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The Cousins Tournament

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Life gets more complicated in later generations of a family company, as the Blanchards discovered when they tried to set up a process for selecting a new leader.

By Kelin E. Gersick, Ph.D. in Family Business Magazine

Photo by {artist}/{collectionName} / Getty Images

At the Blanchard family's 1993 New Year's Eve party, Al Blanchard talks for the first time about retiring as president of Grandview Industries. Al, 67, is standing on the back porch of his rambling Southern California home, sharing brandy and cigars with his younger brother, Morris, with whom he has worked for 27 years. "I only want to do this for one more year, Morris," he confides. "I've had enough." Then he asks: "Do you want to run the company, or should we turn it over to one of the kids?"

Morris has been asking himself the same question for several months. It has not been easy being in his older brother's shadow for so many years. However, Morris suffered a heart attack in 1989, and he, too, is looking forward to more leisure, and devoting more time to the small travel business in which he is an investor. Always a realist, Morris knows it is too late for him to take over a $200 million company with 2,000 employees.

"I would be willing to manage things for a short time if you want to leave right away," Morris tells his older brother. "But I think we need to turn things over to one of the boys."

Their father, George Blanchard, founded Grandview Industries with a partner in 1934. The original company, called Grandview Electric, made small motors for windshield wipers and other automobile components. Under Al's leadership, the company has grown into a diversified manufacturer of a variety of electrical systems for vehicles and small aircraft, with five divisions in California as well as distribution outlets abroad.

George Blanchard and his wife, Molly, had five children—including two daughters, Sarah and Germaine, and a third son, Arnold—but only Al and Morris have had careers in the business. Al joined Grandview before his brother and was quickly viewed as his father's natural successor. A hefty, former high school football player, he was not as dynamic as his father, but he was solid and hard-working, with a certain inner toughness and affability. Morris, five years younger, was a wiry bundle of energy, always filled with new ideas and schemes for reorganizing divisions, creating alliances with suppliers, and taking Grandview Industries into new markets.

Morris never got along with his father and that may be one reason his career took him to the far reaches of the company. He lived abroad for years, developing new customers in Europe. Privately, Morris often expressed impatience and frustration with Al's conservative leadership, but never publicly. Fortunately—or perhaps by George Blanchard's design—their separate responsibilities kept them apart.

In more recent years, the two brothers had developed a greater appreciation of each other's contributions and roles; they had drawn closer. Morris is now at headquarters, as vice-president of marketing, and he and Al meet almost every day to discuss company policy. Although Al respects his brother's opinions, he remains the undisputed leader. His fraternal affection for Morris does not mean he believes in shared decision-making.

Their New Year's Eve conversation has stirred up a lot of buried feelings. George Blanchard died at age 73, a year after his wife, Molly. The founder left equal amounts of Grandview stock to their five offspring. By then, Al was already running the company. Besides Morris, the only other family member with a position in the business was Sam Chafee, Sarah's husband.

A staunch Methodist family, the Blanchards were a model of togetherness and public respectability. Sister Sarah, a voluble personality, now 61, was for a time a local talk show host. But by and large the family kept a low profile in the affluent community.

The only real threat to family harmony occurred in 1977 when Sarah's husband, Sam Chafee, angrily left the company. An accountant by training, Sam was the company controller, but he had larger ambitions and claimed that Al and Morris were sidetracking his career. Al used his contacts to help Sam get another job, and tried to smooth over Sarah's ruffled feelings, but the incident strained her relationship with her brothers.

Al saw himself as the custodian of the family's wealth. He wanted to keep stockholders committed to the family legacy, but at a distance from operations—a delicate balancing act. George Blanchard gave his oldest son one piece of advice that he has never forgotten: "You will keep the family happy," he said, "if you keep putting dividends in their pockets. As long as you support their lifestyles, you will be the best executive in the world. Begin to lose money, and you will become an ignoramus overnight."

