FamilyWork

Family Business Secrets: How to Keep Your Business Thriving from Generation to Generation

Written by Irving Katz, MBA. ©2010

Family Business Secrets is a book that reminds family business owners how easy it is to only focus on our clients or products and services, and to forget about our business as a business. 

The author’s expertise as a family business advisor really helps make this book a practical support to bringing the business of our business back into focus.  Mr. Katz effectively incorporates case studies from previous clients as well as more well-known family businesses to further illustrate critical family business issues i.e. cash flow management, strategic planning, and succession planning .  His use of self-assessments at the beginning of each chapter helps the reader create a pragmatic baseline from which to learn from the material. 

This is a quick read that is quite useful for family business owners, family business members, and family business advisors alike.

Renée Montoya Lado M.S., N.C.C

President, Strategic Designs for Learning

Family Owned Business Network  Book Review Chair & Editor

Natalie McVeigh, MBE

Research Analyst, Strategic Designs for Learning

 Family Owned Business Network  Senior Book Reviewer

Every Family’s Business: 12 Common Sense Questions to Protect Your Wealth

Written by Thomas William Deans, PhD ©2008, 2009

This surprising little book packs a punch with ideas that will have many of us scratching our heads and wondering why we never thought of them.  The book’s context is a dialog between two strangers on an airplane who happen to have their respective experiences in family businesses in common.   The readers are drawn into this flight and experience as though they were present.  William, as the author refers to himself in the book, starts out by saying that family businesses begin for many reasons, but all of them amount to being born of love. This is what makes family businesses “a powerful and emotional idea” that should be respected and treated as such. This book is dynamic in that is has two people on opposite ends of the same FOB situation.

The author, William Deans was a 3nd Generation family business member who was very involved in the selling of his company with his father. He is on a plane to Barbados with another man who happened to be a former 1st Generation business owner who sold his business without the involvement of his 2nd Generation family members who were employed in the company. Both men began talking about their respective  experiences and how those experiences affected them and their relationships with their families in both positive and negative ways. By the end of the flight these two men knew that they had a lot to learn from each other and possibly to offer to many people who are going through a similar situation.

William describes to his flight partner the 12 questions that his family used  to ensure that they had a smooth transition. These questions do need the context of the preceding chapters, so I will not write them here, but they all hang on this single premise: the family business will always be for sale to the highest bidder (whether or not that person is in the family).  What makes this book so interesting is that it makes the selling of a family business no longer a taboo. He argues that this actually saves the family and eliminates the conundrums  existing in a family business regarding employment of relatives, performance based or relationship based compensation etc.  He has the temerity to wonder whether even acknowledgement of family relationships within a family business contributes to destroying it!

A good read — enjoy!

Additional Book Information

Renée Montoya Lado M.S., N.C.C

President, Strategic Designs for Learning

Family Owned Business Network  Book Review Chair & Editor

Natalie McVeigh, MBE

Research Analyst, Strategic Designs for Learning

 Family Owned Business Network  Senior Book Reviewer

Thornton’s: My Life in the Family Business

Written by Peter Thornton ©2009

This book reads like a novel.  The author is more than frank in his narrative about the array of complications and joys that happened in his family business and in his life.  He is as honest about his failings as he is about the failings of his family i.e. “I identified so completely with the company that my own identity and self-respect was entirely dependent on it… My life had been totally dedicated to the Thornton Family Business”….  While in some cases, his candor may be too graphic for some readers, this book is a compelling story for those who are drawn to an autobiographical account of life ‘inside a family business’.

Mr. Thornton is in the third generation of his family business (family tree graphic inserted here). His Grandfather was the founder.  His Father and Uncle successfully ran the business in a mutual partnership.  During the first three generations the males in the family did not have a choice about what they wanted to do/be.   Mr. Thornton describes the norm to be fit to the career instead of the career being fit for the person.

As the reader moves through Mr. Thornton’s family business story, s/he will notice his story is replete with points of failure that are common to many family businesses i.e. triangulation, ineffective succession planning, ineffective leverage of independent directors, ineffectual preparation of heirs for family wealth transition and stewardship.

That said, however, the Thornton family did two critical things well —  they have consistently and effectively leveraged their family mission statement and business principles regardless of family circumstances; and they remained true to their value of putting their employees first, thus creating a very important foundation for business stability and profitability to this day.

Renée Montoya Lado M.S., N.C.C

President, Strategic Designs for Learning

Family Owned Business Network  Book Review Chair & Editor

Natalie McVeigh, MBE

Research Analyst, Strategic Designs for Learning

 Family Owned Business Network  Senior Book Reviewer

Titan: The Life of John D. Rockefeller, Sr.

