When Frederick Weyerhaeuser acquired the 900,000 acres of timberland in the Pacific Northwest that became the basis of today’s Weyerhaeuser Company, he allegedly declared, “What we do today, we do not for ourselves, nor for our children, but for our grandchildren.”
Maybe he meant that literally—after all, “Trees take 60-plus years to grow,” notes his great-great-grandson, now the company chairman. And whether he really made such a statement or not, the current chairman adds, it “has been repeated down the generations by my father, by my great-uncle and by me. It is often used to point out that we are only stewards of the assets we inherit, and it is up to our children and grandchildren to be stewards as well.”
The successful management and transition of wealth across generations has always been a concern and a challenge. “How can I keep the wealth from ruining my kids?” asks an entrepreneur who just sold her company for $33 million. She’s concerned that inherited wealth could drain her children of motivation and ambition—that it might leave them rich but devoid of purpose, direction or meaning in their lives.
Those questions are not merely hypothetical for families that have successfully moved wealth into third, fourth and fifth generations: They’ve already seen some family members ruined by excessive wealth. But whether the family money is new or old, all wealthy families struggle with the challenges of linking their descendants with the history, sacrifice and ethic that formed the original basis of the wealth. How, they ask, can they keep a semblance of unity as a family in the midst of an increasing diversity of lifestyles, values and interests among relatives?
This challenge will become even more widespread as the numbers of families blessed by business and investment success increase in the future. According to U.S. Census Bureau data, there were more than 7 million households with net worth of $1 million or more in 1999, up from fewer than 2 million such households just nine years earlier.
What lessons can we learn from families and companies that have successfully met this challenge? In the end, it boils down to how the family understands what it means to own a common economic interest—whether that interest is a business, wealth or both. To own something means to possess or control it. What separates successful wealth- and business-owning families from those who run into problems is the nature of the owning family’s philosophy about what ownership means.
Bernard Puech, a fifth-generation owner of the Paris based Hermès company, once observed that “We in the fifth generation do not view ourselves so much as owners but as caretakers of the company for our children.” That’s very different from the notion that ownership means the right to exploit one’s company primarily for the personal gain and benefit of current owners.
And the best companies are…
In researching their book Built to Last (HarperBusiness, 1994), authors James Collins and Jerry Porras asked hundreds of chief executives to nominate outstanding companies. From this list Collins and Porras selected 18 “visionary companies” that shared two characteristics: an average age of more than 100 years and financial performance that exceeded the general stock market—companies like 3M, Citicorp, General Electric, Merck and Wal-Mart.
Then they compared these 18 companies with their equally impressive competitors: firms like Norton, Westinghouse, Pfizer, Colgate and Ames. While these second 18 were no slouches in stature and success, they lacked one essential characteristic that pervaded the top list. The visionary companies, the best of the best, possessed what Collins and Porras call a “core ideology”—a set of firmly held values, principles and aspirations that define the company’s reason for its existence, beyond the mere making of money.
Among the visionary companies they studied, making a profit was important but not central to the core ideology. In fact, the authors concluded that, for these companies, making a profit was like breathing air: necessary for life, but not the purpose of it.
Much the same formula applies to successful families. In No Single Thread: Psychological Health in Family Systems (Brunner/Mazel, 1976), Jerry Lewis and Robert Beavers conclude that one characteristic of healthy families is a sense of shared purpose or meaning that transcends the family. Other observers have similarly recognized that an overarching family connection to a shared set of values, principles and purpose—whether religious, cultural or philanthropic—is central to healthy family life.
For families that share ownership in a common economic interest—be it a business, a foundation, a family office or any other form of wealth—the critical point is their ability to perceive the connection between their institution and the role of values and purpose. This is not rocket science. It should be obvious that anyone without a sense of purpose or meaning in life—regardless of wealth—is someone without a future. Yet this simple reality is often overlooked.
Defining ownership
Most owner families fall primarily into one of two categories: proprietorship or stewardship. Each orientation reflects a particular set of common human aspirations.
Proprietorship focuses on tangible and material rewards—the human aspirations to security, recognition and personal independence. Proprietor-owners tend to focus their attention and efforts on exploiting what they possess. They measure their success in terms of material wealth, position and prestige.
