Managing the transition of ownership and control across generations is a challenge that every family business must face. To many business families, the Bancrofts’ experience of losing Dow Jones & Company – to the Murdochs – would represent the ultimate failure. Most multi-generational family businesses, especially those in the fifth generation such as the Bancrofts, see continued family ownership as a part of their vision. But they often fail to develop the plans and take the actions to reach this important goal.
All family businesses are founded by entrepreneurs whose global involvement creates a unity of purpose, which in turn provides a powerful focus on values and clear future vision. These founders transmit their business values and vision directly to their children as they are growing up. Unfortunately, when this powerful matriarch or patriarch is no longer around, their maturing families often struggle. The strong sense of family connection slowly erodes and, by the time the third or “cousin” generation is reached, the social glue that binds the family is gone – and with it a sense of order and commitment. Maturing families also experience predictable conflicts from the centrifugal demographic, economic, legal and psychological forces pulling their members apart. Events such as births, deaths, marriages, retirements or divorces upset the delicate family equilibrium. The natural tendency to divide into branches as the family grows results in a loss of a shared interest and purpose when making decisions. Even if the family tries to stay connected, the more people there are, the more difficult it becomes to communicate and agree on values and vision.
We didn’t get the company from my parents, we are borrowing it from our children
Business success further complicates matters. As the firm becomes more professional, so ownership and management roles separate, resulting in power inequality within the family. The legal division of shares from wills or estate planning also creates potential for ownership inequality. And all the while, growing numbers of family members create new demands on resources and assets. The upshot is that family connections loosen. Involvement, commitment, trust and unity of purpose are lost. Back in 2007, all these social and economic forces were acting on the Bancroft family. One family member, Crawford Hill, wrote to his relatives: “We are now paying the price for our passivity over the past 25 years. As to promoting legacy, [we] never spoke of the legacy of Dow Jones, much less the possibility of actually working there or what it meant to be a steward of the business.” He went on: “There has never existed any kind of family-wide/cross-branch culture of teaching what it means to be an active, engaged owner and, more crucially, a family director.” The missing ingredient for the Bancroft family was a sense of stewardship. In other words, they failed to unite the family around a strong commitment and contribution to sustain Dow Jones as a family asset. Contrast this with the words of Mario Preve, chairman of Riso Gallo, an Italian rice producer since 1845, interviewed as part of an Ernst & Young survey of family business members: “I always say that [the family business] is like the relay race: someone passes you the baton and then you pass it on to someone else. We say that we didn’t get the company from my parents, we are borrowing it from our children. And this is important. We are thinking of how it affects our offspring. We don’t think in quarters, we think in generations.” The power of stewardship is that it supports a family legacy of shared success beyond the business. Stewardship says: “We will leave the business and family in better condition after each generation by developing family capabilities, acting on conscience, demonstrating commitment and making a contribution.” So what can business families do to make stewardship a part of their ownership thinking? One possible starting point is for the family members to meet, revisit their values and discuss their commitment to the family and business. Like all social organisations, families periodically need to renegotiate their values to reflect not only their traditions and experiences, but also the needs of the current and future generations. And multi-generational business families, because of their large number of members and branches with their different interests, and the separation of ownership and management, need to identify an expanded set of family purposes beyond just business success. There are several questions that can help a multi-generational family make values and stewardship a part of their future planning:
- Does the family discuss its values at family meetings?
- Have the values been clearly articulated in writing and shared with the family?
- Do the younger family members see the values played out in day-to-day business conduct, company training programmes, family events and philanthropy, as well as words?
Today younger people are keeping score with new metrics that count talent development, mastery and happiness as measures of satisfaction and empowerment. They are looking to inherit a legacy that encourages capability and contribution of stewardship rather than wealth or power. Five years on from News Corporation’s takeover of Dow Jones, a speech given at the Edinburgh International Television Festival by Rupert Murdoch’s daughter, Elisabeth, caused some controversy. “Obviously News [Corporation] is… currently asking itself some very significant and difficult questions about how some behaviours fell so far short of its values,” she said. “Personally, I believe one of the biggest lessons of the past year has been the need for any organisation to discuss, affirm and institutionalise a rigorous set of values based on an explicit statement of purpose.” Was this a call to stewardship, a bid for the succession crown or simply a bit of clever PR? Who knows? But the Murdochs should heed the words of Eugene O’Neill, the great American playwright: “There is no past and no future, only the past happening over and over again.”