Written by Ron Chernow, ©2004

Titan (a national best seller and over 600 pages long) is a delightfully sweeping narrative about one of America’s wealthiest and most prominent family and their family business.  The book is set against the backdrop of almost 100 years of American history including slavery and the Underground Railroad, the Civil War, the temperance movement and prohibition, the expansion of the railroad, the Industrial Age, the regulation of corporate America, the inventions of the automobile and airplane, and on and on.

There is much to be learned from their family practices inside and outside of their business.  Some of the most relevant to family business practitioners are discussed below.  Enjoy this synopsis of a family that overcame the odds by prioritizing.

Family First

As a child Rockefeller, Sr. left secondary school to attend a brief business training program and take up a job to support his mother and siblings. After taking his first job, Rockefeller Sr. brought his brother William into the company as an apprentice. Although he was initially against his youngest brother joining the Civil War, he did pay for his uniforms and rifles. While he was the President of Standard Oil, he allowed his brothers to be his employees. Rockefeller, Sr. and his wife, Cettie were dedicated to raising their children and preferred home life to social and work life.

Collaboration with Spouses

Rockefeller, Sr. married Cettie and for years she was his confidant and counsel.  Rockefeller, Jr. married Abby, who encouraged him to take his rightful place as heir in the company. Both men married women who were equal or superior in education, and collaborated with them in how they raised their children and what causes they would support.

Philanthropy

World renowned is the Rockefeller legacy of philanthropy – perhaps not as well known is how early it started. Rockefeller, Sr. always gave a portion of his income to church and those less fortunate than he, even before he could really afford it. Before Sr. could find a systematic way of donating money in the amount it was coming in, he had the whole family gather around the table and vet potential applicants for various donations. The grandchildren credited their conceptions of philanthropic stewardship as much to their grandfather as their father.

Equal is not Always Fair

Rockefeller, Sr. understood that keeping parity between Jr. and his three sisters was of paramount importance. When the federal government boosted inheritance taxes twice in 1916 and 1917 the largest intrafamily transfer of money in history happened between Sr. and Jr. This act outraged Sr.’s daughters since the transfer made Jr.’s inheritance greater than theirs. Sr. had decided that the girls did not accept the importance of stewarding the family money, and therefore entrusted his son with the legacy (as well as mitigate the rise in inheritance tax). Rockefeller, Jr. said “anything he gave me would be administered with the same sense of duty and stewardship which compelled his giving.” The two remaining daughters (one had passed) Alta and Edith were each given an equitable trust. Many times Edith tried to show her father’s talent in business and would blow large sums of money, all of which Rockefeller, Sr. would cover. Jr., also set up equal trust for his children but the stipulations of the trusts were different for his children, who did not understand or appreciate the stewardship of their money.

 Reinvest in the Business

It was important for Sr. to buy up as much stock as allowed when shares became available. He wanted those shares to stay in family hands. Rockefeller, Jr. went so far as to set up trusts for his children where they could draw income but the principle withdrawals had to be approved by trustees.

 Early Education of Children about Wealth/Philanthropy

Rockefeller, Sr. seized every opportunity to teach his children about the importance of money. He had his children keep ledger books of their expenditures and gave them allowances much smaller than children of their socioeconomic status. He allowed them to earn extra money by doing household chores. He reinforced the importance of philanthropy and often had his children deal with their money in thirds: philanthropy, savings, and spending. Interestingly, they appeared not to be aware of the large wealth they would one day inherit until much later. Jr. imposed the same rules for his children. From the 1st to the 3rd generation many of the children were under the impression that they were not wealthy. 

 Encourage Children to Pursue Their Own Careers and Dreams

Neither Rockefeller, Sr. nor Jr. exerted any pressure on their children to enter into Standard Oil or the Rockefeller Trust. In true testament to this when Rockefeller, Jr. had to resign from standard oil and devote his life to philanthropy “to live with his own conscience” Rockefeller, Sr. replied “I want you to do what you think is right.”

Non-Family Management/Transition

When Rockefeller stepped down he left John D. Archibold, his protégé, in charge as early as 1896.

Family Members in the Business

Rockefeller, Sr. and his brother Frank always had a rocky relationship and kept him on the payroll despite Frank’s underperformance, outward resentment, and public interviews against Standard Oil.

Family Privacy

Rockefeller, Sr. often kept tightlipped about Standard Oil with his children even in the face of wide, negative press coverage. He often refused interviews or public statements to defend his character in the media. When his grandson, Nelson, asked if he could write a report clearing the family name for one of his classes in business school, Sr. refused and began a 3 year interview process with William O. Inglis to serve as a private family archive.

