All posts by Craig E. Aronoff, Ph.D.

Family is Key

Craig Aronoff

The New York Times columnist David Brooks focuses largely on parsing behavioral science and moral philosophy for practical use.  His most recent books, “The Social Animal” and “The Road to Character” are worthy reads in this regard.

In a recent column, Brooks probes the role of “family” in society.  He notes that individuals “emerge out of families…” and that “the family… is the essential social unit.”

He then turns to statistics that are familiar to all who work with family businesses, concerning the prevalence and performance of family businesses.  He also notes the frequency of multigeneral family heritage in politics, and fields like music, sports and literature. (And he could have added science, law, or virtually all other fields.)

Probing why this should be the case, and without mentioning genetics, Brooks offers five reasons why “certain families are breeding grounds for achievement.”  These include:

  1.  Identity formation by which growing up in a certain kind of family lets you think of yourself in those terms at a young age.
  2. Practical knowledge learned by the example of one’s kin rather than in a classroom or a book.
  3. Level of skills that are cultivated and accumulated across generations. (“It takes three generations to make a career.”)
  4. Audacity in which you can dare seek high achievement because of role models in your family.
  5. Time horizon in that families think and work for the long term, seeking to pass a legacy to those not yet born.

Some people think that being born into the “right” family confers unfair advantages, says Brooks. “Families are unequal.”  And while that makes it harder for others to compete, the result is to make “society as a whole more accomplished.”

His conclusion:  “We wouldn’t want to live in a society in which family influence didn’t happen.”

All those who see their family enterprises as precious to their owners, employees, customers and communities, and mightily strive to maintain and grow all dimensions of their family’s legacy, can thank David Brooks for his recognition of the reality and importance of what families who work together accomplish.

The Sixth Generation at National Geographic

Craig E. Aronoff
Craig Aronoff

The National Geographic Society with its famed National Geographic Magazine is a not-for-profit entity dating to 1888. Among its founders and first president was Gardiner Greene Hubbard, an attorney and financier.  He helped to fund Alexander Graham Bell’s research that led Bell to being awarded the patent on the telephone in 1876. The next year, Bell married Hubbard’s daughter and after his father-in-law’s death, succeeded him as National Geographic Society president.

Gilbert Hovey Grosvenor became the Society’s first employee in 1899, and the next year, married the boss’s daughter.  He was editor of the magazine for 51 years and served the Society as president and then chairman of the board.  His son, Melville Bell Grosvenor, joined the family business in 1924, also served as president and editor, and in 1967 succeeded his father as board chair.  His son, Gilbert Melville Grosvenor, joined the magazine in 1954, became editor in 1970, president in 1980 and was named chairman emeritus in 2010. He retired from the board in 2014 after 60 years of service.

His daughter, Alexandra Grosvenor Eller, MD, joined the National Geographic Board in 2009 and continues family stewardship of this important institution into its sixth generation.

An organization need not be a business to benefit from a family’s multigenerational nurturing commitment. And profit from the good done by the organization need not be in the form of dollars to the family who founded and developed the institution.

WITHOUT WORK, THINGS DON’T WORK

 

Craig Aronoff
Craig Aronoff

A friend asked about the impact of wealth on the children of families owning significant assets.  What’s the secret, he asked, to helping such children achieve reasonably well-adjusted adulthood?  Indeed, I was reminded of one client who shared his fear that making his kids rich would make them “poor” human beings.

Here’s the answer I offered — recognizing the complexity of the challenge:  Parent’s must help their children understand that wealth — while it may provide ease — does not provide easy answers.  Only through work — meaning only through the investment of one’s self — does life gain substance and meaning.  Work does not necessarily mean “working for pay.”  It means working for achievement and it means working at relationships.  If one doesn’t work at fulfillment through achievement and relationships, then things don’t work — and life doesn’t work very well either.

Seven Timeless Principles for Effective Leaders

Craig Aronoff

Part biography, part “how to” management book, and part philosophical tract, Joel Manby’s excellent new book, Love Works, is inspiring, readable and useful.  Subtitled “Seven Timeless Principles for Effective Leaders,” Manby uses his experience as CEO of Herschend Family Entertainment, Inc. (think Silver Dollar City in Branson, MO, Dollywood in Pigeon Forge, TN and other attractions from Georgia to New York to California) to explain a practical and effective method of  management approach based on “leading with love.”

