On many occasions I've suggested that if business is likened to a chess game (OK, with a bit of poker intertwined), then family business should be described as three-dimensional chess. The family aspect superimposes its peculiar paradoxes over those inherent in the business itself. For example, business succession, which is more art than science, depends not only on good corporate governance and willing, capable leadership but also family discipline and governance, in order for the succession to be successfully accomplished.
Businesses have a world full of candidates to be successors, yet a considerable number of family businesses feel they are limited to family members as successors. That limitation of source has both advantages and disadvantages.
The key is to understand what stage the business is at and selecting the proper candidate to lead the next phase of the business’s growth. In a family business, all that is the same, but the leader must also be the right fit for the next stage of the family.
One of the complications in a family business’s development is the strong emotional ties to visions, those of the founder and subsequent generations’ leaders. Some families’ visual reminders (grandpa’s portrait on the wall) subliminally superimpose their influence.
As a consultant to family businesses and one who has studied, taught and written about the subject, I am often asked for the silver bullet, the one magic way to handle family business visions. My answer, always the same– – different families and circumstances should handle that complication differently – – doesn't seem to satisfy the inquirers. Therefore, I have devised a simpler answer, the ABC's if you will, or more to the point, the 3-Rs of learning about family business visions.
The 3-Rs of family business visions are: Reverence, Reversal, and Revamping. Allow me to explain these 3-Rs through summaries of three real family business stories: the Perot, Wirtz, and Terlato stories. The more complete stories of each family and a deeper explanation can be found in my recent book, Visionarie$ Are Made Not Born, for which I interviewed each of the people mentioned and others.
Reverence – – the perfect word to describe the way Ross Perot Jr. thinks of his father Ross Perot Sr., successful entrepreneur and former candidate for president of the U.S. Ross Jr. is a loving son who (i) watched firsthand as his father built his first company, EDS, which he sold for over $1 billion; and (ii) joined his father to grow Perot Systems, until it was sold for billions. As a kid, he sat in the backseat of his father's car as his dad described his vision of the Texas desert’s future, visions that became valuable reality for the Perot family. From that, Ross Jr. learned how to be a visionary himself. By example and by explicit lessons, Ross taught his only son the meaning of loyalty, integrity, discipline and hard work, which Ross Jr. has applied quite successfully. It is easy to see why he reveres his father.
Reversal – – Bill Wirtz did things his own way, including refusing to televise Chicago Blackhawks hockey games. After all, if they televised the games, Bill theorized, why would people pay to buy tickets to see the game in person? Immediately after Bill's death, his son Rocky took over. He had been excluded from the family’s hockey business, even though he worked for years in the family’s valuable liquor business. Now he was CEO of both. He was handed a bill for $20 million so the team could make payroll. Faced with the bill and the quicksand likely underlying it, Rocky could have sold the team, infected as it was by his father's flawed vision, for $100 million. Instead, he bit the bullet, paid the bill and reversed his father’s vision – – all games are now televised. Three Stanley Cup trophies later (all since Rocky took over in 2007), the team is likely worth over $1 billion.
Revamping – – when Tony Terlato started in the wine business, Americans drank really cheap wine; splurging resulted in bad wine in better bottles. Self-taught to recognize good wine, Tony envisioned Americans drinking good wine. He worked hard and cleverly, often taking big risks to convert his vision into reality. Eventually he was selling more wine priced over $15 a bottle than anyone else. Son Bill learned at his father’s side. When he succeeded Tony as CEO, he supported his father's vision 100%. But Bill saw future risks. If they relied totally on Tony's vision, Bill feared the impact suppliers might have, if they let down quality or took over distribution themselves. So, he led the family into a risky vertical integration. He maintained his father's vision but revamped it to expand their operations beyond Tony's distribution business. Years later, it paid off – – big time.
There you have it-- the 3-Rs of family business visions: Reverence, Reversal and Revamping-- a simple explanation of a complex area. Needless to say, there’s a lot more to each story. It’s important to understand the reasons and backgrounds, not just the outcomes. By the way, as you read Visionarie$ Are Made Not Born, you can also view the videos of the extraordinary interviews (in addition to those above, Fred Smith of FedEx, Kay Koplovitz of USA Network, Rick Waddell of Northern Trust, Jim Stephens of Weber Grills, and others).