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Ane of the nigh agonizing experiences that any business faces is the moving from one generation of top management to the next. The trouble is oftentimes most acute in family businesses, where the original entrepreneur hangs on as he watches others try to help manage or take over his business, while at the same time, his heirs experience overshadowed and frustrated. Paralleling the stages of family unit power are stages of company growth or of stagnation, and the smoothness with which one kind of transition is fabricated often has a direct result on the success of the other.

Sons or subordinates of first generation entrepreneurs tell of patient and impatient waiting in the wings for their fourth dimension to take over the running of the company. When the time comes, it normally comes considering the "old man" has died or is too ill to actively take part in management, fifty-fifty though still belongings tightly to the reins of the family business. Often this means years of tension and conflict as older and younger generations pretend to coexist in peak management.

Equally one second generation manager put it, speaking of these bug: "Fortunately, my father died one year subsequently I joined the house." Concerning another company, a prospective heir-apparent said: "The sometime homo is running the company downhill so fast that we'll choice it up for nix before the kids can build it back up."

The transition problem affects both family and nonfamily members. Brokers and bankers, professional person managers, employees, competitors, outside directors, wives, friends, and potential stock investors all have more than than passing interest equally a company moves from ane generation to the next. Some of these transitions seem orderly. Most, however, do not. Management becomes racked with strife and indecision. Sons, heirs, key employees, and directors resign in protest. Families are torn with conflict. The president-begetter is deposed. Buyers who want to merge with or larn the business modify their minds. And frequently the visitor dies or becomes brackish.

The frequency of such accounts and the hurting reflected in describing the transfer of power from i generation to the adjacent led us to brainstorm a more formal research research into what happens as a family business, or more accurately, a family and its business grow and develop over generations. Specifically, what happens in the family and company betwixt those periods when one generation or another is clearly in control but both are "around"? In addition, how practise some managements get through or hurdle the family transition without impeding company growth? And can or must family unit and company transitions be kept carve up?

The enquiry project on these questions began in June 1974 and is still continuing. Information technology has included interviews with over 200 men and women and multiple interviews in over 35 companies, non all of which went beyond the first crucial transition examination. This article contains some of the initial findings and conclusions.

Professional person or Family Management?

Some observers and commentators on family unit concern believe that the sooner the family management is replaced by professional management in growing companies, the better. The problems just described can lead to disruption or devastation of either the family or the business, sometimes both, in the long run. Furthermore, the argument goes, an objective, professional management will focus on what is good for the business organisation and its growth without getting lost in the emotions and confusions of family politics.

This rational argument for professional management in growing companies has many strong advocates. It has fifty-fifty been suggested that the family unit members should course a trust, taking all the relatives out of business organisation operations, thus enabling them to act in concert as a family unit.1

Like whatsoever argument for objectivity, the plea for professionalism has logic on its side. It makes good business concern sense, and in a way, skilful family sense also. It guides a concern abroad from mixing personal lives with business practices, and it helps to avoid the evils of nepotism and weak family successors who announced so often to crusade transition crises.

Historically, the main trouble with this rational argument is that about companies lean more heavily on family and personal psychology than they do on such business concern logic. The evidence is overwhelming. There are more than 1 million businesses in the United States. Of these, about 980,000 are family unit dominated, including many of the largest. Yet most of us have the contrary impression. We tend to believe that, after a generation or so, family businesses fade into widely held public companies managed past outside managers with professional backgrounds. The myth comes partly from a landmark study of big business organization past Adolph Perle and Gardner Means, who maintained that buying of major U.South. companies was condign widely diffused and that operating control was passing into the easily of professional managers who owned only a small fraction of their corporation'southward stock. This widely publicized "fact" was further used by John Kenneth Galbraith to build a concept which he chosen the "technostructure" of industry, based in large office on the alleged separation of corporate ownership from management command.2