Grandview's gradual expansion reflected Al's determination to protect dividends. Nevertheless, the company grew steadily, tripling total sales during the 1960s and '70s. Al had brought four outsiders onto the board, which originally consisted of all five siblings and the company's primary banker, now retired. In the early 1980s, he restructured the company, taking it public but keeping family control by creating classes of stock and a holding company. The strategy was a financial success, fueling further expansion while continuing to provide a good income to family members. Each of the five siblings retained equal voting control of the holding company, in keeping with the wishes of the parents.

Family stockholders were comfortable and had few complaints. No one raised questions about what would happen if Al were no longer around.

Meanwhile, the family was growing rapidly, with many early marriages in the third generation and already eight children in the fourth. By 1990 there were six third- generation members in the business. Al and Morris each have two sons in management. Germaine and Arnold each have one, but both are young and in junior roles. Sam and Sarah's two sons and daughter have made careers elsewhere, as their parents urged them to do after Sam's bitter experience.

At a subsequent engagement party for Sarah's daughter in the spring of 1993, Al announces his decision to retire to the family, gathered on the patio of the Chafees' beachfront home. There are expressions of good wishes and a little kidding about Al's age. But Al's brief remarks have stirred up anxieties about the future. His brother Arnold argues that Al should stay on as CEO for another 8 or 10 years, since things at the company are going so well. Germaine jokes about calling her lawyer and selling her stock before morning.

The following weeks are filled with anxious phone conversations between family members. If Al has had any kind of plan for succession in mind, he has never divulged it to other family members, including Morris.

Al reflects on his relationships with each of his siblings, and how he has managed this complex family over the years. He asks Morris whether he thinks they should have a family meeting or form a family council. Morris feels the two of them should manage the succession choice themselves. "We don't want a lot of extraneous factors brought in," he says. "There are only a few people who might be chosen anyway. Why open it up to the fantasies of our sisters about their sons and daughters?"

Al is tempted to go along, but he feels the cat is too far out of the bag to resolve the issue unilaterally. Instead, he decides to create a succession committee to lay out a process for selecting the next CEO and determine the timing of the transition. Seeing that Al has made up his mind, Morris suggests that Peter Franklin be asked to serve as chairman.

Peter, the owner of a large freight shipping company, has been a friend of Morris's since college and was the first non-family member added to the Grandview board in 1980.

Peter agrees to serve. He has great respect for both Al and Morris as businessmen. He also knows that Al is tired and the company has been slowing down as a result. He thinks Grandview is in excellent condition and ready to make a major jump in size, diversification, and market reach. For those reasons, the choice of successor will be critical.

Al and Morris agree that the committee should have two other nonfamily board members besides Peter. Al argues that the family appointees ought to be members of the next generation not working in the business. Morris argues that because both of his children have jobs at Grandview that would cut out his branch. In the end the brothers appoint Sarah's younger son, Andy, and Morris's daughter, Mary.

The committee is formed, but Peter is already having second thoughts about serving as chairman. All the Blanchard siblings take a passionate interest in their father's legacy and, he realizes, each will push for his or her offspring. He also knows Grandview is way behind in preparing the next generation for leadership. There is no succession plan, and Peter wonders why. Is it Al's personality, or Morris's? Or do both fear that talking about issues might dredge up bitter feelings and cause a rift in the family?

Faced with what is shaping up as a thankless task, Peter nevertheless begins formulating a mental scorecard of the leading candidates' strengths and weaknesses. Of the cousins working in the business, he figures, two stand out as contenders for the top job:

•   Al's oldest son, Joe, who at 42 is also the oldest member of the third generation. Trained as an engineer, Joe has worked in production for most of his career at Grandview. But in recent years he has become more of a manager. Quiet, calm, and thoughtful like his father, Joe led the company's efforts to introduce team methods of work under its TQM program. His greatest plus is that he gets along well with all branches of the family. He is well liked and steady; he has performed well in every sector he has managed. But he is not regarded as charismatic or a strategic thinker.

