FIVE

Stories in Context

Year after year the worriers and fretters would come to me with awful predations of the outbreak of war. I denied it each time. I was only wrong twice.

—Researcher in British Foreign Office, 1903–1950

Managing Family Business

I am a fan of family business, if only it could resolve its problem of succession. I have suspicions about sons who follow their fathers into the business and even greater suspicions about fathers who insist that they do so, let alone bypassing their daughters. (I’ll get back to that.) Family businesses need to cast their succession nets widely, also beyond the stock market.

Following Fathers

My father was an entrepreneur, successful enough. He built a business in the garment industry that kept us comfortable. I came out of the womb claiming I would never work for my father. So when the time came, I became an academic and he sold the business.

Many of the kids I grew up with in Montreal were also raised in entrepreneurial families, but came out of the womb differently. They went to work in the family business, almost automatically. A few did okay, and the occasional one grew the business substantially. But most either sustained the business for as long as they could or else dragged it down. And some encountered rivalries with relatives that drove them out of the business, to settle into a life of investing their inheritances. All told, the record was not good: out of all the businesses I knew about when I grew up—some of them quite prominent—few remain.

This followed a famous trajectory: the first generation makes it, the second generation sustains it, and the third generation blows it. The most prominent example of this from my Montreal youth was the world’s largest whiskey company, Seagram’s, built by Samuel Bronfman, who was at one time reputed to be the richest person in the world. His son Edgar took the headquarters to New York, where he sustained it until his son, the junior Sam, enamored of filmmaking, managed to end the empire.

Being born to a business genius, let alone inheriting the wealth of one, has never made anyone a business genius. Nor does it necessarily bestow the ingenuity and energy needed to run a vibrant family company. But being surrounded by sycophants well aware of that wealth has turned many an offspring into an arrogant failure. I have great respect for the entrepreneurs who build and love their businesses, but not for what often follows.

Enter Fred. He contacted me out of the blue, visiting from Singapore to talk about management and communityship. When I discovered that Fred was the third-generation head of his family’s big shipping company, I thought, Uh-oh, not another one of those.

In good family fashion, Fred appeared with his daughter and brother as well as an assistant. As soon as I saw him, my impression changed: Fred didn’t look the third-generation part. We hit it off immediately, dining and then parading around town. Fred’s a fun guy. So what’s the story?

As Fred recounted it: He too was determined not to work for his father. So as a young man in Singapore, he borrowed some money, went off to Malaysia, made his own fortune, and came back to buy all of the family businesses—one by one! That’s an entrepreneur! Fred was not about to go through a whole process with his siblings, so in effect he bought them out—through his father.

Blame the Fathers

Now let’s consider succession from the father’s side. Why are so many smart entrepreneurs so dumb when it comes to succession? Why are they determined to pass the baton to their own kids, usually a son, no matter what? This is like playing Russian roulette with five bullets in the six cylinders.

A study some years ago suggested that the entrepreneurial personality often develops in families with strong mothers and weak fathers—the latter ne’er-do-wells, or drunkards, or simply gone.⁵⁷ This is not always true, but it does seem to be somewhat common. Perhaps the eldest son becomes the surrogate father at home, strong and responsible, the take-charge person—not bad traits for an entrepreneur. So when I meet an entrepreneur intent on having his son succeed him, I ask: “Was your father a great businessman?” Often not. “So what makes you think your son is?”

Casting the Net Wider

Don’t get me wrong: sometimes that blank cylinder is the one that fires. Learning the business from a devoted parent can be a profound form of training. And increasingly these days, there are daughters who are natural and interested successors, maybe more so because of a different relationship with their fathers. For one thing, the fathers may be more inclined to listen to them. Does this suggest that sons may be the more natural successors of entrepreneurial mothers?

The net can also be cast wider. Nephews were significantly responsible for DuPont’s great success. These relatives offer more choices for succession. And it was a son-in-law who made Marks & Spencer a great company; also Bombardier, at least when run by the son-in-law, if not, later, by his son. (We’ll see—so far, not so good.) Perhaps some daughters are inclined to marry a man in the image of their father.

What I like about many family businesses is their spirit, the soul of these places, demonstrated by a deep respect for the customers and the employees. This is not always true—some entrepreneurial firms are the opposite. But in the others, the employees are seen as part of the family. There is something precious about a family legacy—for the family to be sure but also for the employees and the economy.

But that does not solve the problem of succession. What to do when it is time for the founder to move on and there is no capable progeny to take that place? These days the answer is an IPO—an initial public offering on the stock market. Too often it’s a lousy answer, at least if that spirit is to be carried forward. Nothing can kill such spirit faster than a bunch of mercenary shareholders and analysts whose only value is Shareholder Value—the relentless pursuit of a higher stock price.