There is evidence to the contrary, though. A written report reported in Fortune by Robert Sheehan examined the 500 largest corporations on this question. Sheehan reported that family ownership and control in the largest companies was still significant and that in about 150 companies decision-making ownership rested in the easily of an individual or of the members of a single family. Significantly, these owners were not only the remnants of the nineteenth century dynasties that one time ruled American business organisation. Many of them were relatively fresh faces.3

The myth is even more than severely challenged in a study of 450 big companies washed by Philip Burch and published in 1972. By his calculations, over 42% of the largest publicly held corporations are controlled by one person or a family unit, and another 17% are placed in the "possible family command" category. And then at that place is 1 other major category of large "privately" owned companies—companies with fewer than 500 shareholders, which are not required to disembalm their financial figures. Some well-known corporate names are included in this category: Cargill, Bechtel Corporation, Hearst Corporation, Hallmark Cards, and Hughes Aircraft, among others. Burch notes that reverse to what one might expect, the rather pervasive family unit command exercised is, for the most part, very direct and indelible. It is exercised through pregnant stock buying and outside representation on the lath of directors, and also, in many cases, through a considerable amount of actual family management.4

When one thinks more than closely near families in big likewise as minor businesses, some well-known succession examples also come up to mind, suggesting that family transition and corporate growth occur together even though in that location may be strain in the process. For example:

  • H. J. Heinz was founded by Henry J. Heinz to bottle and sell horseradish, and today H. J. Heinz Two, a grandson, heads the billion dollar concern.
  • Triangle Publications owns the Morning Telegraph, TV Guide, and Seventeen. It was founded past Moses Annenberg. He was succeeded by his son, Walter, and a daughter, Enid, is now editor-in-chief of Seventeen.
  • The Bechtel Corporation was begun by Warren A. Bechtel, for building railroads. His son, Steve Sr., directed the firm into structure of pipelines and nuclear power plants. Today, Steve Jr. heads the $2 billion visitor, which is at present further diversified.
  • Kaiser Industries, built by Henry J. Kaiser, includes Kaiser Steel, Kaiser Aluminum and Chemical, Kaiser Cement and Gypsum, Kaiser Broadcasting, Kaiser Engineering, and Kaiser Resources. The nowadays industrial giant is headed by Henry's son, Edgar, now over 65 years former. An obvious successor is Edgar Jr., president of Kaiser Resources Ltd.

Should a family business stay in the family? The question now seems almost academic. Information technology is credible that families practise stay in their businesses, and the businesses stay in the family unit. Thus at that place is something more deeply rooted in transfers of power than impersonal business interests. The human tradition of passing on heritage, possessions, and name from one generation to the next leads both parents and children to seek continuity in the family business. In this light, the question whether a business organisation should stay in the family seems less important, we suspect, than learning more about how these businesses and their family unit owners make the transition from i generation to the side by side.

Inside and Exterior Perspectives

What are the implications when the transition from i generation to the adjacent includes both business and family alter, and what are the consequences also if business concern and family unit, though separate, remain tied together in plans, arguments, and emotions? In considering these questions, it might aid to examine two perspectives in addition to age difference. One is the family, the other is the concern, point of view. Both of these can be viewed from either the inside or the exterior.

Exhibit I shows these four different vantage points from which to detect family unit and business members. One viewpoint is that of the "family unit managers" (within the family and inside the business) equally seen by both old and young generations. When they forget or ignore the other three perspectives, they can easily become boxed into their own concerns. This kind of compulsion includes hanging onto power for the older generation and getting hold of information technology for the younger. To both generations, information technology implies the choice, inclusion, and perpetuation of family managers.

Exhibit I Pressures and interests in the family concern

A second perspective comes from "the employees," over again older and younger, who piece of work inside the business but who are outside the family. Understandably, they face up unlike pressures and concerns from those of the family unit managers, even though many are treated as part of the larger corporate family. The older employees want rewards for loyalty, sharing of equity, and security, and they desire to please the boss. Younger employees generally want professionalism, opportunities for growth, disinterestedness, and reasons for staying. Both age groups worry about bridging the family transition.

