I made my debut in these pages nearly 20 years ago, in our second issue, as the author of a glowing cover story whose headline boldly announced, “Strawbridge & Clothier: The company that can't be bought.”
As things shortly developed, it could be, and it was. In 1996 America's oldest family-owned department store chain was gobbled up by a larger, younger and tougher competitor.
Today the landmark Strawbridge & Clothier building in downtown Philadelphia awaits refitting as a gambling casino. In other words, a structure that provided consumers with goods and services for more than a century will soon cater to customers who want something for nothing.
“I cannot help wondering what my grandfather and my father would be thinking,” Peter Strawbridge, the last president of Strawbridge & Clothier, recently remarked.
But even given the illogical business logic of our times, who in February 1990 could have dreamt that a newborn magazine would outlast a famous company with five generations of family experience under its belt?
We here at Family Business have learned a great deal in our first 20 years, and not just about the dangers of optimistic headlines. Perhaps the most important lesson of all is one that derives from the fall of Strawbridge & Clothier:
Family ownership, like anything else in this world, can be a blessing or a curse, depending on the circumstances. Five generations of Strawbridges were marinated in a retailing concept in which a family's spirit translated into predictable quality, service and amenities and, ultimately, a healthy bottom line. But by the 1990s the primary attraction that brought customers through the door was the promise of bargains. Many consumers who were pressed for time had stopped coming through any doors and were shopping instead by phone (or, later, online). The Strawbridges, steeped in a noble tradition, lacked the appetite to change their ways even as the world inevitably changed around them.
Their formula worked for 135 years, which is nothing to sneer at. But no formula lasts forever.
What else have we at Family Business learned about family businesses? Here are a few lessons that leap to my mind (some culled from my previous columns and articles):
• Adversity is usually a blessing in disguise. The obstacles of corporate and family life—outside shareholders, sibling rivalries, dissident relatives, takeover threats, estate taxes—force you to keep your blade sharp and stay focused on your primary mission. Conversely, protective devices—like “super-voting” shares or other anti-takeover measures—cause complacency.
• What works for one generation may not work for the next. During his highly successful tenure as third-generation chief of the New York Times Co. from 1963 to 1992, Arthur O. “Punch” Sulzberger increased the company's revenues 16-fold. He also acquired the Boston Globe in 1993 for $1.1 billion. But Punch's personal fondness for the Globe became a company millstone when the Boston paper faltered and Punch rejected an offer to buy it for more than $500 million, much to the dismay of his son and successor. The Globe's value is lately estimated at less than $20 million.
• An effective business leader may be a disastrous family leader. As the oil billionaire J. Paul Getty ruefully observed after five divorces: “There is a Law of Compensation in Nature. Every plus is somehow, somewhere offset by a minus. I have long been able to exercise a very considerable degree of control over my display of emotions. This has been an asset to me in business…. In the more personal spheres of my life, it has often been a distinct liability—nowhere more so than in my relationships with my first four sons.”
• A business family that appears harmonious from the outside may be experiencing great trauma inside. The Pritzkers of Hyatt Corp. and the Bancrofts of Dow Jones are merely the latest and most conspicuous examples.
• Birth order matters. Most family companies still routinely transfer power from a father to the eldest son (or, less frequently, the eldest daughter). Big mistake. As several studies have shown, younger siblings often try harder and demonstrate greater imagination, if only because they didn't grow up expecting to run the place. (See this column, Summer 2007.)
• Clinging to power can be invigorating for a CEO—and disastrous for his family and company alike. Vide Sumner Redstone of Viacom, Hank Greenberg of American International Group and Rupert Murdoch of News Corp., who hung onto their jobs into their late 70s or early 80s. (See this column, Autumn 2005.)
• There's no such thing as a good family or a bad one per se. Contrary to popular belief, there's often greater personality variation within families than between families, as each sibling stakes out a niche for himself or herself within the family. That's why so many U.S. presidents are plagued by embarrassing brothers or sisters. (See this column, Autumn 2006.)
• When you sell your house, you have no right to complain if the new owner asks you to move out. The Strawbridge family (see above) first offered stock in Strawbridge & Clothier to the public in 1941. By the mid-1980s well over half the company's shares were held outside the company's “family” of relatives and employees. Yet in the face of a takeover attempt, S&C mounted an advertising campaign that declared, “The family is not for sale.” Indeed, it was.
• Non-relatives often matter more in a company's success than family members. Some of them may become CEOs when the family blood runs thin. Cherish and reward them accordingly. At any large company, family members are just the tip of the iceberg.
• The best things wealthy parents can bequeath to their children are the things money can't buy: sound judgment, credibility, patience and a strong sense of self-esteem. In a family business, these qualities are often especially difficult to impart. (See this column, Autumn 2005.)
But enough about you. Let's talk about Family Business Magazine. In 20 years this publication has undergone at least four formats and three page sizes that I know of. Unlike Strawbridge & Clothier and the New York Times, we didn't discover an ideal formula right off the bat. The good news is: With all those fits and starts, we were never wedded to the past. And our controlling family—the Rocks—have hung in there through years of tinkering.
This magazine's original business model seemed logical at the time: Our founders perceived that more than 80% of all U.S. businesses are family-owned (true), yet no publication specifically addressed itself to the needs of family-owned companies (also true). A magazine capable of filling that niche, our founders reasoned, could attract hundreds of thousands or even millions of readers—a huge and affluent audience that in turn would attract ads for luxury cars, upscale travel, fine wines and whiskeys, investments—all the material goodies that prosperous business families were presumed to enjoy.
This theory suffered several flaws. For one thing, a family business that coasts on its illustrious past will soon be an extinct business. It turned out that many business families (like, say, the Strawbridges whom we trumpeted in our second issue) had neither the time nor the taste for BMWs and Amazon cruises; on the contrary, they were engaged in day-to-day struggles for survival against bigger and more aggressive competitors, not to mention a changing economic world.
More important, our original model was doomed by a misconception that also doomed my 1998 book, The Inheritor's Handbook. That book was conceived as a guide for baby boomers who had never conversed with their parents about money and death and didn't know where to begin. With $10 trillion about to be bequeathed over the next generation, my publisher figured my book would sell a million copies. Instead, it sold about 10,000.
Why? In retrospect, people avoided The Inheritor's Handbook for the same reason they avoided talking to their parents about death: They'd rather not think about it.
Similarly, many family business executives avoided the label “family business.” To them, the term smacked of mom-and-pop groceries or the corner dry cleaner rather than Wal-Mart or Ford or Fidelity Investments. They thought of family businesses as cozy, complacent, soft and small, whereas they wanted to think of their companies as aggressive, dynamic, entrepreneurial and gargantuan.
If this magazine has contributed anything to the business landscape over the past 20 years, it is to foster the notion that, in many cases, family businesses are more efficient and flexible and less bureaucratic —in other words, more dynamic and responsive—than non-family businesses. They last longer, too—for the same reason that families outlast companies, sports franchises and even governments. And the family businesses that flourish the most and last the longest often tend to be those that consciously promote themselves as family businesses.
But old ideas die hard, and consequently this magazine's survival through several incarnations over 20 years is a small miracle. Then again, the survival of any business for two decades is a miracle.
The dynamics of a business are something you have to work at every day. Pretty much like the dynamics of a family, come to think of it.