•   Morris's oldest son, Bill, 41, a trouble-shooter who enjoys his reputation as a hard-nosed manager. A business school graduate, Bill is performance-focused and demanding. His father brought him to Europe to turn around one of Grandview's subsidiaries there, and he did an outstanding job of reorganizing the business and cutting payroll. Bill is also the only cousin in the business with significant international experience, which Peter knows will   be important in developing the company's future markets. He has made money for Grandview in businesses that looked marginal to family stockholders. But his abrasive style is not appreciated by his cousins—especially Joe. A few have confided to Peter that they would be uncomfortable trusting their assets to Bill.

The other cousins in the company are either too young to be considered or have not yet demonstrated exceptional ability. Only Mary, 32, Morris's daughter, appears to have the talent for a leadership position. Mary is a chemist and metallurgist who holds a middle-management position in R&D. Although bright and exceptionally good at her job, however, Mary has never expressed any ambition to do anything beyond research. In any case, women in the family have always been subtly excluded from management. It is the company's loss, Peter feels, but he sees no indication that the family is yet ready to accept a woman as CEO.

As he runs down his list, Peter realizes that the cousin he admires most is not on it. Edward Chafee, 40, Sam and Sarah's oldest son, isn't in the company. By leveraging the stock he had received as a young man, Ed has built a very successful electronic hardware business in Silicon Valley. Starting out as a computer whiz, he has in recent years shown a flair for deal-making as well for motivating his employees. Ed was the youngest president ever of the State Manufacturers' Association; he has even been mentioned in Inc. magazine's "Young Presidents to Watch" column. As far as Peter can tell, he is also popular with his cousins, although he does not socialize with them very often.

Al and Morris, however, are clearly not considering Edward. When Peter accepted the job as committee chair, Morris had said: "We have several children who have been working hard and doing a fine job in the company. Help us pick the right one." Peter has to keep reminding himself that his friends are not only business owners, they are fathers.

At the first meeting of the succession committee, the members agree there is no one individual who stands out as the obvious choice, and that all the cousins now working in the company can use more experience in general management. Following this discussion, the tension in the room rises when Peter Franklin reports:

"Al and Morris have come to the same conclusion about the readiness of any of the potential candidates. But Al does not want to continue as president after the end of the year. Therefore, Morris has agreed to take over the CEO role for an interim period, until a successor has been chosen and is ready."

The silence that follows is deafening. Andy Chafee, Sarah and Sam's son, argues that the business will do better if Al hangs on longer. The issue is debated, but no clear consensus emerges. Finally, Morris's daughter, Mary, speaks up:

"None of you trust my father. You believe he will interfere in this process in the interest of my brother, Bill. I don't want my father to take on this job either. His heart is not strong enough, and he should be resting instead. But I resent your assumptions about him.

He would have been better for the company than Uncle Al all along. We should be glad to have him."

Now there is another embarrassed silence, followed by many statements of support for Morris. But a long-festering issue is now on the table. The committee goes home with a lot that is troubling to think about.

At the next meetings of the committee, the members cannot agree on a process, let alone a list of candidates. Meanwhile, pressures from other family members are beginning to build. Peter reads a letter from Sarah, in which she writes:

"I am pleased that the family has persuaded you to chair such an important committee. Having someone not in the family run this committee is the only way we can have objective decisions. I would like to add one other point: There are many members of the younger group who might be the best choice to head this company, who are not in the company now. Are they disqualified? Some of them were discouraged from making a career in the company before. I would like to see them have a chance."

Peter has already gotten an earful on the same issue from Al and Morris's other sister, Germaine, a friend. "If you could convince Edward to give up his business or bring it into the company," she says, "he's clearly the best of the bunch. But I don't think you could offer him enough to do it. Once you've been a success as your own boss, why would you want to work for the family?"

A short time later, Peter talks with Ed Chafee at a YPO lunch in San Cupertino. Ed is curious about how the committee is progressing and, when Peter makes a few oblique references to Ed's own career, he suddenly says: "If you're considering inviting me into this tournament, I think you don't know my family. Al is a nice man; he is truly interested in keeping the family together and finding the best successor. But Morris is out to accomplish his own agenda—which is getting Bill into the president's office."