A third perspective comes from "the relatives," those family members who are not in the active management of the business. The older relatives worry about income, family conflicts, dividend policies, and a place in the business for their own children. The younger, often disillusioned brothers and cousins experience varying degrees of pressure to join the concern. Both generations may be interested, interfering, involved, and sometimes helpful, as we shall encounter afterward on.

Finally, the fourth perspective comes from "the outsiders." These are persons who are competitors, R & D interests, creditors, customers, regime regulators, vendors, consultants, and others who are continued to the business and its practices from the exterior. They accept diverse private interests in the visitor which range from constructive to subversive in intention and outcome.

A curious irony is that the more than "outside" the family unit the perspective is, equally shown in Exhibit I, the more legitimate it seems as a "real" management problem. Yet the concerns in the left column boxes are typically just every bit of import as, and more time consuming than, the outside-the-family problems on the right. These inside-the-family problems tend to exist ignored in management books, consultant's reports, and business school courses. Ignoring these realities can exist disastrous for both the family and the company.

Our studies show that the transfer of ability from first to second generation rarely takes place while the founder is alive and on the scene. What occurs instead during this time is a transition period of great difficulty for both older and younger generations. For the founder, giving up the company is like signing his own death warrant. For the son or successor, the strain may exist comparable. As one of these said:

"I drew upwardly the acquisition papers to buy my begetter out, considering for a long time he has been saying he did non intendance about the business anymore. However, when it was all taken care of, and we presented him with the papers, he started to renege. Everything was washed the way he would like it. Yet he would not sign. He finally told me he did not remember he could exercise it. He felt information technology awfully hard to really lose the company. He said he felt he still had something to give."

And another commented:

"I can't change things as fast as I would like to. It is absolutely clear to me that things demand to be inverse. However, information technology is not like shooting fish in a barrel. Beginning of all at that place is the part of age and experience as well as being the boss's son. Every other officeholder in the company is in his fifties. What I am talking about at present are deep sources of dissatisfaction. I would like more than ownership. Now I accept simply vii%, my begetter has eighty%, and my family unit another 13%. In my position, I just cannot movement the company fast enough. We contend a lot, but nix seems to alter. I have gear up a goal for myself. If I cannot run the visitor within two years, I am leaving. I'll exercise something else."

The Company Transition

While family unit managers feel the multiple strains equally the generations overlap during periods of transition, some other related procedure is occurring as the company grows and develops. Various authors have tried to describe this procedure.v But, where one describes a polish procedural development, some other sees a serial of difficult crises. For some, a series of growth stages is important. For others, information technology is the merging of functions with processes that count. About writers practice non tie business growth or decline to family transitions. However, the post-obit points stand out for us in relation to company transitions.

1. Organizational growth tends to exist nonlinear. Organizations grow in discrete stages, with varying growth rates in each stage.

2. Periods of profound organizational development often occur between periods of growth. These slower periods oft are viewed with alarm, but they forcefulness managers to examine what the company has grown toward or into. These periods of development are the transition periods which appear less dramatic (i.e., there is less growth) but may be most crucial to a company'due south preparations for its own futurity.6 The apparent floundering can provoke useful learning once management begins to adopt and encourage new practices and procedures.

iii. A typical management response to transitional strains is a total or fractional reorganization of the company. This sometimes helps milk shake up onetime habits but rarely resolves a transition crunch. What is needed is time for the social and political systems of the company to realign themselves into new norms and relationships.

Exhibit Ii shows how a later growth phase differs from and builds on the before ones. The offset stage is feature of an entrepreneurial company with direct management. The second is typified by a rapidly growing production line and market situation with second-level management fix in specialized functions. The tertiary phase has divisional operations with a diverse line of products and markets. Whereas the direction style of the first stage is highly personal and directly, the 2d tends to become the more than collaborative style of a boss and specialized peers. The third stage typically involves a looser, impersonal, commonage style, with the chief executive managing generalists as well equally functional specialists. Under the patterns of the first stage, the core trouble for a small company is survival. The patterns of the roughly defined second stage evidence a size and scope requiring such specialized functions as finance, product, marketing, and engineering.

