Spring 2007 Toolbox

Family firms' successes and scandals

Dynasties: Fortunes and Misfortunes of the World's Great Family Businesses, by David S. Landes

Viking, 2006, 380 pp, $25.95

Why were history's most renowned business families—the Rothschilds, Barings, Morgans, Fords, Agnellis, Rockefellers and the like—so successful? That's the question David S. Landes, author of the widely acclaimed The Wealth and Poverty of Nations, aims to explore in Dynasties. “As a historian, I was quickly drawn into the drama of these stories and the larger-than-life qualities of many of these competitors for wealth,” writes Landes, an emeritus professor of history and economics at Harvard University.

Indeed, the book—which boasts a 31.5-page bibliography and more than 21 pages of endnotes—abounds with lessons on the history of the banking, automobile, steel and other industries. It's also replete with dishy details about its subjects. “We can learn a great deal about business from these dynasties,” Landes writes. “[M]oreover, these are extraordinary men and women, full of eccentricities and genius, and they provide a wealth of entertaining tales.” So we are told that as children both John D. Rockefeller and his son John Jr. wore their elder sisters' outgrown dresses to save on the family clothing budget; that J.P. Morgan “recruited a lawyer at the funeral of the lawyer's predecessor”; and that Eduardo Agnelli's widow died along with a male companion in a 1940s car crash. (Read the book to learn the rumored salacious circumstances of the accident.) Tales of overt prejudice, extreme miserliness and blatant infidelity abound; though you might love to be a fly on the wall at these families' dinner parties, the book doesn't make you wish you were an invited guest.

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All this historical information may be edifying and amusing, but what does it teach us about running a family business? Many of the strategies that were key to these families' wealth-building couldn't or wouldn't be used today: The Rothschilds kept their fortune in the family by encouraging marriages between uncles and nieces; Jean-Martin Wendel, founder of the French metallurgical dynasty, had 14 children; John D. Rockefeller “persuaded” competitors to join his cartel.

The most relevant lessons Landes gleans from the stories of the 11 families he examines are well recognized in the family business community: Emotional ties between generations can make or break a family firm; later-generation relatives who grow up surrounded by wealth and privilege may not want to spend their days toiling at the family company; loyal and talented non-family managers must be nurtured and appreciated, lest they jump ship or challenge the family's ownership; inactive family owners (including female relatives) hold more cards than active shareholders may realize; the great advantage of family enterprise over public companies is the CEO's willingness to put up personal money to rescue the business from hard times.

What I found to be the most interesting part of Landes's thesis is only briefly mentioned in his preface and concluding section, and not elaborated on in the body of the book. “[T]he nations of the developing world, particularly those most desperate for economic development, urgently need family enterprise,” the author writes in his preface. “Their cultural, political, and economic circumstances are not mature enough for managerial business structures…. Businesses in these regions need the trust and training that family makes possible, and the resources that family can mobilize.” The story of how the Toyoda family survived the privations of wartime Japan and emerged to build their Toyota Motor Corporation into an international powerhouse, to cite one example, may offer lessons for enterprising families in developing nations, but Landes presents no detailed analysis along these lines.

If you're interested in global economic history and family business trivia, Dynasties is the book for you. And if you'll titillated by the dalliances of the super-rich, this book will impress your airline seatmate more than the latest issue of Us Weekly will. But if what you're after is advice on sustaining your company, the family business literature offers many more fruitful titles for your reading list.

Mapping the life stages of your family business

How can you convince your family to sit down and discuss the key issues your business is likely to confront? The University of Toledo Center for Family Business has teamed up with Edventures in Learning, a Toledo firm that creates learning tools for organizations, to develop “The Rapids of Success”—a “map,” or visual aid featuring USA Today-style graphics, that's designed to inspire family discussion and alignment around key family business issues.

Edventure has created customized learning tools for Fortune 1000 companies focusing on change management and organizational learning. The principle behind Edventure's maps, according to the firm, is that people retain more information when the learning process is interactive. Storyboarding of complex concepts—such as the typical life stages of a family business, the challenges and forces that affect a family firm at each stage, and the dynamics of managing family relationships within the business—allows group members to link issues to graphic issues and form a common understanding. The diagrams also include key data, allowing conversation to center on facts rather than solely on opinions.

Question cards increase the interactive nature of the experience. The questions are open-ended, notes Edventure partner Mike Beier. The use of such Socratic dialogue “allows people to come to their own conclusions” rather than just having information handed to them, Beier says. The process compels participants to address issues they otherwise would be inclined to avoid, he says.

Edventure's maps, according to the firm, inspire organizational change by creating a shared vision of the future, setting the stage for collaboration on what must take place to make the shared vision a reality, and fostering essential dialogue. Participants in the process “are learning not just from the visualization and the data, but also from each other,” Beier says.

For information on facilitators offering “The Rapids of Success,” contact Debbe Skutch, director of the University of Toledo Center for Family Business, at (419) 530-4058 or dskutch@utnet.utoledo.edu.

A comprehensive look at family enterprise

Handbook of Family Business and Family Business Consultation: A Global Perspective

Florence W. Kaslow, Editor

Haworth Press, Binghamton, N.Y., 2006
464 pp., $49.95 softcover; $69.95 hardcover

This scholarly volume offers a comprehensive overview of family business advising around the world from the perspective of the practitioners. It opens with a history of the Family Firm Institute, the professional association for family business advisers and educators, followed by a history of the field's international expansion.

After thus “establishing the context” in which the field developed, the book goes on to offer consultation models from three practice groups, who share their time-tested philosophies, theoretical frameworks and strategies for establishing and developing governance structures, key documents and policies, and conflict-resolution procedures. The next section features observations on family business advising in 13 different countries, from those in which the field is well established, like the U.S., Canada and the United Kingdom; to those in which the field is newly emerging, like Trinidad and Tobago. The final section offers a “kaleidoscopic overview,” focusing particularly on asset accumulation and wealth management, plus a discussion of the book's themes and comparisons/contrasts of its perspectives. An appendix provides a glossary of concepts from the family systems literature as applied to family businesses.

The volume's editor, Florence Kaslow, is president of Kaslow Associates, a family business and team development consultation firm in Palm Beach Gardens, Fla. Many of her highly respected contributors appear frequently in the pages of Family Business Magazine. The principles discussed are amply illustrated by an array of tables, diagrams and case studies.

An aim of the book, Kaslow writes in the preface, is to assemble “a wealth of historical data of the field; of family business struggles and successful experiences; of family business consulting and advising activities; of setting up and orchestrating all kinds of structures … and helping firms globalize and deal with globalization of their wealth.”

While consultants and academic researchers in the field of family business constitute the main audience for Kaslow's handbook, family firm owners with a thirst for knowledge can gain valuable insights from this in-depth assessment of the field and its history.

About the Author(s)

Barbara Spector

Barbara Spector is Family Business Magazine's editor-at-large.


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