Peter likes Ed's directness. "All right," he says, "let's leave Morris out of this for a minute. What do you want? What's your agenda?"

"I like my own business," Ed replies. "We've grown to $25 million this year. The future looks good. We have some deals pending that could help us sustain growth for several years to come. It would take a very generous salary, freedom to run Grandview my way, and some financial buyout of my own company for me to take this job."

"Let's be clear," Peter says. "Nobody is offering you a job. We're talking about whether you are interested in becoming a candidate." Then, after a pause, Peter says: "I understand your position, but you are only presenting one side. You are successful, but your company will never be anything but small potatoes compared with Grandview. With strong management and strategic leadership, Grandview can become a major player on an international scale. The facilities are modern and highly productive, there is a good mix of mature and young products, and the balance sheet is in excellent shape. Are you ambitious enough for that opportunity?"

"You make an interesting case," Ed says, smiling. "Captain of my own yacht or the family's hireling on an ocean liner.  I honestly don't know. Let's keep talking about it."

What Ed does not share with Peter is his feeling—which has been popping into his head lately—of how much it would mean to his mother, Sarah, if he became the next leader of Grandview.

The following week, Peter has lunch with Al. "I need more guidance from you," Peter says. He tells Al that he feels trapped by conflicting loyalties and responsibilities. "For example, do you want the committee to consider only family members inside the company?"

"My friend," Al replies, "I see that my sisters have been talking to you about their boys. Let me put your mind at ease. There is no solution that will please all of this family. The five of us have kept all our eggs in one basket, the way our parents wanted it to be, for a long time now. I thought it would be relatively simple to continue that for another generation. Morris still thinks so—probably because he thinks that the eggs will fall gently into the hands of his own son. But I'm not so sure. I don't know what the best choice is for the business. My son Joe has solid potential. Morris's boy, Bill, is stronger in some areas, weaker in others. Both of them are dedicated to this company and deserve to be rewarded for that commitment. That's where you come in. Do the right thing for the business. I will try to make it fly with the family."

Peter is beginning to appreciate what a strong-willed and complicated group the Blanchards really are. On the ride home, he reminds himself that Grandview Industries is not a small operation. Hundreds of employees depend on its continued vitality. What everyone needs now is a process that the whole family will support, leading ultimately to the choice of the best possible leader for the company's future. Is that a reachable goal?

When the committee reconvenes, Peter immediately lays it on the line. "We cannot continue to just discuss issues as we have been," he warns. "We have a deadline for a plan: two months. We have to focus on resolving three issues by the end of our next meeting." The three issues to be decided are:

1.  What should be the process for choosing the next president? Does the committee's present composition ensure maximum acceptance and support of whatever plan is proposed? Should the committee be changed or a new one created? Should Al and Morris be involved?

2.  Does the interim CEO plan, with Morris serving until a new leader is chosen, make sense? Or will it only exacerbate tensions between the siblings?

3.  Should Ed Chafee be considered? Or only cousins who have experience in the company?

 

WHAT THE EXPERTS SAY

Ernesto J. Poza, A family business consultant in Cleveland, and author of Smart Growth: Critical Choices for Business Continuity (Jossey-Bass, 1989).

Is Grandview Industries ready for a transition in leadership? Is the family? No. Neither has considered the subject of succession to this point. The president, Al Blanchard, is tired of it all and ready to retire. While his motive for such a surprise move is understandable, it is also quite irresponsible. He has no succession plan, no strategic plan. He has not even communicated his desire to retire previously. But all of a sudden it's a done deal, right?

So we have to work on Al—he is the client—even though he may not be particularlyready to put up with an outside expert telling him that he has a lot more work to do rather than less.

Can he now delegate the work to his brother Morris? Absolutely not. Al and Morris's story is about sibling rivalry. And Mary's outburst at the succession committee meeting tells me that Morris's family suffers from a sense of "historic under appreciation" or "victimization." Morris becoming the interim leader is asking for win-lose dynamics to "even the score." And we know that win-lose dynamics go on to lose-lose dynamics, in which each side becomes intent on teaching the other a lesson and nobody cares about saving anything of value.