Showroom Ii Characteristics of visitor growth

Every bit the company'due south size continues to increase, information technology is probable to evolve toward third-stage patterns of growth: At this point, different product lines become dissever companies or divisions, while, in multinational firms, the separation may also be on an area ground (east.g., Europe, North America, Latin America, Middle East, Far Due east) also.

In between the box-like stages of growth shown in Exhibit 2 appear the transition phases which assistance to prepare an arrangement for its next stage. To cantankerous the cleaved lines separating i growth stage from some other in Exhibit 2 requires time, new interaction patterns, and an awkward menstruum of overlap. In issue, the cleaved vertical lines of Exhibit II represent widened fourth dimension zones of varying and irregular width.

As we have seen, family transitions and company transitions can occur separately and at dissimilar times. However, nosotros found that they usually occur together. Equally a visitor moves from the trouble of survival to one of managing rapid growth, information technology must develop new control, motivation, and advantage systems. It also requires a management fashion that can integrate specialists and their functions. This development cannot occur without a top management that wants to have the extra stride across survival thinking. That is where an eager younger generation comes in. He, she, or they are more likely to want to go beyond traditional practices. This pent-upwards free energy seemed to be a major gene in getting beyond company transitions in 27 out of 32 businesses we studied where the company had gone beyond the kickoff growth phase.

Another kind of transition occurs between the second and the third growth stages. Company and partition units in stage three had general managers in both the head role and the decentralized units who had learned to work with both other full general managers and functional specialists. This meant that they had to take or develop a sense of the complex interdependence that characterizes almost major companies today.

These dual transitions seemed best catalyzed when the old direction forces somehow helped to pave the way for the new. The following case is a proficient example:7

  • When Max Krisch came to America in 1851, he brought an expertise in baking and an old family recipe for bread. Soon after settling, he established a small bakery. The business grew, and Max got help from his iii sons as soon as they were old enough to operate the ovens afterward school and on weekends. When Martin, the oldest, graduated from higher in 1890, he joined the business and soon started suggesting changes which he was convinced were good for the visitor'southward growth. His father refused, and the two men would oftentimes end up in disagreement. Sometimes the arguments were long and bitter.

Somewhen, Max'south wife abandoned her function of neutrality and intervened on Martin's behalf. She begged Max to give Martin a risk to implement his ideas. Reluctantly, Max agreed and let Martin take the first footstep.

Martin's idea was to sell bread to milk peddlers who would offer information technology for sale to their milk customers. It was a new concept at the fourth dimension, and information technology worked. The demand for Krisch's Bread increased sharply.

At this time, too, the second brother, Peter, was ready to bring together the company. Martin realized that the visitor's product capability would soon exist unable to continue upwardly with the increasing sales. He hoped that Peter could accept over, modernize, and aggrandize production, but again Max reacted strongly. He argued that the baking of Krisch's Staff of life could not be done in volume without ruining the quality. Martin and Peter eventually promised their father that if the new methods harmed the bread's quality they would discontinue them. Over fourth dimension, Max again agreed to continue with the modify, and Peter worked closely with his begetter to increase production while still maintaining quality. Again, as well, the female parent was behind the scenes trying to go on peace in the family unit.

When the third brother, Kurt, joined the firm, Martin gave him the responsibleness for bookkeeping and fiscal affairs. Fortunately, Kurt had a good head for figures and did the job well.

Every bit Max became less active in the business, Martin was in charge, with Peter heading product, while Kurt handled the fiscal end of the business concern. The business flourished. Occasionally, the iii sons felt hampered by Max's continuing strong opinions on some aspects of the business. At these times, the boys' mother would ofttimes referee the disagreements. Partly considering she was a sensitive person and a expert listener, she was usually able to assist the father and sons arrive at some mutually satisfactory solution to their problems.

