Happy Landings: The Opportunity to Fly AgainKenneth Kaye, Ph.D.
Summary: The success of a business for its owners is measurable in terms of the opportunities it creates for their beneficiaries. Perpetuating that business is only one of many possible opportunities for them.
Reportedly, as many as a quarter to a third of viable U.S. businesses remain in the same families from one generation to the next. That is a remarkably high number; not a poor record at all. Yet, if the vast majority of family businesses are not destined for that kind of transition, what are we experts doing for them? Are we doing a disservice by our almost obsessive focus on the succession process?
Too many families can't bring themselves to get out of a business when they no longer have capable and motivated leadership, or to get unsuited family members out of the business when their relationship with it or each other jeopardizes everything. I have written about chronic conflict (Kaye, 1991), about "prisoners of the family business" (Kaye, 1992), and about families' unhealthy relationships with business (Kaye, 1996). With due respect to the many healthy family firms, this article proposes a conceptual change, a research agenda, and a consulting orientation toward family functioning and opportunity rather than succession.
Family Business Success Means Opportunity Building
The ultimate success of a family business can be defined identically to the success of any parent: gauged by the value added to next-generation opportunity. Parents, by nature, want to find or create opportunities for their children, enabling the latter to start their adult lives with advantages over other young adults in the same society. That is why a common measure of how well parents have done is how much they have increased their children's socioeconomic standing, relative to where they themselves started two or three decades earlier.
This definition refers to opportunities created for all children in any family; regardless of gender, intellect, proclivities, or gifts. In the case of a business-owning family, it would apply to those who don't enter the business as well as those who do.
Successful parents may provide advantages of many kinds, including:
a profitable, already viable business
a professional degree
a network of social connections
mental health and good judgment
moral principles and sound practices
Driven by biological instincts, most parents try to give their offspring as many of those competitive advantages as possible. Entrepreneurial success creates diverse opportunities, most of which are better accessed with cash (for postgraduate tuition, travel, investment, politics, philanthropy, financial independence, etc.) than by the inside track to a job in the family business. In short, family success does not necessarily entail retaining ownership of a business.
Confining the discussion to family enterprises in which the next generation does become active, Table 1 offers a perspective on success that transcends the question of succession.
From that perspective, successful consultation means liberating individuals or whole families from any of the failure conditions listed on the right side of Table 1, and maximizing their chances of achieving the full list of criteria on the left. If the business does stay in the family and/or if family members stay in the business, educators and advisors ought to do our utmost to ensure that we're really helping to transfer opportunity rather than its opposite: entrapment. That should be the responsibility of a family's legal and financial advisors as much as it is that of psychological advisors; especially since relatively few have psychological advisors, while nearly all have legal and financial counsel.
An example of consulting failure can be found in fifth-generation Hasbin Molding Co., controlled by the widow of the founder's grandson. Her two children, Buddy and Shirley, ran the company; each was divorced and had three adult children. Three of those six fifth-generation members were employed in the business, as well as the spouse of one. Buddy was the hands-on manufacturing vice president, which really meant plant manager. Shirley had the title of sales vice president, but she actually functioned as president in all respects but one: Neither Buddy nor his son, a machinist, took any direction from her.
Shirley's two sons were the company's principal salesmen. Although they worked hard, Buddy wasn't convinced of their worth. He cited numerous examples of how they were getting a "free ride." As if bent on proving their uncle's point, at the time our consultation began, the two young men had defied their grandmother by flying first class instead of coach on a business trip to Hong Kong. Shirley wasn't happy about her sons' flagrant disregard of company policy, but she was incensed about Buddy's accusations. He had bullied her as a child, his alcoholism had ruined family life, and
Table 1. Success Criteria and Corresponding Failures of a Family Business
Score success if all of the following are achieved:
Score failure if any of the following occurs:
Both generations feel that the younger generation has made significant contributions to the business.
The business doesn't serve as a place where children can be validated as adults and appreciated by their parents.
