Family Business

Answer the following questions using the answers from the solutions manual (file uploades). Single spaced. SUMMARY OF THE CASE IS ALSO PROVIDED IN THE SOLUTIONS MANUAL

1.What should Amit do first upon returning to Gupta Garments?

2.What should Amit be careful not to do?

3.What relationships should Amit develop further and whose support should he enlist?

4.What is Amit’s power base for bringing about the change that will allow Gupta Garments to benefit from the opportunities seen and what is likely to be his biggest source of influence going forward

5.How can Amit improve his overall chances of success in bringing about the needed changes?

6.What approaches or family business best practices should be implemented in the interest of continued success across generations at Gupta Garments?

Section 3
Cases Notes and Discussion Questions


Case 1: The Bingham Family and the Louisville Courier Journal Companies Case

Suggestions for Use

The Binghams and the Louisville Courier Journal case is an excellent example of the vulnerabilities that are unique to family-controlled corporations on the basis of blurred boundaries between family, management, and ownership.

This particular case can easily be used as a primer to the course because of its simple yet dramatic and profound perspective on the subject of family-owned firms. I often use it at the end of the semester, though, because of its compelling set of take-aways. In other words, I often use it as a synthesis for the course because of its thought-provoking and action-prompting quality.

I conduct this case discussion with an action orientation, that is, I ask students to put themselves in the shoes of the CEO, the CEO spouse and next generation members and discuss what they would have done differently that would have changed the outcomes of this case. While some students rightfully insist on going back in time and discussing Barry Sr.’s and Mary’s parental deficiencies, I always acknowledge these perspectives and their importance to the family business drama and then channel the discussion again to what they could have done in the last 5-7 years. I choose 5-7 years because of the anecdotal evidence that succession processes take about that long. Again, I emphasize the recent past and the present of the family business situation instead of the early years and upbringing of the Bingham children in this family. In doing so, I both provide greater focus on what can be done now and on what can be done to promote family business continuity in general.

Executive Brief

The Bingham family/Louisville Courier case is a simple yet powerful scenario to highlight the absolute necessity of family communication and its salutary effect on family unity. It also presents a compelling rationale for the three leadership imperatives of the three protagonists of the family business succession drama. In the Bingham case, Barry Sr., the CEO, fails to create the institutions to govern the relationship between the family and the firm and fails to transfer corporate control to the successor, Barry, Jr. Mary Bingham, the CEO spouse, fails to be a “trust catalyst” or “chief trust officer” for the family at a time when such a person is urgently needed. And Barry Jr., the potential successor CEO, fails to engage and re-commit Bingham family members to a compelling vision of growth and continuity. As a result, not only does the family break down, but shareholders become unwilling to remain patient capital or long-term investors of the Bingham enterprise.
Here are the teaching points that I emphasize during the case discussion:

Leadership behaviors that would have changed the outcomes of this case:

  • Visible leadership by the CEO that signals commitment to family business continuity (e.g., Samuel Johnson III of S.C. Johnson, a Family Company, stating: “I want this company to remain a family business”
  • Leadership by a chief trust officer that promotes trust and win-win dynamics (or as Barry Sr. exclaims, “unfortunately there wasn’t a healer in our family”. Indeed there are several examples of behavior from Mary that tear at the family fabric instead of playing an important role weaving the family fabric together. If the CEO spouse or another family member is not capable of performing this function, a high-influence friend of the family, the family’s priest, rabbi or minister or a family business consultant could still be assigned this important leadership task.)
  • A vision by the next generation successor that is compelling and engaging enough to all shareholders that they allow this successor to lead them into the future. This leadership capacity is earned, not inherited. Barry Jr. may have never been able to quite do this in the shadow of the death of his charming older brother, the one everybody in the family expected to be the next CEO. But there is not much evidence of his behaving as if to earn this leadership capacity with his siblings.
  • Transfer of power from current CEO to successor (vs. Barry Sr. being the deciding factor in who is on the board and still holding 95% of  voting stock as the dram unfolds.)
  • Much communication that promotes understanding among family members and shareholders
  • Drafting estate and continuity plans that build on the understanding created and the commitment to business continuity (e.g., again transferring the controlling stock to the right people at the appropriate time.)
  • Establishing a family council or meeting frequently as a family to discuss, address and resolve whenever possible family and shareholder issues impacting the business. In the absence of family meetings, owners relied too much on the family board to govern the family-business relationship and the family conflict contaminated and paralyzed the board.
  • Using the external help of advisors and family business consultants. The CEO confronts succession only once in his/her lifetime. One experience does not an expert make.
  • Implementing managerial and equity structures that facilitate corporate control and agility, rather than communicating “I love you all equally” with the transfer of stock. This near equality among next generation members (all board members for a while, similar holdings of non-voting stock, etc.) not only paralyzed the decision-making process of this family in business but gave de-facto power to the minority that preferred to break-up the firm and sell instead of continuing the firm for the next generation.