Our studies show that when the familial and organizational transitions occurred together, equally in the Krisch example, they typically took place in an atmosphere of strain and doubtfulness. Quite frequently, a female parent was a behind-the-scenes influence. More than often, though, the transitions were not managed well either within the family or inside the business. In the Krisch case, Martin guided the company into its second growth phase. But information technology was his female parent's sensitive management of the family relationships that eased that procedure and eventually permitted the brothers to reach an outstanding growth record for the firm. Although Max'south time-tested ways and methods brutal past the wayside as his sons took over, he became a useful adviser once both he and his sons accepted Martin every bit caput of the business though non head of the family. The transfer of power within the business concern took place when Max moved into a new working relationship with his sons and a new family relationship with his wife. With Martin managing the business transition and his mother helping to hold the family unit together, Krisch's Bakeries made both transitions.

The second transition period for Krisch Bakeries is besides instructive. Afterwards an impressive growth record over a 30-yr menstruum, Martin Krisch and his brothers set the wheels in move for the transition to the third generation. Martin's son, Max Krisch II, was the nigh obvious successor.

By 1925, the company had established an executive committee of both family and nonfamily managers who made decisions by consensus. The brothers believed that such an arrangement helped keep the family together and provided valuable inputs from nonfamily members on the executive commission.

In grooming for the transition, Martin, who was then 55, hired an outsider who suggested that a new role of coordinator be set upwards for the committee which he took on initially and then passed on to Max II, who had just been brought onto the committee every bit a member. Presently later on, Martin was advised by the outsider that he should get off the committee and out of the visitor as much as possible.

Thus Martin began to spend more and more of his time away from the company in civic, volunteer, exterior boards, and other business organization activities. At times, he was frustrated and unhappy over not being in the mainstream of the business, merely he gained some satisfaction in watching Max Two develop into a manager who prepare new wheels in move for the company's expansion and diversification into new areas of business. New production lines were adult, the company was broken into divisions and a chain of other businesses was started. All seemed to be going well until the visitor was hit by an antitrust suit which restricted and delayed some of its most ambitious plans.

Though the Krisch Bakeries' plans for wider ownership, diversification, and expansion were stalled for a number of years, information technology seemed to again make the dual transition on both the family and the business levels.

The Single Transition

Fifty-fifty though most of the companies nosotros studied inverse top management and growth stages together, other companies showed one transitional change at a time. A stagnant company can get that way when the older generation gives way to the younger without any company transition. The Quinn Company was one of these.

  • In the Quinn family concern harmony had been difficult to attain. The founder, Josiah Quinn, established his industrial supply company in 1911. He began the business with a partner, and it grew steadily. As business improved, the partner took a less active role, and Quinn soon began to resent the partner'due south equal bacon and taking of the profits.

When his wife suddenly died, Quinn impulsively sold the concern to his partner and took his v children West. After several years at that place, he returned dwelling house and began a new business, remarried, and had 2 children past his 2d wife.

Eventually, Quinn's oldest children joined the business firm. They worked well together, and the visitor prospered. When his second set up of children also joined the company, however, jealousy and resentment increased. Disharmonize began to disrupt operations daily. The problems flowed over into family life, where his wife took the side of "her" children against "his." Finally, Quinn decided to fix a separate visitor for his wife's children. He founded it under another proper noun, brought customers from the other company, and enjoyed helping information technology become started.

When World War 2 broke out, Quinn'southward most capable son in the showtime company was drafted. He was sent out W, married, and somewhen set up his own company in San Francisco. This left the first company without a really capable successor, though the departed son's brothers and brothers-in-law worked to keep the company going. Again, dissension increased. While the visitor continued to operate after Quinn died, its performance levels never rose over the next xxx years.