Additional Information:

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Renée Montoya Lado M.S., N.C.C

President, Strategic Designs for Learning

Family Owned Business Network  Book Review Chair & Editor

Natalie McVeigh, MBE

Research Analyst, Strategic Designs for Learning

 Family Owned Business Network  Senior Book Reviewer

The Trust:  The Private and Powerful Family Behind the New York Times

Written by Susan E. Tifft and. Alex  S Jones 

We have all heard of The New York Times — the world-renowned and a classic American institution, but even with the fame surrounding this institution, very little is known about the family behind the paper.  The Ochs-Sulzberger family was a major player on the stage of American history for most of the twentieth century.  They are arguably one of the most successful family businesses of our time.

Adolph Ochs started the New York Times from his meager beginnings at the Chattanooga Times.  He always held true to the motto “All the news that’s fit to print”.  This book chronicles several generations of the Ochs-Sulzberger’s family.  There is much to be learned from their family business practices — both positive and negative.  Some of the most instructive are discussed below. 

 Gender Bias

Adolph Ochs has one child, Iphogene, who he called “my ownest daughter and onliest son”. He made it very clear that she would not be a successor because she was a female. She was allowed to participate on the Board, but not in the operational aspects of the paper. She may have been a valued and excellent Publisher, but was never allowed the formal opportunity. All of the NYT publishers have been male. Gender issues plagued the NYT for quite some time after.

 Early Education/Incorporation Of Children In The Family Business

Adolph explained to Iphogene his passion for the paper and often took her into work and explained the reasons and mechanisms behind the paper process.  Second generation successor Arthur Sr. Asked Eddie Greenbaum, the family attorney and friend, to create an education program to inculcate the children with the significance of the NYT.  One result of this program was a once per year (or more) meeting between the siblings where free-ranging discussion about the structure of the paper, Adolph’s will, and their imminent inheritance of the NYT.

Board of Directors

In place early and consisted of family members and non-family members. They were in charge of approving successors, as well as a place for potential successors to gain knowledge and experience in the running of NYT.

Incorporation of In-laws

Adolph wanted to incorporate in-laws in the family business and made Iphogene’s husband, Arthur Sulzberger, a successor candidate.  The tradition continued with several more male in-laws being groomed for succession when traditional heirs were too young or not ready for succession.

Encouraged Children To Pursue Their Own Careers And Dreams

All of Arthur and Iphogene’s children had time to explore other avenues before joining the paper (if they chose to do so at all).  The children grew up to become a teacher, Red Cross worker, Doctor and Marine.

Succession/Transition Planning

Arthur had to wait a long time before Adolph stepped down and he wanted to ensure that there was a plan in place. As a result, Arthur created a position Chairman of the Board to keep himself involved but voluntarily stepped down as Publisher.

 Mentoring

Orvil had many mentors in the NYT besides direct family.  Punch, Arthur’s son, was also allowed and encouraged a mentoring relationship within the company (Specifically an employee named Turner).  Arthur Jr. was mentored by Punch and Mattson.    

Family Council

Split into groups on philanthropy, Family Governance, Employment Policy, Trust Participation and Board Succession. The Family Council also established special rules for family members: (1) Family members ascent to the highest level of newspaper was allowed, but that rise had to be based on merit and with equitable treatment for outsiders and insiders;  (2) A ‘Buy Back’ agreement that promised the siblings would give one another a right of first refusal on their shares of common stock in the company once they came into their inheritances – in an effort to keep NYT in family hands.

Outside Management

The NYT ownership was smart enough to recognize when a family member was not the best candidate for the job.  When Punch became Publisher and CEO, he relinquished the title of CEO to Mattson, an outsider.

Creating titles

Punch made a mistake despite his no nonsense stance on family favoritism.  He created two titles that did not exist prior or after for his heir apparent, Arthur Jr. — Assistant Publisher and Deputy Publisher.

Adolph created the foundation for a multi-generational family legacy and the family attributes their solidarity to him.  Family members have said on numerous occasions that he made them what they are — “a devoted family circle”.   Despite being a successful business they never lost sight of the fact that they were a first, a family.

To better visualize the family progression here is a pdf of the NYT Family Tree

Renée Montoya Lado M.S., N.C.C

President, Strategic Designs for Learning

Family Owned Business Network  Book Review Chair & Editor

Natalie McVeigh, MBE

Research Analyst, Strategic Designs for Learning

 Family Owned Business Network  Senior Book Reviewer