Add to this the problem created way back when second-generation siblings were given equal ownership and equal voting power. Why should siblings not active in the business have equal voting shares? Who says fair is equal? Share the wealth, sure, but the control? Al Blanchard missed a tremendous opportunity to act responsibly toward both the business and the family in the early '80s when he financially restructured the company.

Yet this ownership structure is not unique. I still run into a fair number of these arrangements in this country and Latin America.

What should Grandview do now? Al has to stay at the helm for another five years or so. He is the only one in a position to lead the family through this critical transition.

Whoever is at the helm in this period—Al, his appointed successor, a "bridging" nonfamily executive—better be able to continue delivering dividends, because this seems to be what keeps the family together. Of course, this very premise argues for a change in the ownership and governance structure—and the selection of a very able business grower as the eventual successor. With the number of shareholders growing rapidly in the next generation, just meeting shareholder dividend requirements will be a major challenge unless the rules for stock distribution are changed. The case says Grandview has grown steadily, tripling sales. But inflation alone would have doubled to tripled sales in those 20 years, so the firm actually grew little.

The succession committee can increase the probability of a buy-in by the family branches by doing some fact-finding. It can generate information on what each candidate wants for himself and for the business, his strategic vision of the company's future. But the ultimate decision has to be Al's. Joe, Bill, or Ed Chafee all seem to be reasonable candidates.

Because of the growth imperative, Ed Chafee seems particularly appropriate as the next leader. But perhaps Joe and Bill could work as a team, as Mr. Domestic and Mr. International, replicating the pattern of accommodation in the previous generation. In any case, a bridging, nonfamily executive may be necessary to broaden the time horizon in which this decision is made. Meanwhile, Al can use the current crisis as a rationale for changing the ownership structure, dividing the company's stock into voting and non- voting shares.

The Grandview board, with its four outside directors, would be a good forum for developing criteria for selection of the next leader and judging the candidates against these criteria. As chairman, Al would have ultimate responsibility for making the final decision. In the vacuum created by his departure (in body or spirit), greed, rivalries, and a thousand hidden agendas will rush in. If Al fails to manage this last heroic feat, Grandview will become another business-failure statistic and the Blanchards another broken-hearted family.

Marion McCollom, Associate professor of organizational behavior at the Boston University School of Management, and a consultant to family businesses.

This family business is a ticking time bomb. Luckily for everyone, the warning lights   have begun to flash. To defuse the bomb, the leaders must buy time to stabilize the family and give direction to the board.

The situation is dangerous not just because of the lack of succession planning, but because leadership transitions are also imminent in the ownership structure and in the family. The Blanchards are unprepared for all these transitions. Fortunately, this family and business have a lot going for them: a stable and successful leadership team (Al and Morris), strong management candidates in the third generation, and generally cordial family relationships.

The politics and pragmatics of leadership transitions inevitably destabilize human systems. The Blanchards' strategy should be to keep the family and business stable for at least two years. For this, the intervention of a qualified outsider will be helpful, and perhaps vital. Structures need to be set up to contain the conflict and anxiety that accompany change. The Blanchards as a family must be solidly behind the next business leader, and the transition can't be rushed.

This perspective suggests a three-pronged approach. First, capitalize on the Al-Morris leadership team; Al should be persuaded to keep the chairman role, while Morris takes over as president. This team should be prepared to serve for two to five years. If Al or Morris can't perform their roles for as long as necessary, then the board must be ready to provide qualified interim managers to run the company until a successor is selected, trained, and ready.

Second, engage the board in the work of a board. The search itself can be delegated to a subcommittee that includes family members not in the business, but the board itself should set the criteria for the search. I would recommend that the subcommittee conduct a full-scale effort that covers both family and nonfamily candidates. After all, this is a $200-million business. The company may ultimately choose a family member, but everyone will be better off if the board articulates clear qualifications for the job and casts a wide net.