The Quinn Company's transition from first to second generation was influenced by a major split inside the family unit, by the loss of its key young successor, and the divisive part taken by Quinn's second married woman. The family conflicts seemed to keep Quinn and his heirs from dealing with company transition problems, since all their energies were spent on inside the-family problems. The result was a family transition without a simultaneous visitor transition. Such single transitions were even harder for those inside the family unit and the company than when the two transitions occurred together. Today the Quinn Company is heading painfully into another transition, its second generation having evidently suffered much, only having learned petty from the start one. The older family unit managers discover it difficult to let get as the 66-year-onetime president steps aside uneasily, just to be replaced by a 68-year-old in-law whose sons await impatiently and sometimes irresponsibly for their plough. Meanwhile, the company suffers.

Another blazon of single transition occurs when a company moves from one growth phase to the next within one direction generation. Such growth occurs rarely, it seems, in the first generation, partly considering entrepreneurs tend non to be reorganizers, and growth requires reorganization forth with a shift in direction styles. We constitute these company transitions without a family transition to occur more than often during the second generation. Whereas first generation entrepreneurs had trouble shifting to high growth strategies and more collaborative styles; the sons were more flexible, possibly because the shift from a second to a third stage growth pattern involves letting go of less personal ties or possibly because they had more assistance in making the shift. Here is an case of such a transition:

  • When Wells Thomas died, his hardware supply business passed on to his two sons, Paul and Bing. Paul handled production, and Bing worked in sales. The 2 brothers congenital the family firm into a major hardware supply firm. Paul became main executive officeholder, and he and Bing somewhen diversified the business into retail hardware stores, medium equipment companies, an electrical manufacturing company, and several unrelated businesses. Along the way, they brought in six 3rd-generation members of their own and their sister'due south families. Just these younger family members never quite fabricated the course. Paul, with Bing's approval, fired five of the six and handed the presidency of the corporation over to a man who had been president of i of the acquired companies.

His justification for discharging his sons, nephews, and sons-in-constabulary was the skillful of the family business, and therefore in the long run the interests of all family unit members. Nevertheless, he had created a split in the family that never healed. Meanwhile, the new visitor president admitted that Paul had get like a father to him, and it was apparent that the father-son parallel was very strong for both of them. There was still one nephew in the company, and although he had an important position, it was clear that he had no inside runway on succession plans.

Thomas Enterprises moved faster than most companies do in its growth bicycle, possibly because Paul Thomas was willing to sacrifice family harmony for what seemed to exist business organization efficiency. Ironically, though, the fired family unit members each went on to successful careers in outside jobs, most of them pleased in hindsight to exit from under Paul'due south reign. Whether any one of them could accept taken over the sprawling visitor is hard to judge at this phase. What is clear is that Paul found another "son" who became heir credible. In an artificial way, the "succession" transition actually came along only slightly backside the company transition.

The three patterns shown in the Krisch, Quinn, and Thomas cases suggest some overall advantages of family and concern transitions occurring at the same fourth dimension. The Quinn and Thomas cases besides show what happens when family managers, relatives, employees, and outsiders cannot form a power coalition to protect either the family or the business transition, whichever is jeopardized past family conflicts. In the Quinn example, the family managers withdrew in the face of destructive family pressures typified past Quinn's 2nd wife. She not only divided the family but had a stiff hand in dividing the company into two separate enterprises, each also competing with the other. In upshot, the microcosm of family conflict became replicated in the macrocosm of the two companies. Without capable second generation managers, the original Quinn business never got across the first growth stage.

In the Thomas case, the opposite occurred. The relatives retreated "for the skillful of the family business" as Paul Thomas put it. They helped to destroy the family by abdicating in favor of the dominant older family managers, Paul and Bing Thomas. In the process, some competent family managers were lost. However, the point is not whether Paul and Bing were correct or wrong, it is simply that they made sure that they were never really tested or questioned past the intimidated relatives. Neither employees nor outsiders constitute a style to assistance either.

