By Bob Clark
July 16, 2009
Family Wars: Classic Conflicts in Family Business and How to Deal with Them
By Grant Gordon and Nigel Nicholson
Kogan Page Limited, Philadelphia, PA. April 2008, 288 pages, $37.50.
Every family endeavor does not operate with the intrigue and dysfunction of a Dallas or a Dynasty TV series. The vast majority are responsibly managed by good people with a clear eye on the future. However, there are iconic family companies that have had serious problems.
The authors look at 24 firms with storied and troubled histories. Among them are Ford, Mondavi, Gallo, Guinness and Gucci. Other companies and brands with well-known names are included - IBM, Puma, Adidas, U-Haul, Seagram and LA Times - but the family names may not be as recognizable to many readers.
The authors are from the United Kingdom and have solid academic and business credentials. Nigel Nicholson is a professor at the London Business School and Grant Gordon is director general of the Institute for Family Business. Gordon also is a fifth generation family member, and former senior executive with a family firm - William Grant & Sons, the UK distillery.
The purpose of the book is not to repeat the stories of conflict and tragedy in the families and businesses. The authors weave the stories into a good read, but each story has a clear point for the reader. The narratives teach a lesson about the origin of the pitfalls any family firm can face.
It is likely that most operators of a family firm have taken sound steps to ensure business continuation if the entrepreneur is removed by accident or illness. Developing a plan that addresses the expectations of the next generation for control may be a work in slow progress.
The big risk factors to stability for a family firm are identified are as follows:
-¢ Nepotism - unprepared family members assigned key positions.
-¢ Intergenerational struggles - unplanned ownership continuity.
-¢ Disagreement over remuneration and rewards - no liquidity plan for family members.
-¢ Sibling rivalry - lack of clear roles for family members.
-¢ Not letting go - no mechanism ensuring the orderly departure of senior family members.
The remedies for avoiding trouble are summarized in nine categories:
-¢ General transitions - design a succession process that honors both the incoming and the outgoing leader.
-¢ Planning and information - ensure due process for actions and sound evaluation of results.
-¢ Communications - have a sound framework defining overall purpose.
-¢ Family governance - develop a forum to hear all perspectives and forge common values and goals.
-¢ Corporate governance - include an independent board for oversight and objective scrutiny.
-¢ Education and training - equip family members for stewardship in clearly defined roles.
-¢ Liquidity and exit mechanisms - deliver fair returns and open choices about personal financial decisions.
-¢ Conflict resolution - provide for open debate about changing situations and needs.
-¢ External benchmarking - be open to outside counsel and expert advice in how best to manage the family business.
The strength of the book is twofold: first, it delivers a thoughtful review of the traps family business leaders can fall into; and second, it develops clear ideas on how to avoid the traps. Anyone leading a family business will benefit from buying this book and reading it carefully.
Bob Clark is the president of RWC Consulting LLC and has more than 30 years experience in labor-management relations. He provides consulting help in labor relations and is an adjunct professor at Concordia University in Ann Arbor.