Al and Morris need to be informed and involved in the final decision; their approval of the choice is crucial for success. Neither, however, should serve on the search committee.

Third, the five second-generation siblings need to get together soon, with a facilitator, to clarify their goals for the business. Do they see Grandview primarily as an investment?

Or as a family legacy? Would they be willing to forego income from the business if reinvestment is required? Do they plan to continue to disperse their stock equally among their children, or do they want to concentrate ownership in fewer hands? Does anyone want to be bought out?

This conversation is essential, since it is not clear whether they share views about equal ownership and consistent dividends. Even if they agree on those values, it's a good bet that their children won't.

After several sessions with the senior group, the facilitator should urge each of the five parents to have conversations of the same type with their own families. The family collectively needs to know the third-generation's degree of commitment to the business— whether as managers, investors, or stewards of the legacy—and their wishes for their own children. Once the seniors have sounded out their offspring, they should present the board with a summary of the family's collective vision for their continued involvement in the business.

In the short term, this statement of family goals will guide the board in its job. In the long term, the statement and the experience of putting it together should foster the creation of a family council, a multi-generational, representative group of Blanchards that meets regularly, outside the business, to discuss issues of concern. This is the group that will help the family deal with the coming leadership transitions. The forum will give family members a chance to know one another better; it is the structure from which future family and board leaders will emerge. The council will thus be a key stabilizing structure to help future generations of Blanchards work together to make decisions and plan for transitions.

Charles S. Strickler, Director of Rocco Enterprises, a third-generation food company based in Harrisonburg, VA.

The Blanchard family should not limit its discussions to CEO succession. Discussion should extend to the larger context of family business continuity. Given their predisposition for maintaining the company as a family business, the Blanchards should be concerned about the structures necessary to assure a successful transition in ownership, as well as in management. The appropriate structures will allow family members to enjoy a strong association with the business, even if they are not actively involved in management. The Blanchards also must have processes in place to make sure that family shareholders are educated about the business and understand the special issues faced by family firms. Shareholders should be able to enjoy the status and prestige of the family company while maintaining the distance from day-to-day management that is needed for effective business operation. The basic structures include:

1.  A family council. The council provides a forum for educating family shareholders in important matters such as estate planning, philanthropy, or buy-sell agreements. This forum promotes family harmony and helps to raise the members' awareness and understanding of their role in electing an effective board of directors.

2.  An effective board of directors. The board should include several outside directors as well as family representatives. Membership should be limited to no more than nine. The board's primary responsibility is maximization of shareholder value. The most critical aspect of this is hiring and firing the CEO. In addition, the board ensures that effective succession plans are in place at all times.

3.  An investor relations liaison. This person responds to inquiries from shareholders between shareholder meetings, ensuring that they are well informed and continue to feel they are part of the business.

With such a structure, the Grandview board should articulate what will be expected of the next CEO. This is crucial, because the expectations will define the qualifications of the next CEO and establish the criteria used for evaluating candidates.

After CEO expectations have been spelled out, the board should appoint a committee to recommend to the full board the candidate who is most qualified to "take the business where it needs to go," and also serve the interests of all stakeholders. To promote objectivity, the selection committee should be composed only of outside directors. The committee might utilize an executive search firm to help ensure that the search is conducted in the most impartial manner. This process will help to maintain family harmony and reduce, to the extent possible, the negative emotional issues that the next CEO will have to overcome.

The charge to the committee should be broad enough to ensure selection of the most qualified candidate. In the event that no family candidate is eminently qualified, a nonfamily executive should be chosen—with the explicit understanding that one of his or her responsibilities will be to prepare the most qualified family member for the CEO position.  The interim CEO should not be viewed as a “lame duck”.  Rather, he or she should be seen as providing a “bridge” between two generations, working to ensure the continuity and success of the family company.  If the CEO selected is not a family member, there may be concern that the person will not perpetuate the family’s values and philosophy.  Since family members will be represented on the board and in management, however, maintaining the family’s influence should not be a problem.

