Melanie Stern is section editor of Families in Business
Perpetuating the Family Business
by John L. Ward
John Ward, considered arguably the pre-eminent authority on the world of family business, is in love with his subject; he has chosen to explain his views on it in twice as many words as any sensible person with an average attention span (and spare time to read management books) could handle. Ward speaks a lot of sense, and he knows his onions, but couldn't he know them in half the time and do his bit to help slow deforestation?
Perhaps this is a little harsh. But as Ward would no doubt concede, we're already so knee-deep in white papers, management tomes, venn diagrams, business models and case studies in this field, one more book probably just makes the task of figuring out how to sustain your family business beyond your lifetime more mind-bending than it already is. In his proposal to offer us "50 lessons", Ward teases the hand-wringing family business patriarch or matriarch with a single, simple manifesto with which to fashion a plan; but by the time we reach lesson one, we're one-third of the way through the book having navigated 'the five insights', 'the four Ps', and other observations leading to eye strain. One wonders at this point if academics should be barred from publishing books, unless they are of the pocket guide, stocking-filler variety; Jim Collins it ain't.
Saying that, Ward does hit upon what is probably the DNA for all problems family businesses seem to face in the 21st century: they can't seem to handle change. Businesses live and die by their management thereof these days. To his credit, Ward pins this crucial lesson down as early as page five of the book when he discusses the infamous maxim "shirtsleeves to shirtsleeves in three generations" – meaning the first generation builds the business, the second sucks the value dry, and the third is charged with rebuilding it, if they stick around at all. He tells us about the responses family businesses provide him with when he asks them why this is so often true of family companies. "A company doesn't keep on top of the changing business environment", says one; "Estate or death taxes strip and defeat the business," says another; "the founders are often ill-prepared" finds a third family business member. Intriguingly, Ward discovers that the only families who are unaffected by these issues are the ones who demonstrate no interest in growth. "When I looked at the 20 per cent of family businesses that had survived beyond 60 years, I uncovered a startling bit of information," says Ward. "Two-thirds of them weren't growing. In the face of the common belief that a business has to grow or die, how is it these non-growing companies continued to survive?" he asks. "One reason is they were lucky enough to find themselves in a protected niche where customers, competitors and technology didn't change. However, the idea of finding a protected niche is no longer a realistic one."
Ward makes the point that families need to watch their tendency to be family-focused instead of business-focused when trying to make a success of their enterprise. From there, the book rattles off its 50 promised lessons beginning with the virtues of 'social entrepreneurship' (whatever that is) and journeys nicely through the perennially good ideas of discouraging nepotism, filling the board with competent non-family principals, preparing the business financially and strategically well in advance for successorship, and knowing one's raison d'etre. Philanthropy, forming plenty of family councils and boards, and 'providing for family members in need' are not bad ideas, but muffle whatever business lessons were supposed to be proffered here; and can it really be true that philanthropic involvement can play a crucial part in perpetuating the family business? This strikes as somewhat old school when juxtaposed with the message of change management being critical to the 21st century family business.
But just as Ward slows the pace, he returns to bamboozling form in his closing words, urging readers to "interlink" lessons and "understand over-arching principles", "re-visit appendices", group such-and-such lessons under the umbrella of such-and-such insights but not forgetting the blessed four Ps, before advising one to plot each element and relate various principles. It may be easier for families to skip that piece of guidance and heed the core principal that seems to echo in every lesson and example given: change is good, but potentially destructive – so master its management as a family, and the business may have a fighting chance of defying the shirtsleeves myth.