They either pass the baton or make a good decision to sell the business, in which case they work together to maximize its value.
The equity value of the business is reduced by poor teamwork, poor leadership, or poor management of this family resource.
The process of getting there is personally rewarding for them, individually as well as collectively.
Financial success is achieved at the expense of the members' personal satisfaction, enjoyment of their relationship, or their moral values.
There are no serious personal casualties along the way.
The family business gives some of its owners and their children joy, but significantly contributes to other members' arrested development, chemical dependence, or lifelong alienation.
Note. Adapted from Kaye, 1996, p. 356)
he continued to be verbally abusive and demeaning despite ten years of sobriety. Buddy and Shirley agreed on almost nothing, the company was going nowhere, but Mrs. Hasbin refused to discuss selling it and refused to proceed with estate planning until her family proved they could work together harmoniously.
Buddy and Shirley did agree on one thing: There was no way they or their sons could work together in the future. I failed, however, to convince them that an assertive united front on that one point would more effectively persuade their mother than the power struggles that only served to maintain their problems. The company attorney, whose firm had doubled as Mrs. Hasbin's estate counsel, failed to use their 20-year relationship to budge her from her angry position. She feared that if she sold the company or allowed either Buddy or Shirley to exchange stock for other assets, she would lose her power over their paychecks and thereby her control over their unhappy lives and what little control she had over her grandchildren as well. That was true.
The Happy Landings MetaphorIn aviation, every aircraft is in the process of landing from the moment it takes off. The force of lift produced by motion of its wings through the air merely postpones its fall. The pilot's work is all aimed at bringing the aircraft down at the optimal place and time�instead of returning to Earth in a less desirable place, time, or condition. So with any human enterprise: The question is not whether it will survive in perpetuity but when, where, and how it will terminate. How is even more important than when and where: An unscheduled landing at an alternate airport preserves all the capital assets (financial, intellectual, and human), so they can be used again for another trip. An unrelenting effort to reach their planned destination may put safe alternates out of reach, and thus destroy all those assets.
The analogy may help to clarify what should be the job of family business educators, researchers, and consultants alike. It is to help owners recognize when the time comes to redirect or terminate their "flight." Sooner or later, every business-owning family (if not in this generation than in the next or the next), needs help looking for the best place, time, and manner to land safely.
In order to fulfill that function responsibly, we need much better answers than we currently have, to two sets of questions.
The first set involves predicting where things are headed under various scenarios. I won't belabor the airplane analogy because, unfortunately, we experts on family business are closer to astrological forecasters than to aviators or scientists as yet. For example, when clients asked, "What happens if next-generation leaders of a family business try to share the CEO function equally among two or three siblings, in-laws, or cousins?" I used to say with as much expert authority as I could muster, "It won't work." More recently, I've heard myself saying, "It depends on a number of factors ...." The bald truth would be, "I don't know." So, too, with questions about nonworking siblings' stock ownership, the importance of outside experience before entering the family business, the size of firms requiring a "real" board, and so forth.
Most of us realize that research on questions like those is currently insufficient. At least our young field has built the institutional support for such research, which may take another decade to reach a critical mass that one could call a genuine body of knowledge. The second set of questions, however, has barely begun to be asked; and I think they are just as critical.
This second set of questions deals with human beings' persistence in holding on to family enterprises that are clearly failing on the criteria of Table 1; enterprises that we can see aren't providing many external or internal advantages for the next generation and actually seem to be eroding their opportunities. There is a direct analogy to aviation psychology, because the latter field, too, has yet to discover the answer to this question: "What leads an intelligent, experienced (non-airline) pilot to fly on into worsening weather conditions when running out of fuel, fatigued, and with known equipment malfunctions?" From the point of view of human psychology, the answer in both domains may turn out to be the same.
Why the resistance to letting go�of unhappy family members, of the business itself? The author's consulting sample (Kaye, 1996, discussed below) shows how strong this resistance is. But why?