There are alternatives to the IPO, to which I will return in a later story. Suffice it to conclude here that a vibrant economy is developed by people who build, not hang on; and a democratic society is reinforced by people who succeed by their own wits, not some birthright. We need people who chart their own courses, even if that means coming back to buy the family firm.

Global? How about Worldly?

This globe is actually a soap bubble. (Is ours?)

Do we need more globalization on this globe? How about more worldliness in this world?

In our International Masters Program for Managers, the 10-day worldly mindset (introduced in a previous story) is devoted to the social, political, and economic issues around the companies. We call it that because we want the managers to come out of our program more personally worldly than commonly global. Global implies a certain cookie-cutter conformity—everyone subscribing to the same set of beliefs, techniques, and styles. Is this any way to foster the innovation required by so many corporations? We should be celebrating managers’ uniqueness, not their sameness.

Consider these definitions of the two words from the Pocket Oxford English Dictionary:

global adj 1 worldwide … 2 all-embracing.

worldly adj 1 of the affairs of the world, temporal,

earthly … 2 experienced in life, sophisticated, practical.

Global may be “all-embracing,” about the whole globe, but worldly is “earthly,” bringing together the “sophisticated” with the “practical.” To repeat what bears repeating, the big picture need not be set from on high; it can be better constructed from experiences on the ground.

The worldly mindset takes place, not coincidently, at the Indian Institute of Management in Bangalore. India is another world for the non-Indian managers in the program; indeed, in some respects India is other-worldly. Arriving at the first running of this module, I shared a taxi from the airport with Jane McCroary, an American manager who worked for Lufthansa. Judging from her reaction to that ride, it was a good thing we were not in an autorickshaw! A few days later, she asked one of the professors: “How can you possibly drive in this traffic?”

He replied nonchalantly: “I just join the flow.” Welcome to the worldly mindset! That’s not chaos out there but another world, with a logic of its own.

At this module the managers are not voyeurs, touring some foreign country. They are hosted by colleagues from that country, just as they host these colleagues at modules in their own countries. More recently, at the Bangalore module, Professor Srinivasan started her presentation on the Cultural Dimension of Doing Business with “I want you to see this through my eyes!” Here again is the spirit of the worldly mindset.

How global is global? I have asked many groups of managers all over the globe how many of their companies have more than half their sales outside their home country. You would be surprised at the number that don’t. Think about how much retailing, banking, food, and real estate is local.

Moreover, the headquarters of many “global” companies are populated by people whose mindset is decidedly local. And that can include the CEO, no matter how many tours they may have had abroad. Companies don’t need managers who roam the globe to spread the local word. Down the hall as well as around the world, companies need a worldly perspective, promoted by managers who appreciate different worlds, in the spirit of these famous lines from T. S. Eliot’s “Little Gidding”:

We shall not cease from exploration

And the end of all our exploring

Will be to arrive where we started

And know the place for the first time.⁵⁸

Who Can Possibly Manage a Hospital?

Great debates continue as to who should manage hospitals and other health care institutions.⁵⁹ Should it be physicians? Nurses? Professional managers? The physicians favor cure, the nurses know care, the professional managers exercise control—but who knows all three? There is thus good reason to reject all of these candidates. I reject the question itself.

Professional managers, so-called, namely people supposedly qualified to manage everything, have been the target of several other stories in this book. Being educated in the abstractions of administration prepares no one for the cauldrons of practice.

Because management, unlike medicine, uses little science, it is not a profession. Or to put this another way, because illnesses in organizations and prescriptions for their treatment have hardly been specified with any reliability, management has to be practiced as a craft, rooted in experience, and an art, dependent on insights. Visceral understanding counts for a lot more than cerebral knowledge.

Well then, if not professional managers, how about physicians? Surely they have the visceral understanding of the operations, plus the status to be heard. Moreover, are hospitals not fundamentally about medicine? Yes to all of the above questions. But there is a lot more to managing health care than knowing medicine. In fact, there are reasons to believe that the practice of medicine is antithetical to the practice of management.

Physicians are trained mostly to act alone, individually and decisively. Every time one sees a patient, an explicit decision is made, even if that is to do nothing. Decision-making in management is not only more ambiguous but also more collaborative. A cartoon appeared some years ago, showing several surgeons around an anesthetized patient, over the caption Who opens? In management that is a serious question! Add to this the facts that medicine tends to be interventionist, mostly about episodic cures rather than continuous care; that it usually focuses on parts and not wholes; and that it strives to be scientific and evidence based, and you have to worry about physicians managing hospitals.