Stable structures and processes promote the open communication that is necessary for maintaining family trust and harmony at this stage.  Those structures, combined with sound business practices, will go a long way toward perpetuating Grandview Industries into the next generation and beyond.

John L. Ward, Ralph Marotta, Professor of Private Enterprise at Loyola University Chicago and a family business consultant.

Unless it soon becomes clearer who the best candidate is – which is unlikely – the board committee needs to go back to the drawing board.  Grandview is not ready for succession.  The family is not ready.  The possible candidates are not ready.  More time is needed.

Temporarily, Al and Morris can continue to share leadership, perhaps with Al as chairman and Morris as president, until a successor is selected by the board.

The candidates should be put in positions where they can demonstrate their commitment and qualifications, probably for two or three years, before the final choice is made.  The serious candidates should run profit-center divisions first.  Only Ed has seemingly run a profit center, and he is in a different industry.

The succession committee should invite both inside and outside people to be considered as candidates, through a search firm. An industrial psychologist can examine their skills.  The board will have to articulate the characteristics needed by the company for its next CEO.  The board should learn what key non-family executives think about the company’s needs and strategic alternatives.  To develop the leadership options, the board should examine the firm’s requirements, depth, and the flexibility of senior management.  To test top candidates, consider whether there are roles that can be assigned to them for the next two or three years.

In addition, before succession takes place, the boar has to review and perhaps redefine policies regarding family shareholder roles on the board, family-shareholder estate plans, family shareholder meetings, and so on.

The real risk here is that succession will be seen as only a leadership transition.  For third-generation family firms, succession is also an organizational transition, a governance transition, a family transition, and, likely, a strategic transition.

The deliberation over succession can and should be a professional as possible in a public company such as Grandview.  The family needs some basic education – from the board or a consultant - on how succession works and what to expect.  Alternative leadership structures might be considered, such as separating the CEO and president roles, or having a nonfamily president reporting to a family chairperson.  The board is in the best position to assess the pros and cons of the various scenarios.

The issues facing the Blanchards are very normal for family businesses entering the third generation.  It’s a vulnerable time.  Family members often are jealous of the family branch that includes the CEO.  Senior-generation family members do tend to promote their own kids’ interests.  To succeed, the succession decision must be seen as that of the outside board members, and family members need to focus more on company welfare than the interests of their branch of the family.

The Blanchards can expect the struggle over leadership succession to last for a while.  The outside board members need to take control of the process.  The greatest issue for Grandview, as a public company, is the family’s ownership transfer plans.  Can each branch afford the death taxes?  Who will vote the stock in the next generation? Who will sit on the board? Do family members want to collaborate on social, philanthropic, and educational activities?

Until some answers to these questions come into focus, the company isn’t ready for leadership succession.

Finally, third-generation family members might be asked to serve on task forces or committees to address the future ownership and governance issues.  Perhaps on these panels one or more of the business leadership candidates will prove themselves as respected leaders to the whole, extended family. ▪

 

Kelin E. Gersick, Ph.D. is a co-founder of Lansberg • Gersick, a research and consulting firm in New Haven, Connecticut, that serves family businesses, family offices and family foundations.  Kelin is a Management Fellow at the Yale School of Management, and professor emeritus at the California School of Professional Psychology. He is an advisor to business families worldwide, a frequent presenter at conferences, and the author of many articles and several books, including Generation to Generation: Life Cycles of the Family Business (1997, Harvard Business School Press).

Source:  Family Business Magazine, Winter 1995

Copyright © 1995. Family Business magazine. Subject to the provisions of the Terms and Conditions of the Family Business Web Site, subscribers to Family Business magazine may print and distribute copies of this article, electronically or otherwise, provided that (a) such printing and distribution is done only for your personal, informational, non-commercial purposes, and (b) you do not remove or obscure the copyright notice or other notices. For other uses, including reprint permission for non-subscribers, contact Family Business magazine.