Herschend Family Entertainment is a family business in its third generation.  Manby constantly credits Jack and Peter Herschend, brothers who led the company for over 40 years, for teaching by eample “how to lead with love.”  Manby’s thinking behind the book involves how he is seeking to build the Herschends’ family values and their example into the DNA of the company’s culture.

As one who works with hundreds of family businesses, I see Love Works, in addition to its many other merits, as a terrific primer on the importance and power of fully integrating an owning family’s values in their enterprise.  We often say that the strength of a company’s culture, built on its owning family’s values, is among the most powerful competitive advantages that a family firm can achieve.  There are few examples of how this can be accomplished on a practical basis.  Manby provides just that with Love Works, and I thank him (and the Herschends) for it and recommend the book to every family business for what it teaches.

Love Works

 

 

Love Works is available on Amazon.com. 

More Data Says Private Companies Are Better

Craig Aronoff

A recent article in Forbes magazine made the following points:  stocks listed on U.S. stock exchanges have declined from 7400 to 3600 in the past 15 years;  public companies earn less than half of business profits in the U.S. economy today; and the part of the business sector that is not listed outperforms that which is listed. Obviously, family businesses make up a substantial portion of the non-listed universe (and the publicly traded universe as well).    These data speak once again to the size and importance of family business in the economy and the comparatively better results of private companies over public companies.

Is Business Longevity the Goal for Enterprising Families?

Craig Aronoff

In a static or relatively stable socio-economic system, the ability to identify, sustain, and defend a niche in the marketplace creates tremendous value to pass from generation to generation.  When the socio-economic system is in ever accelerating flux, creativity and adaptability rather than defensive stability may be the key to longevity. The specific corporate form of the enterprise may be far less the issue than the values, knowledge and assets passed from generation to generation.

Encouragement for Board Chair’s and CEO’s

Craig Aronoff

The Chairmen’s Forum, a group of experienced chairman from major corporations, has stepped up its effort to encourage the separation of the roles of board chair and CEO.  The group endorses the appointment of  independent chairmen .  Companies in the S&P 500 which divide the roles have almost doubled in the past five years.  While the practices of public companies do not necessarily provide models to family businesses, in this instance we agree with William E. McCracken, head of the Chairman’s Forum, that “boards function much more effectively” with responsibilities split between the chair, who manages the board, and the CEO, who manages the company.

IT’S NOT JUST FAMILY SUCCESSORS THAT FIND IT TOUGH TO FOLLOW FOUNDERS

Craig Aronoff

Research pointing to the fact that family businesses outperform their non-family peers have also shown that performance in subsequent generations of family businesses does not tend to be as strong as it is in the founder generation.  In a Forbes Magazine piece pointing out the challenge confronting Steve Jobs’ successor Tim Cook, Scott DeCarlo observes that successors to iconic company founders generally don’t fare that well.  During Bill Gates tenure as CEO of MicroSoft, for example, the company’s annualized total return was 58%.  In the five years after he left the CEO slot, the company’s annualized return was –11%.    Bernie Marcus at Home Depot had an annualized return of 47% but his successor managed “only” 25%.  Other examples are also given.

It is not just the next generation successors in family businesses that are challenged by the record of their business’s founders.  All successors face that issue.  Being compared to one’s parent, however, can make the comparison seem more dramatic and even painful.  Being a successor is no easy job.

No Reason for Gratuitous Criticism of Family Business

Craig Aronoff

This from the most recent Bloomberg Business Week:

“Last year revenue at the company grew 12 percent, to a record $9.7 billion, and while the Great Recession slowed rivals Neiman Marcus and Saks, Nordstrom gained market share.  Nordstrom, it seems, is that rarity in American business: an enterprise run by a founding family that hasn’t wrecked it.”

Marriott, Smucker’s, Huntsman, Enterprise Car Rental and many more, often less well known enterprises, continue to be run quite successfully by founding families .As with Nordstrom, all businesses can learn from such families’ accomplishments.  We urge Bloomberg Business Week to continue to tell the instructive stories of outstanding family firms and to lay off gratuitous criticisms of what remains a crucially important aspect of our economy and society.