This book has had a long gestation period—from my teenage years until now. My father started several businesses simultaneously (scrap metal, barrels and drums, and sanitary rags for manufacturing use) in Cincinnati, Ohio, during the early 1930s and brought my older brother into the business after World War II. They gradually sold off the businesses, leaving only the scrap metal business. About 20 years later, my younger brother entered the business. Because of a serious disagreement that never was resolved, he left the business 8 years later to start his own scrap metal firm in Dayton, Ohio.
Although I worked in the business for several summers during my high school days driving a tractor-trailer (I was big for my age and got away with it), I knew that I couldn’t work there. My need for independence would have been too upsetting for all concerned. I decided to become a clinical psychologist. And of course I often wondered about the connection between my unfinished business with my parents and my becoming a psychologist.
After several years of graduate school and clinical experience, I began to focus on the subspecialty of family therapy, and with three other kindred spirits, we founded the Family Institute of Chicago. My reputation as a family therapist brought me into contact with family businesses, one of which proved a turning point for me and my career. A family had been in therapy for a year or so. Their therapist felt that little progress was being made and that my experience with family businesses might be effective in helping them. It turned out that one of the major issues was the father’s refusal to appoint his son as successor. In response to my question as to why, the father responded that his son wasn’t ready. “Well, how will you know when he is ready?” I asked. “When he shows me he can sell…he would have to open up a new territory and manage it.” I turned to the son and asked him if he could do that. The son said he could and would. We met once more to review their agreement and scheduled a third meeting in three months, by which time the son felt he could accomplish the task.
We met at the appointed time, but the tension in the family was as high as ever. The son had indeed succeeded even beyond the goals we had established, but the father had nevertheless persisted in insisting that the son was still not ready. The remainder of that session was devoted to exploring the father’s position. What was revealed was his fear of relinquishing control and becoming a “nobody.” His view of succession was one in which he would be kicked out of the business he founded and shepherded through its history. We all agreed on a role the father would play were succession to occur, a role that played on his exceptional ability in finance and mergers. Within several months the son became president, the father began to work on several merger possibilities, and the need for continued therapy disappeared. Accomplishing this required four meetings in all.
What dawned on me was that my background in therapy was standing in the way of conflict resolution in family businesses—that meetings with family members had to be structured around business issues, and psychology had to support that process rather than supplant it. This realization also prompted me to learn much more about business—strategic planning, organization design and development, process analysis, management development, and team building—which has stood me in good stead not only with family businesses but with the many nonfamily firms with whom I have consulted as well.
I offer this personal background and my transition from being a therapist to a management consultant as a backdrop to the material in this book—in particular, to my emphasis on how the structure of the family firm can be diagnostic of family dynamics. Structure refers to such considerations as how a successor is chosen, how “sweat equity” issues are handled, the values governing the running of the business, the relationship of family members not in the business to the business, and how management succession is dealt with, among others. Psychology and interpersonal dynamics play a role in each of these issues, but their importance emerges around business issues. Many case studies are presented as a means of illustrating this position and bringing to life the various family business issues that have to be addressed and resolved.
Generally the family businesses that I have seen have been founded and are being run by fathers. For that reason the founder is referred to in this text as a male. The second generation in these families may be male, female, or both—I alternate between referring to offspring as him and her. To preserve the anonymity of these businesses such items as gender, number of siblings, and type of business have been changed, but in a way that preserves the dynamics of the situation.
The first chapter deals with what is a family business. The definition among scholars and practitioners is unclear, and consequently the relevance of some research results about family business is suspect. The importance of definition becomes clear in considering whether the family firm is as inefficient as portrayed in many newspapers or whether, as some researchers claim, it is even more productive and successful than nonfamily enterprises.
The second chapter reviews the transition process that has to occur in a family firm if it is to remain in the family and under family control. Appendix A is a summary of the issues involved in transition and a map of how to conduct a family transition plan.
Family dynamics occupies center stage in chapter 3. It deals with how marriage types influence the roles offspring play in the family and the coalitions that are formed between parents and children and how these can affect business decisions, and it introduces one explanation for why family firms can be a lure to family members despite the difficulties encountered.
Consultation is the theme of chapter 4. If a family firm is experiencing problems, who can they call on, and what can they expect in the way of assistance? Succession planning is the main topic of chapter 5 and, in many important ways, the culmination of the transition process. The final chapter, the epilogue, brings the reader full circle to several of the basic themes underlying the book.
I would like to thank the many family businesses that have sought my assistance over the years and express my gratitude for their trust in me. I dedicate this book to my wife, Adine, who has seen me through my own transition and has stood by me with love and loyalty when my transition was not always smooth.