When patients are treated for a mental illness, their families, physicians, and health maintenance organizations expect to know the scientific basis for their particular diagnosis and treatment plan. In our field, there hasn't been any research at all, as yet, that could provide a scientific basis for saying, "Family business A has what it takes to pass to the next generation; Family B's problems are not fixable; Family C's problems can be solved by taking steps x, y, and z." Of course, we do make statements like those and we are often right�but we cannot long continue without a body of statistically valid research.
What we do have are some good theories about individual and family development, and some concepts that help us think about the resistance to letting go of a family enterprise that isn't working. We need to test those theories. Is it true that some families are afraid of individuation (Kaye, 1996)? "Individuation", or the equivalent term "differentiation", means that healthy family members allow each other and themselves to balance their shared identity with distinct separate identities and purposes that may sometimes take them in different directions without jeopardizing their family bonds.
Family business succession sometimes appears to be a means of resisting individuation�as though chasing a parent's dream were the only way to maintain family bonds. That, in turn, intensifies conflict, which increases fears about individuation; so the problem escalates. Unfortunately, the fears may be justified because individuation does endanger family business survival in any family business that happens to be built around stifling individuation. Will systematically gathered data support or disconfirm that good theory?
What role does ego development play in children's ability to make the break, or in parents' ability to accept it? For children to grow into healthy, secure individuals, their parents must have enough ego development to let them go.
Ego development means the ability to control internal instinctual reactions and anxiety, and the external stress of others' explicit demands and implicit expectations. Herbert's (1989) groundbreaking study of a select sample offers a model for personality studies of entrepreneurs and their families, which could be aimed at the questions raised here.
We need to know, too, what role social pressures play in people's difficulties about terminating family firms. Are there cultural variables that make some families define success in terms of business ownership and family participation? Surprisingly, films, novels, and theater have portrayed negative images for centuries�family business as an unhealthy trap, a spoiler of children, or a home for ne'er-do-wells. Why, then, do we still see so many families equating success with succession?
A research question for anthropologists, perhaps, is whether human beings have innate feelings about the family enterprise as the archetype of pre-industrial life. Could there be an instinctual drive to keep business and family inseparable?
Finally, to what extent do professional advisors (of all disciplines) encourage succession planning and warn against "failing" to perpetuate a family business? When this happens, is it because we envy the client's wealth and power, and can't imagine anyone not wanting to be Dwayne Andreas? Or are we merely reflecting what prospective clients want to hear instead of challenging their assumptions?
The Family Firm Institute should make us sign a pledge not to make facilitating family business succession our professional mission. Succession can be a failure, when it occurs as a result of developmental failure in a family. Conversely, a thoroughly successful outcome for a family business may be the decision to dispose of it (Le Van, 1998; Tagiuri and Davis, 1996).
The key for consultants is to beware the assumption that something is wrong with people who don't "succeed" at succession�and something right, by definition, with those who do. Frequently, insurance and estate planners bemoan their clients who commission wonderful plans but don't execute them: What's wrong with those people, the advisors wonder, that stops them from doing the presumably successful thing? Could it be that the "best laid plan" is wrong? Could it be that deep down the client knows it isn't good for the family?
As reported in Kaye (1996), a family dynamics (psychology or organizational development) consultant can group family firms according to whether they possess the necessary ingredients for a transition to currently active successors (about a quarter of the author's practice, with whom our "success rate" runs close to 100%), or the ingredients would be present if one or more members can first be liberated from destructive positions and attitudes (about two fifths of this practice, with only about a 33% success rate), or the would-be successors simply aren't capable of working together for a promising transition (about a third of my clients). "Success" in the latter case would mean helping the family take positive steps toward terminating their shared business ownership. By that definition, I am successful with only about 10% of that group (Kaye, 1996). Shouldn't our goal as a profession be to improve that poor success rate for "happy landings"? How should we educate those clients, reframe their goals, prepare them and counsel them?