Most owners in our society seem to fall into this category. After conducting interviews with 300 wealthy people in 2000 for J.P. Morgan & Co., marketing consultant Bill Cummins concluded that most related their wealth to their sense of destiny: “It gave them a sense of purpose and made them feel interesting.” The self-made wealthy, Cummins discovered, “can’t be the person they want to be until they’re wealthy.” The reason? Acquiring wealth is hard work. Once they are wealthy, though, “they can start dictating the terms themselves.”
Stewardship, on the other hand, focuses on sharing one’s wealth. It’s a matter of striving not just for oneself but for one’s family, one’s community and all of humankind. To the steward-owner, the joy of acquiring takes a backseat to the joy of serving others. “There are so many opportunities to do good beyond the family circle, opportunities I hope my family will seize,” wrote G.W. Haworth, founder of Haworth Inc., the world’s No. 2 office furniture manufacturer, in a privately printed memoir distributed to his descendants. Haworth exhorted his family to share “their legacy and their wealth,” adding, “If there is one thought I want to pass on to each of them, it is this: You can risk doing nothing or you can risk doing something. Life’s a fifty-fifty proposition. But at the age of eighty-four I can confidently say that doing nothing is the greater risk.”
The proprietor-owner asks, “How can I reinforce my security, sense of recognition and independence?” The steward-owner asks, “How can I invest what I own through others and reach a sense of purpose beyond the limits of my own efforts?”
To be sure, we never completely rid ourselves of the proprietor’s fear of losing it all. And proprietorship isn’t necessarily a bad thing per se. The fruits of proprietorship—personal security, a sense of recognition, a feeling of independence—are essential building blocks in the development of successful people. In that sense, proprietorship forms the launching pad for stewardship. But this transition from success to significance doesn’t just happen; it must be intentionally fostered and developed.
The critical elements
The transition is easier said than done. The Puritan ethic—with its notions of hard work, personal responsibility and self-reliance—is deeply ingrained in Western culture. Young adults out to prove their mettle are especially vulnerable to using wealth and property as convenient ways of keeping score. Only at an older age does the superficiality of material wealth begin to wear off. Raymond Chambers got out of the leveraged buyout business at age 50 to devote himself full-time to helping inner-city kids in his native Newark, N.J. Bob Buford, in his mid-30s, sold his family’s Buford Television Inc. in 1999 to launch a second career aimed at finding spiritual fulfillment for himself and his Generation-X peers.
For the next generation to make the transition from proprietorship to stewardship, several things must take place. Education and grooming of the next generation to further the stewardship orientation must be an ongoing family commitment. Each member of the successor generation must have legitimate opportunities to meet his or her needs for achievement, security, recognition and independence—whether inside or outside the family company. “Don’t just ponder succession planning,” fifth-generation member William Mennen IV advised after the Mennen Company was sold in 1992. “Make provisions for individual accomplishment by driving younger family members to expand their expertise beyond the skills needed in the family enterprise. If the company is sold, they will thank you. If the company is not sold, the family as a whole will reap the benefits of increased training” (FB, Summer 1993).
Heiress Patricia Taylor makes the same point more philosophically in Barbara Blouin’s The Legacy of Inherited Wealth: Interviews with Heirs (Trio Press, 1995): “Money is supposed to allow you to avoid having to work by the sweat of your brow. Yet living by the sweat of your brow is where the gift is. Work becomes ‘call,’ an inner and outer call, which brings you into a sense of wholeness and puts you in contact with the rest of the world.”
None of this can continue on a long-term basis unless it’s supported by the right relationship tools and structures—for example, the family forum, family office, owners’ forum and beneficiary forum. Finally, there must be structures to guide investments of family assets, such as a family foundation, a family charter or even a written family legacy that documents the family’s values, purpose, mission and aspirations.
Frederick Weyerhaeuser’s fourth-generation descendants, for example, successfully operate the Rock Island Company, which maintains investments in the forest products industry. They also have a family office, a family foundation, an in-house mutual fund company (it sells only to family members) and several other family committees. Family members can serve on any or all of these bodies. These roles offer opportunities “to interact with one another, form alliances, learn the history and show leadership skills,” says the company’s chairman.