Discussion Questions:

  1. If you were Barry Bingham Sr., what would you have done differently over the past 5 to 7 years that could have changed the outcomes of this case?
  2. If you were Mary Bingham, what would you have done differently over the past 5 to 7 years that could have changed the outcomes of this case?
  3. If you were a next generation member of the Bingham family, what would you have done differently over the past 5 to 7 years that could have changed the outcomes of this case?

Case 2 Small Family Business: Power Play at the Inn

Entering a New “Time Zone”

Pat Frishkoff

Just zeroing in on Jake’s self-declara­tion as general manager is too simple. The situation indicates a greater need.

“Trigger events” are demarcations—happenings that signal change. Jake’s attempt to assume the role of general manager is one trigger event; a second is Amy’s pregnancy.

Robert must recognize that these events mark a new “time zone.” Planning must begin. Robert must first decide who should be involved in charting the inn’s future. Then his chosen team must consider: Where are we now? Where do we want to go? How do we get there?

We know three things: That Jake feels entitled to a higher position and may go to extremes to shift responsibility; that Elaine steers Jake and is, herself, interested in a role at the inn; and that Amy feels threatened by Jake’s actions and is questioning whether she can “have it all.”

The unknowns must be resolved: What are the dreams of each of the three children and perhaps even the dreams of the in-laws? What does Katherine want? And Robert should reveal his own desires and be honest about the financial health of the inn. A family meeting away from the inn, per­haps to start a tradition, is in order.

Today’s “trigger events” also de­mand immediate action. Robert has two choices in handling Jake: If Robert has decided, unequivocally, on Jake as suc­cessor, then he should acknowledge this fact to Jake and begin to develop a formal succession plan. If that is not the case, however, Robert must imme­diately inform Jake that he has stepped beyond his authority and must outline the consequences should Jake ever do so again. Amy deserves encouragement and is entitled to know how Robert han­dled Jake.

Robert Needs to Restructure

Kathy Berliner

Does Robert respond to Jake as a boss or as a father? Is Katherine’s role in decision making acknowledged directly, or does she advocate from behind the scenes? Here lies the challenge for the family business: How does the first generation establish a pattern for managing the conflicting demands of work and family? Recognizing where the family and the business are in their respective life cycles will help dictate a strategy.

We could guess that up until now, the Mays’ business has been an extension of home: All are welcome. But the second generation now must manage adult life-cycle tasks in a con­text that may still be governed by old family scripts. Jake’s behavior is evidence of the need for a new structure that can provide for the growth of the individuals and the business.

Robert’s first step is to put Jake’s self-declared promotion on hold. (This tells the family who’s in charge.) Then Robert and Katherine need to clarify certain issues. What do they expect from the business financially and emotionally? What kind of retirement do they envision? Thus begins the process of planning for succession.

Next comes a frank discussion with each child regarding goals and abilities, so career pathways can be more delin­eated. In this respect, a family business can be uniquely responsive to the needs of working mothers. At the same time, the business’s financial viability must be evaluated in light of the parents’ desire to accommodate the career and financial needs of their children.

Once these steps have been taken, the business is ready to adopt structur­al changes, such as job descriptions, formal training, performance evalua­tion, and separation of areas of respon­sibility. These reduce the likelihood of power plays.

