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Senior leadership: Lessons from the top

The question of what makes a good senior family business leader is much debated. Questions of leadership style, level of involvement and when to step aside are all very subjective. There are many examples of older family business leaders who cannot let go, who refuse to relinquish power and who stifle the next generation; heads such as Sumner Redstone, the 86-year-old chairman of National Amusements, and 78-year-old News Corporation head Rupert Murdoch, are two prominent illustrations.

There is no doubt senior family members can and do play an important role in the business, the difficulty is judging what that role should be and how best to use the talents and wisdom of those in their twilight years.

Bill Harris, the 56-year-old third-generation president of US-based retailer Harris Family Furniture, believes there are clear advantages to having senior family members working within the business. "Senior family members bring knowledge and experience with them. And also a bit of conservatism, which is very important. If I hadn't been a conservative influence and we were highly leveraged at the moment there is a good chance I would not be here," he says.

During the low-points of the current recession, much was made of this more conservative, long-term view taken by family businesses and how this was affording them a certain level of protection during the downturn, as Harris implies.

This long-term view is one of the most important qualities senior family business leaders bring to the company, according to Kavil Ramachandran, chair Professor of Family Business and Wealth Management at the Indian School of Business, Hyderabad. "They bring a long memory to the business, they have been through many of the fluctuations before and can remember how they dealt with similar problems in the past," he says. "They can reassure those now running the business that although there are some temporary setbacks, the business will be fine and bounce back," he adds.

Economic and market fluctuations are not the only difficulties family businesses face; family conflict can arise too and experience in the more effective ways to deal with it is invaluable. Mariano Puig, 81, former chairman of fashion group Corporation Puig, says: "To deal with the family is not an easy thing, it is not impossible but it is not easy either. You need to take into consideration so many different points. It is important to pay attention as sometimes it can be very delicate and it takes time to learn this."

Ramachandran also believes senior family members can act as custodians of the family business values, ensuring they are taught and propagated to the next generation. "They can reinforce the family values, because they are not actually under as many operational or time pressures. They can take a longer view of the business and remind those in charge of the importance of looking after loyal customers," he says.

Serving in an advisory capacity is another valuable role senior family members can play, however Puig cautions against offering unsolicited advice. "They should play an advisory role, but only if the next generation asks for advice. Senior family members must not force their thoughts and opinions on those now running the business," says Puig.

His views extend to the level of involvement senior family members should have in the management side of the business too. "I think it is important those senior family members are not directly involved in the business. They can helpfully serve on governance bodies or work in the family foundation," he says.

Puig's views are reflected in the company policy of his family business. At Corporation Puig they enforce a mandatory retirement age for each section of the business, as he explains. "In our group we have age limits. There is one age at which you must retire from the management board, another when you can no longer be chairman of the board and an older age when you must retire from the board altogether. At 81 I am past all of those age limits so I am now just a shareholder and I'm very happy with that."

One of the benefits of insisting on a mandatory retirement age is it forces the family and the business to address succession, one of the most prevalent and difficult issues family businesses face. Knowing when to move on is not always a strength associated with family business leaders and it can prove detrimental for both the business and the next generation. "Senior family members often do not think of retirement," says Ramachandran. "They wonder what they would do if they did retire but they must acknowledge that they are not eternal."

Both Redstone and Murdoch have experienced first hand the problems that can arise from not moving on. Redstone made it public he wanted his daughter Shari to succeed him as company head, however he retracted his endorsement in 2007 after he was unwilling to cede any power. Despite both owning the company, Sumner and Shari are no longer on speaking terms. While Murdoch's unwillingness to step aside drove his eldest son and heir apparent Lachlan to leave the family business and start his own company Illyria.

At Harris Family Furniture, although there is no specified retirement age, succession issues are addressed and discussed regularly. "We are going through some changes right now," explains Harris. "We have a senior partner considering retirement in the next year or two and another senior partner retiring in the next three to five years. We are working on filling their shoes now to ensure a smooth transition when the do leave," he says.

One of the reasons Ramachandran believes some senior leaders find it difficult to move on centres around how they view their children, and may resonate with many next generation members. "Some parents still view their children as young kids. Even if they are 50, 55 even 60, their fathers, uncles or mothers still treat them as children. This often comes from a lack of open communication and the unwillingness of older generations to retire," he says.

The dynamic nature of business is one of the reasons it is important more senior members do retire, or at least cede some power to the next generation, as Ramachandran explains: "Leadership qualities change as the business expands, evolves and grows. The nature of competition is different, the business is different and relationships are different so naturally the leadership qualities have to be different over time."

Harris explains some of the changes he has witnessed over his 34 years. "In my father's generation, leading the family business was like being a general in-charge of an army. They were full of confidence and made my generation work a lot harder because they went through the depression and the war, and that in itself was an accomplishment."

Harris expects his children to work hard too, but the expectations are different, as are the methods of dealing with people. "I want the next generation to work outside the family business for three to four years before I invite them back in. I think they should be out learning new skills and technologies that they can bring back to our company. My son Will did this very successfully," he says.

Although the qualities required to lead a family business do change over time, Puig has a longer-term view of leadership. "It is always difficult to be a leader, now, 10 years ago, 20 years ago and even 50 years ago. Leadership requires a delicate touch, it is an important position with a lot of responsibility."

And as that responsibility passes onto the next generation, Puig has some advice for those taking up the mantle. "As a family business leader you must listen to people and connect with people because business is made by people. You also need a good team around you at the top, so again it is all about the people," he says.

Harris also has some advice for the next generation taking on the challenge of leading the family business. "You must be fair, or as fair as possible. And recognise that wealth is not everything. Values are more important than wealth and if you have good values sometimes wealth might follow on," he says.

However, the lessons senior family leaders want the next generation to take from them and the lessons they do learn can sometimes be at odds, according to Ramachandran. From his work with many Indian and other family businesses he thinks senior family leaders can inadvertently pass on a certain leadership style to the next generation. "If you look at India's Ambani family, both of those brothers have inherited the somewhat autocratic leadership style of their father, it has caused them to split the family business into two groups," he explains.

Over the time spent working in and leading the business, senior family members inevitably learn much about running the company and working with the family. Harris has been at his family business for 34 years and during that time he has held many different positions from salesman to company president, a role he has held for the last 11 years. "I've learnt you must be a good communicator to lead a family business. It is the number one thing you have to do well. Communicate and meet with other family members as often as possible and when there is a conflict, meet it head on," he says.

Puig agrees good communication skills are the most important thing he learnt about leadership, although he takes it a step further. "Listen to people. That is what a good senior family business leader must do. Ask questions so you know how your staff feel and can make informed decisions." 

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