Policies Versus People
Jack and Bill Mitchell became managers of the men’s clothing business their father, Ed, founded in Westport, Conn., in 1958, and helped grow Mitchells into one of the most successful independent clothing stores in the country. In 1991 the company needed to hire a financial executive, and decided to approach Jack’s oldest son, Russ, who worked for IBM and was clearly qualified for the job, although he had never considered working for the family business. Russ agreed.
TOP VIEW
Only the most carefully planned and skillfully integrated family businesses can hope to thrive under the management of the third generation. The grandchildren of the founders and their extended families may drift away from the core values that animated the companies and prompted their growth under the management of the first and second generations. Indeed, many liquidate their companies rather than tackle the thorny management and governance issues. However, a select few are able to put in place mechanisms to achieve consensual decision making among the growing ranks of owners, while centralizing management authority in the hands of the most competent individuals, thereby spurring their companies on toward greater success. |
A year later, the company’s senior buyer left, and the company hired Jack’s son Bob, who had a passion for selling. Russ and Bob had clearly internalized their father’s and grandfather’s work ethic. They soon sought out the chance to prove themselves. “In 1995, we saw the opportunity in another market, and purchased a business, Richards, in Greenwich,” Bob recalls. “This became Russ’ and my project.” By having their own company to develop, they were able to demonstrate their ability outside of their father’s orbit. Richards became the successful counterpart to Mitchells in the Greenwich market.
However, more brothers and cousins joined the businesses in the years that followed—Todd, Scott, Andrew and Chris. It soon became apparent that Jack and Bill needed both a plan for governance and a blueprint for succession in order to manage both the business and the family’s expectations.
Before the issue of hiring members of the third geration even arose, Jack and Bill attended an industry conference where they heard a presentation by family business consultant David Bork, founder of Aspen Family Business Group in Fort Worth. While Jack had been thinking about succession, Bork’s discussion spurred him to take more formal steps. “They struggled because they were not sure how to transition the business to the next generation,” Russ recalls. “David Bork helped us see that you need to have guidelines; you can’t do it haphazardly. While you cannot predict the future, without a clear road map, it will get away from you.”Before members of the third generation began to join the firm, Jack and Bill worked with Bork to design guidelines for hiring. They decided that business strategy had to take precedence over family members’ desire for positions. Their Family Employment Policy states: “Family members are expected to work elsewhere for five years. A job will not be created for a family member. When family members enter the business, there must be a real job and they must have the skills to match.” They designed these policies to quash any expectations of entitlements and perks that might weaken the business.
“This rule is not about getting experience in the clothing business, but rather to help discover yourself, who you are and how you work, and to experience work where you don’t work for your father,” Russ explains. “It also helps you make sure you really want to work here. We all think the process has been really successful. We just met with my cousin Chris, who is starting work, and he used the five-year period to sharpen his skills.” Professional Exigencies
By the third generation, the scope of most family businesses has grown well beyond the small, entrepreneurial ambit overseen by the founder and his or her children. Taking the family business to the next level of performance often requires that members of the third generation become more professional in their management skills—or secure managers who have the requisite experience.
|
