Spring 2008 Toolbox

Family business relationships viewed from ‘the soft side’

Family Business on the Couch: A Psychological Perspective, By Manfred F.R. Kets de Vries and Randel S. Carlock with Elizabeth Florent-Treacy; John Wiley & Sons, 2007; 297 pp., $60 

Though each family and every industry has its particular idiosyncrasies, there is at least one universal truth in the family business realm: Many conflicts that on the surface appear to focus on business matters tend to be rooted in family emotions. In this comprehensive, clearly written volume, Manfred Kets de Vries and Randel Carlock, two leading scholars in the field—along with Elizabeth Florent-Treacy, their colleague at INSEAD (an international business school and research institution)— uncover the psychological issues that lie beneath the surface of common family business scenarios.

“[M]ost business issues facing family-controlled firms are similar to those faced by equivalent publicly or widely owned firms,” the authors write, “but the challenge for the adviser working in this context lies in finding explanations for often seemingly irrational behavior and decisions of the family about these issues.”

According to the authors, many business school courses address family-controlled firms from a management rather than an ownership perspective, and often take a purely economic approach when analyzing family companies. In Family Business on the Couch, the authors provide additional context in their examination of what drives business families, for better and for worse. Kets de Vries, Carlock and Florent-Treacy offer an overview of important academic research on family relationships and the effect of family ties on business functions, as well as case studies of how these issues have played out in actual business families. “Once we acknowledge that the two systems in family firms—the family and the business—are not necessarily compatible,” the authors write, “we can work to exploit the strengths of each and establish structures and processes to neutralize the weaknesses created by the interface.”

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With the aid of charts, tables and illustrations, the authors explain fundamental concepts such as the “three-circle” model of family, business and ownership; Sigmund Freud’s six-phase model of human development and Erik Erikson’s eight ages of man; and Elizabeth Carter and Monica McGoldrick’s six-stage model of the family life cycle. “[W]hen studying family businesses,” the book explains, “we search for underlying themes, meanings, and metaphors, and explore the implications of certain activities and behavior in order to throw light on what is going on in the business.”

In their preface, the authors describe “our intended audience,” which is quite broad: family business stakeholders (family and non-family executives, owners and directors), business students and the academic community, and advisers to business families (investment bankers, lawyers, accountants and more). Some of these readers may opt to skip parts of the book. Laypeople may be overwhelmed by some of the discussions of theoretical perspectives, while practitioners may find some explanations too basic. Some passages (like the discussion of “The Clinical Rating Scales and the Circumplex Model,” which spills over from Chapter 8 into Appendix 2) are geared toward family business advisers rather than family members themselves. Some business owners will enjoy the peek into an adviser’s toolkit; others’ eyes will glaze over.

But all readers are likely to learn something important from this book, a handy, desktop crash course in family business psychology—especially from the chapters that illustrate, in the authors’ words, “how particular character styles of family members can affect a family business, especially when a family member is the CEO.” Particularly insightful is the chapter on dysfunctional narcissism, envy and family myths (e.g., the myths of the martyr, the scapegoat and the messiah), as well as the chapter on generational succession. Appendix 1, “Developing a Business Family Genogram,” cogently explains, with examples, how diagramming family relationships can help family members see patterns of behavior that recur over generations.

Most valuable of all are the real-life case studies. The book opens and closes with the story of Steinberg Inc., a Montreal-based diversified retailing and real estate organization that was sold in 1989 and subsequently dismantled in the aftermath of a feud among the third-generation siblings. The case, the authors explain, “demonstrates how over 50 years of entrepreneurial achievement, through two generations, can be destroyed by subsequent generations if the family fails to address the psychological issues they face.”

The book’s other case studies —describing both functional and dysfunctional business families— include analyses of India’s Reliance Group, S.C. Johnson & Son and Gucci, plus a number of others. Some of the case examples are presented pseudonymously.

Another highlight is a retelling and analysis of the plot of a Danish film, Arvet (“The Inheritance”), in which a reluctant son takes the helm of the family firm at his mother’s insistence, sacrificing his own happiness in the process.

In the business community, “hard” issues—finance and operations —tend to receive greater emphasis than “soft-side” family relationship concerns. The authors of Family Business on the Couch present abundant evidence to make the case that family enterprises ignore soft-side issues at their peril.

A fun way to approach a serious conversation

Are you skittish about initiating a frank family discussion of the challenges of intergenerational wealth transition? GenSpring Family Offices has developed an enjoyable, non-threatening conversation starter, the Shirtsleeves to Shirtsleeves Board Game. What’s the object? “Not to run out of money by the time you get to the third generation,” explains its inventor, Steve Barimo, chief innovation officer at GenSpring.

The game board is decorated with various cultures’ version of the classic lament “Shirtsleeves to shirtsleeves in three generations.” (Germany: “The first generation creates, the second inherits, the third destroys”; Italy: “From the stable to the stars and back again”; China: “From peasant shoes to peasant shoes in three generations.”) To further emphasize the universality of the issues, international coins are moved around the board in lieu of game pieces. Participants begin with $25 million in play money, an amount chosen because that level of wealth provides the senior generation with the flexibility to provide optimally for their own future, for their heirs and for philanthropic causes, according to Michael Zeuner, GenSpring’s chief strategy and client experience officer. But along with “$1 million,” “$5 million” and “$10 million” bills, there are “IOUs”—and the stack of IOUs is higher than the stack of play money!

