Quote:
Originally Posted by Hitch
This is so weird--a good friend, who is one of the first Booknook.biz clients, is in a similar situation (although, there's no PHB grandson, as I understand it). Her husband (in his 70's) has had to return to his position as CEO, because the Prez that they hired to replace him was running the biz into the ground. Damnation, I know that you'd THINK that some youngling in that fam would take over, no? Boggles my brain.
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Family businesses have inherent problems that not all overcome. If the family is dysfunctional, the business will be too.
One problem is attracting and retaining competent subordinates. If it's known that Junior will inherit the business and become CEO when Dad retires, there's an absolute ceiling on how high and employee can rise. Some folks who would like to
be a CEO someday will leave for someplace where that's at least possible.
Another is whether the next generation is interested and/or competent. In some cases, the siblings simply aren't interested in the family business, and have other interests. Years ago, for instance, I was taken to dinner at a high end Italian restaurant by a friend. We got into a conversation with the Maitre D, who stated that Italians didn't own/run any Italian restaurants in NYC these days. The grandparents had come over from Italy, got into the food trade, and worked 12 hours a day seven days a week to establish themselves and built a successful and prosperous restaurant. Their kids largely didn't want to recapitulate that experience. The wanted to go into other middle class careers like law, medicine, or brokerage. So the next generation of immigrants filled the void. He recounted interviewing a guy for a job as a waiter. Asked where he was from, the prospect mentioned an Italian village across the border from what was then Yugoslavia. "Who are you bullshitting?", responded the Maitre D. "You're a Yugoslav! You're from
my town!"
A third issue is that there may be multiple siblings, but not all will be fit to run the business. In earlier eras, you had the concept of the remittance man. This was typically someone like a younger son of a noble who would not inherit the title. He was given an allowance and encouraged to go live somewhere else. The Rothschilds made use of the technique. They recognized that not all of the younger members of the family were suited to be managers of the business. They were given allowances sufficient to maintain themselves in a suitable fashion, and sent to live elsewhere, where they would establish themselves at high levels of the local society, and make a point of keeping the family informed of what was taking place that might offer opportunities, but they wouldn't actually be making the deals.
And a fourth issue is that multiple siblings who are interested in running the business may fight over who does what and who gets to be the top boss. (See above about dysfunctional families.) The Bancroft Family had owned and controlled Dow Jones, whose properties included the Wall Street Journal. They sold out to Rupert Murdoch's News Corp in 2007. Among other things, there were reports of disagreements in the family about the management of Dow Jones, and they decided to simply get out of the business instead of fighting over it. (Many folks including me are less than thrilled over what happened since Murdoch took over.)
The hired hand mismanaging things is yet another issue. A friend recounted the problems at his company, a computer/network consulting outfit, where the owner had hired a woman to handle day-to-day management. As it turns out, she had ambitions, and was deliberately running the company into the ground so it could be picked up for a song by people she was involved with, and leave her as CEO after the ownership change. She got caught, and tried to purge the evidence. He talked about employees voluntarily coming in on Sundays to do computer forensics on her machines and resurrect the stuff she tried to delete to cover her tail. The last I heard, she had fled, tried the same thing at another company elsewhere, and was currently a wanted fugitive facing racketeering, embezzlement, and other criminal charges. The owner had to resume management of the business. Whether he learned from the experience is unclear.
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Dennis