An approach that I have adopted is to focus on the word opportunity. I congratulate parents on the opportunities their success has created for the next generation, get them talking about how far the family has come from humble roots, and then ask the younger members how they feel about those opportunities. They feel appreciative, of course; though they haven't always expressed that to their parents. I emphasize advantages in the broadest sense, including appropriate examples of both external and internal advantages, with the aim of gaining all members' agreement to define success in those terms, regardless who winds up owning the business. Parental success means providing those opportunities at times when their children's lives can best capitalize on them. Inheritor success means making the most of those opportunities, not ruining or being ruined by them.
When substantial wealth is involved, we find it helpful to discuss the major challenges ahead whether they keep the operating business or not (Hamilton, 1992). It is the wealth, not the business, that presents opportunities as well as problems, which these task-oriented entrepreneurs can sink their problem-solving teeth into more readily than they can think about "letting go."
In my experience, the families that do manage to keep their firms successfully over generations are mainly those that don't have to do so. Only those whose members have other paths on which they could have succeeded, alternative opportunities they were capable of taking, seem to have talents and experiences that make them likely to thrive in business together. Unfortunately, many families that cannot pass their enterprises successfully to the next generation are those that can least afford not to�because their children are ill-equipped for success elsewhere. This means that clients can benefit much more, the earlier they seek counsel or encounter books, articles, forum programs, and so forth.
What about the succession cases? (I give them, rather than ourselves, credit for their virtually inevitable progress through the process.) Notwithstanding the 100% "success rate," they seldom achieve a perfect outcome. As one client said, "Yeah, of course we'll make it, but what will be the quality of our relationship when we're done?" Rarely is it better than it was before. If the dream of being closer and more comfortable with each other, or of being appreciated by a son, daughter, parent, or sibling wasn't realized by 20 years of working together, it isn't going to happen through a succession process. Individuals may come to accept themselves and their families as good enough. Even with such modest goals, though, the quality of family relationships after business transition is a measure of the consultant's success. With clients whose legal/financial transitions are assured, how can we be satisfied with ourselves as consultants unless we also helped them wind up in a good family place?
The role of a family business consultant should not be to increase the number of families whose firms survive into the next generation, but to narrow the number to just those whose family businesses enhance their lives. For that group, our role is to help them make a transition that increases the opportunity for all members. For others, it is to help them exchange the business for its worth in new opportunities.
The words success and succession are still used as synonyms--mistakenly, when family firms are concerned. We decry tax-driven planning, yet we are guilty of a comparable blindness if our avowed mission is succession-driven rather than health-driven. We should be in the business of helping entrepreneurs discover whether their overlapping family and business roles are good for them in the long run. "Is this business healthy for our family? If it cramps our personal growth or hurts our relationships, how can we change that?"
Veteran pilots like to say that a good landing is any landing everybody walks away from; and it's a great landing if the plane can be flown again. In family business terms, it is a happy ending when the whole family survives with their capital free to create new opportunities for all, and with appreciation for how thoughtfully and earnestly their business stewards created those opportunities.
Hamilton, S. (1992). A second family business�patterns in wealth management. Family Business Review, 5(2), 181-188.
Herbert, James (1989). Black Male Entrepreneurs and Adult Development. New York: Praeger.
Kaye, K. (1991). Penetrating the cycle of sustained conflict. Family Business Review, 4(1), 21-44.
Kaye, K. (1992). The kid brother. Family Business Review, 5(3), 237-256.
Kaye, K. (1996). When the family business is a sickness. Family Business Review, 9(4), 347-368.
Le Van, Gerald (1998). Survival Guide for Business Families. New York: Routledge.
Tagiuri, R., & Davis, J. (1996). Bivalent attributes of the family firm. Family Business Review, 9(2), 199-208.
Kenneth Kaye, Ph.D., is author ofFamily Rules (St. Martin's, 1990) and Workplace Wars: Turning Personal Conflicts into Productive Teamwork (AMACOM, 1994). A faculty member of Northwestern University in Evanston, Illinois, he consults full-time to business-owning families throughout the United States.