This leaves the nurses. Their practice is often more visceral, more engaging, more collaborative, and arguably closer to the whole patient as a person. Moreover their jobs are ones of continuous care more than intermittent cure, plus they are inclined to engage in more teamwork. So some nurses at least should be rather more suited to managing hospitals. Sure—but how to get the doctors to accept management by the nurses?

The conclusion thus appears to be evident: no one can possibly manage a hospital! Running even a complicated corporation must seem like child’s play compared with managing a general hospital: the strident doctors, the beleaguered nurses, the sick patients, the worried families, the determined funders, the posturing politicians, the escalating costs, and the accelerating technologies—all embedded in the events of life and death.

Yet people do manage to manage hospitals and other health care institutions, sometimes rather well. So beyond the evident answer to our question is the obvious answer: people, not categories, have to manage hospitals. I have encountered physicians who were renowned as heads of hospitals. (One of Montreal’s most respected hospital directors was an obstetrician with an MBA.) Likewise I have seen some awfully impressive nurses managing hospitals—and imagine how many more there would be if given the chance.

My own preference is for people who have worked in the operations before moving into the management, whether that be in nursing, medicine, social work, or other specialties. The wider the net is cast, the greater the chances of success.

Managing Government, Governing Management

Government certainly needs to be managed, but management also needs to be governed. It cannot just be let loose on public services, especially in the form of the New Public Management that imitates fashionable business practices. Governments no more need to be run like businesses than businesses need to be run like governments.

This New Public Management is hardly new; it began with Margaret Thatcher’s government in the United Kingdom of the 1980s. Yet for many influential people today, the old New Public Management remains the “one best way” to manage government.

As noted earlier there is no one best way to manage anything. Believing that there is has done great damage to many government departments, as well as to hospitals and NGOs, not to mention businesses themselves, many of whose currently fashionable practices discourage innovation, destroy culture, and disengage employees. (For more on this, read the rest of the book.)

In its essence the New Public Management seeks to (a) isolate public services so that (b) each can be run by an individual manager, who is (c) held accountable for quantitative measures of performance while (d) treating the recipients of these services as “customers.” Let’s take a look at all this.

Am I a customer of my government? No, thank you! I do not buy police and diplomatic services at arm’s length in the marketplace of caveat emptor (“let the buyer beware”). Must I really be called a “customer” to be treated decently? Check out how some banks and airlines treat their customers these days.

I am a citizen who has every right to expect more than does a mere customer. This is my government, after all. I am also a subject—whether formally in a kingdom or de facto in a republic—because I have responsibilities to my state. For example, while I choose to empty my tray at some McDonald’s, I can be charged with littering if I leave my waste in a public park. How about soldiers drafted in wartime: are they the customers of the army? And criminals: are they the customers of the jails? True, I may be a customer of the state lottery, but frankly governments have no business encouraging me to gamble. Pretending to be business cheapens government.

Can government services be isolated from one another, as well as from political influence, so that their managers can be held accountable for their performance? Sure, sometimes—back to that state lottery. But how about defense and diplomacy? Johnson & Johnson may have one brand manager for Tylenol and another for Anusol, but can a government have one brand manager for waging war and another for negotiating peace? Individuals may be assigned to these activities, but can their responsibilities be isolated and the results attributed to anyone? Activities in government can be remarkably intertwined—sometimes exasperatingly so.

Moreover, how easily can policy-making for public services be separated from their administration? Sure elected politicians need to be kept from meddling, especially where there can be corruption. But can they remain aloof, for example when protestors are in the streets accusing the police of abuse?

It’s all very tidy to assume that the superstructure plans and the microstructures execute, thus allowing politicians to cast their laws in concrete for faithful execution by the civil servants. Even more than businesses, with all their ambiguities governments need to learn their strategies or policies more than plan them. If only our political structures allowed this. For new legislation to work, there inevitably has to be adaptation en route by people on the ground who have to deal with its consequences, no matter how politically improper this may be.

To what extent can we rely on performance measures in government? Measurement has been embraced with a religious fervor in the New Public Management. Look at the damage this has done to the education of our children, the delivery of our health care, and so much else.

Sure we need to measure what we can, just so long as we don’t pretend that everything that counts can be measured. In fact, many activities are in government precisely because they have no easy measures of performance. If we couldn’t manage what we can’t measure, we would have to close down government.

So the next time some civil servant calls you a customer or imposes some artificial metric on you, the next time you meet a “CEO” in a government department, the next time some candidate for political office claims that government needs to be run like a business, tell them that you have just the story for them to read.⁶⁰