Nether the distorted potency of either family managers or relatives, not but crippled transitions simply regression can gear up in. Consider one more case:

In the Brindle Company, a father had handed the business organisation over to a son-in-law, did not like the results, and reclaimed the company, even though the son-in-police force had done an impressive job of managing the visitor in terms of growth and expansion. Several years afterwards, with the son-in-law out of the business concern, simply still with a minor ownership stake, Mr. Brindle sold the visitor at a fraction of the price that the aforementioned buyer had offered while the son-in-law was running the business. The business' growth had stalled and declined. The company had gone from second generation dorsum to offset generation, and the family was shattered to the extent that the two youngest grandchildren born to the son-in-police and his wife had never been permitted to encounter their grandparents.

Managing the Two Transitions

If, every bit in the Brindle example, a single dominant ability force tends to cause lopsided transitions or regression, how tin a constructive pattern be built for creating and managing both transitions? The answer seems to prevarication in a ability balancing setup that prevents polarized disharmonize. Only in the Krisch case, of those described earlier, was this ability balancing done finer. Withal it likewise happened in at to the lowest degree some of the other companies we studied. It may help to look at some of the assumptions and mechanisms that were used to encourage and manage the two transitions.

The Company Volition Live, Merely I Won't

The key supposition for growth was an almost explicit decision by senior managers that "the visitor will alive, just I won't." This assumption, so oftentimes avoided by older family managers, is almost built into the forced retirement programs of established companies. Just an entrepreneur or even his sons, as they get older, must somehow consciously face and brand the conclusion that, even though they will die, the company will live. Often, that decision occurs not because they are pushed into information technology, or out of the visitor by the younger family unit managers, but because of the intervention of relatives, noncompeting employees, or trusted outsiders, who may observe a manner of helping to pull the old family managing director into a new set up of activities.

At some point, a critical network of family managers, employees, relatives, and outsiders must brainstorm to focus upon the duality of both family and business transitions. Such talks should, in our opinion, brainstorm at least vii to eight years before the president is supposed to retire. Even though the specific plans may modify, the important assumptions behind those plans will not.

Mediation vs. Confrontation

Time afterward time we saw cases in which an entrepreneur'southward wife played an important office in bridging the growing gap between father and sons, as happened in the Krisch case. It also happened that an entrepreneur's widow would step in as a peacemaker for the younger generation. Simply when it came to helping make both transitions occur, the wife was more important than the widow. As in the Krisch case, she would assistance or persuade her husband to look toward the (children's) future instead of his ain past. In issue, she provided a relative's outside-the-business perspective. Such outside perspectives turned out to be crucial in transition direction, because they helped to heal and avoid the wounds of family unit conflict.

In some management circles over contempo years, a cult of confrontation has been congenital. Confrontation is regarded every bit calling a spade a spade, non in anger, merely every bit a way to move beyond conflict toward problem solving. The approach is reasonable and works in many concern situations.

Every bit we pointed out earlier, though, families and their businesses are not necessarily reasonable. The master emotions tend to be close to the surface, and then that conflicts erupt almost without reason. Attempts at confrontation past one party frequently neglect, because they are seen equally open or continuing attacks past the other.

When such nerve ends are raw, partly because of family unit jealousies and partly considering of historical sensitivities, a 3rd party or exterior perspective tin provide mediation and assistance to soften hardened positions. Relatives, outside directors, friends, and central employees all take this role in family unit companies. But they practice something else that is equally of import. They can assist to brainstorm a practice of open dialogue that cuts non only across age levels, but across the unlike perspectives of family managers, relatives, employees, and outsiders. The dialogues tin can aid in manpower planning and in managing the transitions. The question is how to develop such dialogues so every bit to include all the relevant perspectives.

Mechanisms for Dialogue

None of the dialogue mechanisms we observed or heard of is a cure-all. Just each brought unlike important combinations of people together. One company direction had periodic family meetings for family unit managers and relatives. Some other combined family managers and employees into project teams and task forces. Exterior boards of directors, executive committees, and nonfamily stock ownership (to be sold back to the visitor at the possessor'due south death or deviation) brought together family unit managers, employees, and outsider consultants on major policy problems in a number of companies. One family unit company had in-visitor management development programs, but invited exterior participants and also gave periodic progress reports to the financial and civic customs for comment and review. At one extreme, family unit managers and primal employees did gear up upwardly a series of confrontation sessions, but but after detailed planning. The ground rules were carefully worked out and over the years both family unit and company transitions made good progress. At the other extreme, companies would agree various lunches or social events where the open dialogue opportunities were limited but sometimes possible in an informal setting.