Players move along the board from the first generation to the second and then the third, stopping with a roll of the dice on spaces that order them to pay taxes or, if they’re lucky, receive an investment dividend. At each stop, a player must also pick a card symbolizing situations likely to be encountered by a member of the first, second or third generation. One first-generation card reads, “Generational mathematics: Give $2 million to each player.” Unlucky players who reach the second generation may draw a card that compels them to pay high maintenance costs on a new yacht. “The game helps, in a very fun way, to raise awareness around these issues,” Zeuner says.

The game is rigged so players have a 70% chance of going bankrupt. “They can go through the shirtsleeves-to-shirtsleeves process without actually losing any money,” Barimo explains.

GenSpring facilitators who have observed families playing the game have seen family members beginning to share stories from the family’s past and younger generations starting to grasp the effect of estate taxes, according to Zeuner. The atmosphere is “boisterous,” he says. “They’re laughing, they’re competing.”

The cards also help players recognize that family dynamics can have financial implications, Barimo notes. (Example: “You call your daughter ‘baby’ at the office. She quits and takes your biggest client. Lose $15 million.”) “The family capital needs to be at the service of the human capital,” Zeuner says. “It’s the human capital issues that are causing the wealth destruction.”

At the end, there are two possible outcomes: “Congratulations—you beat the wealth transfer odds,” or “Sorry—you’re a wealth transfer statistic.”

For information, contact Steve Barimo at (561) 472-9422 or Steve.Barimo@GenSpring.com; www.GenSpring.com.

Appreciating your staff members

Jack Mitchell, the second-generation CEO of upscale clothing retailers Mitchells and Richards in Connecticut and Marshs on Long Island (acquired in 2005), has become famous for his hugs. Mitchell’s 2003 book, Hug Your Customers, a guide to providing superior customer service, has sold more than 148,000 copies, and the author has become a fixture on the speaking circuit, addressing audiences from Starbucks, Nike, Morgan Stanley and other firms and associations. (For an excerpt from Hug Your Customers, see FB, Summer 2003.)

In Mitchell’s new book, Hug Your People (Hyperion, 2008; 250pp., $19.95), he stresses that hugs (which he describes as “any positive act, gesture or deed that personalizes a relationship and creates a ‘Wow, these people really care about me’ feeling”) shouldn’t be reserved for customers only; they should be dispensed liberally to employees (whom he prefers to call “associates”), as well.

Mitchell—whose brother, Bill, and wife, Linda, work in the family company, along with his four sons and three nephews—notes that the “hugging” philosophy at his business starts at the top. “It’s the leader or leaders who own the challenge and set the tone, mindset and culture of the company …,” he writes. “We get to know our associates as if they were family, because we actually believe they are members of our extended family.”

The book is divided into five parts, reflecting what the author calls the five principles that constitute “the Mitchell blueprint for how to hug your people”: Be nice to them (and hire nice people to begin with); trust them; instill pride in them; include them so they believe they are “an intrinsic and irreplaceable part of the business”; and generously recognize them. The book is replete with laudatory references to the company’s employees, both family and non-family. (For a discussion of the family employment policy created by Jack and Bill Mitchell, see Family Business Agenda, Autumn 2007.)

How do the Mitchells hug their people? Here are a few of the ways:

• They eschew a probationary period for new hires. (“I don’t know about you, but to me, probation suggests a convicted felon,” Jack Mitchell writes.) Instead, they view themselves as “getting married for life” to new associates (although they acknowledge that some of these “marriages” will fail). New associates receive a congratulatory card and flowers from their manager; within the first six months they receive a “hug bonus,” which “quickly lets the air out of the new associate’s anxiety level and makes the person feel at home.”

• They strive for transparency by sharing their sales results with all associates—“by the hour, by the day, by the month, by the quarter, by the year, by department, compared to last year, and compared to plan.” They do have limits, however, Mitchell notes: “We’re private, and therefore we don’t share the bottom-line figures, except with the owners, advisory board, and our bank.”

• They celebrate all kinds of achievements, occasions and milestones—birthdays and personal milestones, anniversaries with the company, awards, sales achievements and more.

• They keep their workplace clean, stylishly decorated and well maintained—and everyone pitches in. (“Dad used to say, ‘I empty the trash and serve the coffee at the store and at home, just like everybody else does,’” Mitchell writes.)

The Mitchells may be nice people to work for, but Jack Mitchell notes that they’re not pushovers. He includes a chapter on why and how he will fire someone when necessary. (“People change—or don’t change,” he reflects. “And we make mistakes. Or they do.”) He also expounds on his company’s take on the classic family business philosophy—“fair is not always equal”—and notes that this principle applies to rewards for non-family employees as well as family members. (The people who are singled out for rewards or praise are those who have earned it.)

Throughout the book, Mitchell cites the firm’s family business consultant, David Bork, who helped them develop many of the policies, philosophies and exercises over nearly 25 years of working with the family.

Hug Your People is as wise and well-written a guide as Hug Your Customers. But this latest volume goes even farther than Mitchell’s first book in putting his advice within a family business context. Even if your family isn’t in retailing, you will find helpful suggestions on motivating and retaining your most important asset—your team members.

About the Author(s)

Barbara Spector

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


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