGee
02/01/2005
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Family members who have fought, successfully, to keep their companies under their ownership or control usually instill a sense of identity with the business in their offspring early on, Ward says. He recalls the case of one heir to a food distribution company who taught his son from infancy to recognize that his father’s business was not just a job, but also a family enterprise. When the son was 4, he drew a picture of his father as a figure clutching a briefcase and standing beside a company truck, which he colored in with the company colors and a near-perfect rendering of the logo.
 That kind of child is likely to take an interest in family affairs later in life. But even the most acclimated son, daughter, nephew or niece will not necessarily want to become involved in the business. His or her interest might veer more in the direction of the family’s other ventures, notably philanthropic endeavors. In cases such as these, family governance policies play a crucial role in guiding heirs toward their goals, and they stave off the kind of conflict that splintered Freedom Communications. Governance issues should not be restricted to running the company; they also need to be applied to the family itself, says William O’Hara, head of the Institute for Family Enterprise at Bryant University in Rhode Island and author of the book Centuries of Success: Lessons from the World’s Most Enduring Family Businesses.
By the time the fourth generation reaches adulthood, the family’s responsibility to the enterprise their great-grandfather founded is no longer to produce a chief executive in every generation. Rather, says Richard Narva of Genus Resources, a family business advisory firm in Massachusetts, “their job is to ensure that the interests of all shareholders and stakeholders are reflected, to ensure that there is good governance—that they are looking out for the long-term interests of the company, rather than tackling shorter-term management issues.”
Most often, families work together to solidify their interests by forming a bloc to elect family members to sit on the board of directors. In extreme cases, families call on their membership to step into the breach to help the company in times of crisis. One of the most telling examples in recent years occurred at Ford Motor. The automaker had been without a representative of the Ford family at the wheel for more than two decades when Chairman William Ford Jr. took over and fired chief executive Jacques Nasser in the fall of 2001. Ford, one of 13 members of the fourth generation, worked to recover the company from a string of business disasters, including deaths attributed to Firestone tires on Ford vehicles, employee lawsuits against the company and slumping profits. As disaffection with Nasser grew, the board gradually supported Ford’s bid to replace him.
The fourth and fifth generations seem to be called on to address a lot of these very thorny problems about what to do with the family firm and then what happens to the family? |
The Ford case illustrates two vital points. The family’s stake in the automotive giant had been whittled down to 40 percent over the years, as the company had sold more stock to the public and family members had sold their own Class B multiple voting stock. Thus Bill Ford had to prove that his own business savvy, not simply his family name, made him a natural heir to the CEO’s office. “Since American companies almost inevitably turn to the capital markets to finance their growth, you will find those situations everywhere, where the family ownership is diverse and shared with a vast number of other shareholders,” Narva says.
Also, Bill Ford benefited from his family’s tradition of holding regular councils comprising more than 30 Ford heirs to discuss not only family issues, but also current events at the company founded more than a century ago. These family meetings sparked Ford’s interest in the business and became a stage for him to develop and display his leadership skills, beginning with his efforts to encourage other family members to lobby the board for a seat for him and culminating with his rise to chairman. The kind of family councils—or executive committees of the family network—held by the Fords can serve to introduce and elucidate both business issues and more routine matters such as organizing family reunions and educating new generations about their heritage or responsibilities, perhaps at special family summer camps.
“If you don’t have this kind of structured family communication, that’s where later generations can run into trouble in maintaining their ties to each other and to their businesses,” says Ivan Lansberg of Lansberg, Gersick & Associates, a family business advisory firm in New Haven, Conn. “You need to create new institutions outside the context of the family company and identify new leaders in the family, people who may or may not be business leaders, but who command respect from across the different family groupings” that have evolved.
Paul Karofsky, a Boston-based family advisor, agrees that finding ways to facilitate communication among widely dispersed family members is vital to maintaining the crucial substance of emotional glue, whether it is applied to the business or to maintaining family ties that revolve around other institutions, such as a foundation or family office. He is working on a project for a third-generation chief executive of a food processing business who is eager to improve communication and identify members of the fourth and fifth generations who might be family leaders, either inside or outside of the business.
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