Future Role Edifice

Unwillingness to face the future stalls both family and business organisation transitions, since in one sense the hereafter can merely mean death for an older family manager. But in a more than limited sense information technology implies new just separate lives for the manager and his company. If some of the above assumptions and mechanisms begin to have hold, they will lead to the building of new roles. The older managers acquire how to suggest and teach rather than to control and dominate. The younger managers learn how to use their new power potential as bosses. Family managers take steps to learn new roles exterior the business as directors, office holders, and advisers. Employees acquire new functional management skills every bit well as new general management skills. Relatives larn how to take third political party roles to provide an outside perspective.

Offset Near the Stop

We have been describing one of the most difficult and deep-rooted problems faced by human organizations. Family endemic and managed concerns include some of the largest as well as nigh of the smallest companies in the United States and possibly the world. It seems pointless to talk about separating families from their businesses, at to the lowest degree in our gild. Families are in business to stay.

Even so, as one direction generation comes near its end, the life of the business is also jeopardized. Meanwhile, critics, scholars, and managers like to pretend that the "real" business organisation problems lie outside of the family unit's interest. This may exist true in some cases, but it can also lead to and perpetuate iv sets of tunnel vision. Family unit managers, relatives, employees, and outsiders adopt separate perspectives and separate paths.

Our studies, however, suggest that the healthiest transitions are those old-versus-immature struggles in which both the family managers and the business change patterns. For this to happen, "the sometime man" must face the decision of helping the visitor alive even though he must die. If he can exercise this, the direction of transitions can brainstorm. In effect, a successful family transition can mean a new start for the company.

Writers like to retrieve that their piece of work and words will have a lasting impact upon the reader. However, the history of the topic we are discussing provides niggling cause for such optimism. In fact, a truly lasting solution may come up simply from experience such as that described by an entrepreneur, who said:

"I left my own father's visitor and swore I'd never subject my own children to what I had to face. Now my son is getting proficient experience in another visitor in our industry before coming in to accept over this one. Within five years of the day he walks in that door, I walk out. And everyone knows it—fifty-fifty me."

References

1. Harry Levinson, "Conflicts That Plague the Family unit Business," HBR March–Apr 1971, p. 90.

2. Adolph A. Berle and Gardner C. Means, The Modern Corporation and Private Property (New York: Harcourt, Brace & World, 1968) and John Kenneth Galbraith, The New Industrial State (Boston: Houghton Mifflin, 1971.)

three. Robert Sheehan, "Proprietors in the Earth of Big Concern," Fortune, June 1967, p. 178.

4. Philip H. Burch, Jr., The Managerial Revolution Reassessed Lexington, Mass.: D.C. Heath, 1972.)

5. George Strauss, "Adolescence in Organizational Growth: Problems, Pains, and Possibilities," Organizational Dynamics, Spring 1974, p. 3; Robert B. Buchele, Business Policy in Growing Firms (San Francisco: Chandler Publishing Co., 1965); Theodore Cohn and Roy A. Lindberg, Survival and Growth: Direction Strategies for the Small-scale Firm (New York: AMACOM, 1974); Lawrence 50. Steinmetz, "Critical Stages of Pocket-sized Business Growth," Business organization Horizons, February 1969, p. 29; Bruce L. Scott, "Stages of Corporate Development—Role I," Harvard Business concern School Note 9-371-294, BP 798.

6. Larry E. Greiner, "Evolution and Revolution every bit Organizations Grow," HBR July–August 1972, p. 37.

7. This and all following cases are based on existent circumstances, just fictitious names and industries are used.

A version of this article appeared in the July 1976 issue of Harvard Business organization Review.