Three generations of the Follett family, whose Follett Company is the world’s largest college bookstore operator, gather annually for a two-and-a-half-day family meeting that incorporates business concerns and ownership discussions with team-building and family communication activities. The Follett Family Forum, attended by 85 family members last year, is conducted by the Follett Family Council, which also meets regularly. A family board member also serves as the liaison between the Family Council and the company’s board. In addition, there’s a family website to foster communication, education and cohesiveness within the family.
No one structure or approach fits all families. Joseph F. Lizzadro is chairman emeritus of his family’s third-generation Illinois contracting company, Meade Electric, and continues to lead his family’s twice-a-year meetings and philanthropic activities. Joe became chairman when his father died unexpectedly of a heart attack in 1972. “What works for one family doesn’t work for another,” he acknowledges. But the place to start is with regular meetings structured to exchange information—and “that will happen only because some one person drives it. The leader-of-the-time has to figure out how to satisfy a variety of family interests, how to make it work and get the family to buy into particular family member initiatives. It requires trust, built up over time, and the sponsorship of the leader-of-the-time.”
These structures may strike you as excessive. But the opposite extreme is worse: When this kind of nurturing fails to happen, the family members’ needs may go underground and become expressed in distorted ways: excessive control rather than security, entitlement rather than recognition, self-doubt rather than independence.
Assessing your stewardship
To assist the transition from proprietorship to stewardship, we developed the following six principles, along with questions to help you evaluate how well you are nurturing this process.
Principles of Stewardship
1. Being an owner is not a right; it’s a privilege and a gift.
To what extent do you approach your role as owner with an attitude of humility, gratitude and responsibility that is apparent to all, as opposed to an attitude of possessiveness, entitlement and privilege?
To what extent do family members follow your example in embracing the responsibilities of stewardship beyond the privileges of proprietorship?
2. It’s my responsibility to protect and develop what is entrusted to me. That means acknowledging when my own self-interest gets in the way.
How readily do you recognize it, and stand up to be counted, when you contribute to a problem as opposed to avoiding the issue and expecting everyone around you to adjust, thus jeopardizing your common economic interest?
How much do family members point fingers of blame rather than embrace honesty and extend arms of reconciliation?
3. Every day is a new opportunity for me to do something good for and with what has been entrusted to me. Whether or not that happens is up to me.
To what extent do you discipline yourself to accomplish, every day, the one or two things that will have the greatest positive effect on your ownership interests, as opposed to losing your focus, getting fragmented and wasting opportunities?
To what extent do family members exert this discipline?
4. I cannot let discomfort and fear—my own or others’—cause me to avoid facing and resolving problems that threaten family relationships or business well-being.
Do you court risk by avoiding discussion of painful and difficult family, business or ownership issues because of your own—or someone else’s—fears and discomfort?
To what extent is avoidance of conflict and growing false agreement among family members jeopardizing your common economic interest?
5. Staying focused and committed to being my personal best in mind, body and spirit are essential to fulfilling my stewardship responsibilities.
How well do you take care of yourself, strive for balance in your life, nurture and live according to your core values and personal mission, as opposed to relying on your work and business to be the source of your self-worth and purpose in life?
To what extent does the culture of your family reflect the value of personal well-being, health and balance in life?
6. I will not knowingly abuse the privileges entrusted to me, nor jeopardize the well-being of the whole for the benefit of any one individual—myself or anyone else.
To what extent do you take inappropriate advantage of your rights and privileges of ownership because there is no one to question it and jeopardize the whole for your own or someone else’s benefit?
Have family members come to expect special privileges simply out of a sense of entitlement and without regard to the impact on others?
Developing the stewardship orientation is one of the responsibilities of ownership. Ultimately, the difference between proprietorship and stewardship can be boiled down to the story of the bricklayer and the stone craftsman. Asked what he was doing, the bricklayer responded, “Building a wall.” The stone craftsman, working on the same wall, replied, “I’m building a great cathedral that will be the heart of our community for centuries to come.”
Edwin A. Hoover and Colette Lombard Hoover (fambzns@aol.com) are family business and wealth management and relationship specialists in Willowbrook, Ill. They are co-authors of Getting Along in Family Business: The Relationship Intelligence Handbook, published in 1999 by Routledge.