Case 3: The Ferré Media Group

Suggestions for Use

This case is a rich display of family culture, family influence in regional economics and politics, sophisticated management practices, and a continuing entrepreneurial culture across generations of owners.  This case also highlights challenges to the effective governance of the family-business relationship and the unique role of in-laws. As in the Vega Food Company case, discussion will benefit from a certain level of sophistication in the complexity of family businesses. But it is a great example of a centennial company with many take-aways regarding leadership and managerial, family and governance best practices. It is for that reason that it is positioned early in the book, as an antidote to the rather widespread stereotyping of family businesses and their problems.

The aim of this case is to promote discussion of best management, governance, and family practices in the service of business continuity and intergenerational entrepreneurial activity. The Ferré Media Group case also aims to promote learning about practices that can go into building shareholder loyalty and keeping the family–business relationship healthy.

Executive Brief

This is a very successful and enterprising fourth generation family business. El Nuevo Día and Primera Hora newspapers enjoy a commanding share of the news market and receive approximately 70% of all advertising dollars spent in the local market.

Five next-generation members of the Ferré Rangel family are successfully leading the corporation, running business units, or in leadership positions on the editorial side of the business. The company consists of newspaper and web publishing, digital printing, commercial real estate development, a recycling company, and an investment/venture capital company. (Until 2002, the Ferré family also controlled Puerto Rican Cement.)

The origin of the family business is traced back three generations, but a separation of companies and assets among siblings of the second generation and third generation, to which Antonio Luis Ferré, Chairman, belongs, gives the Ferré Media Group Case a continuous entrepreneurship flavor. A. L. Ferré bought a small regional newspaper from his father for $400,000 in 1968, while presiding over the family-controlled cement company, and turned it into one of the top 45 dailies, by circulation, in the United States. His spouse, Luisa Rangel, held a variety of positions in the newspaper over the years, and was more recently actively involved in the family foundation and the company’s board of directors. She played a very active role in family communications, successor development, and the transfer of power across generations. Family members and key nonfamily employees considered her the “chief trust officer” of the family.

In 1993, the Ferré Rangel family began to meet regularly as a family to discuss family and business issues. In these meetings, they developed a family mission statement and a family constitution, a document that would guide succession-planning discussions for several years. These meetings were the forum for discussions of the state of the business, business strategy, investments, the succession process, conflicts between the siblings or between family and nonfamily managers, family relationships, estate planning, and stress management. Education, communication, policy-making, and problem-solving were the primary activities regardless of the issue or topic at hand. A. L. Ferré had set a target date for succession to take place by 2004. These meetings began to build readiness within the owner-manager family for the transition. (See Exhibit 1 below for a summary of phases and key activities during that ten-year period.)

In 1995, the first family business retreat was held. This forum, for the first time, included the in-laws.

Exhibit 1.

Ten-Year Succession and Continuity Process at the Ferré Media Group







Between 1997 and 2002, every member of the next generation grew into a position of significant responsibility. The company was restructured. The new organization gave more responsibility and autonomy to business unit presidents, created separate boards for several of these businesses, and included a holding company, whose president was the eldest Ferré Rangel daughter, María Luisa. This reorganization provided career opportunities for family and nonfamily key managers alike. A corporate strategic planning effort was spearheaded by the holding company; it promoted the development of new strategies at a business unit level. Next-generation members were simultaneously running operations, developing their leadership capabilities, and nurturing the development of their own generation’s vision for the company.

A retaliatory move by the government, frustrated by repeated coverage in the newspapers of corruption, waste, and poor management in local government, led to reductions in ad revenues and the blocking of environmental permits required in the cement operations of the company. The Ferré Media Group filed a first amendment rights case in federal court in Washington, D.C., and for more than two years focused much energy in proclaiming its journalistic independence and winning the case. The company emerged triumphant when the case was settled in late 2000. The next generation had witnessed the financial and personal sacrifice brought about by the suit. Adversity tested the family’s resolve regarding business continuity, but family members renewed their commitment to the enterprise and its mission.

Finally in late 2002, and as a result of this renewed commitment to running the enterprise by next-generation family members, corporate statutes, buy–sell agreements, and estate plans were developed and funded. Separate classes of stock were created to differentiate between generations and between owner-managers and other heirs (with no involvement in the management of the enterprise). These legal documents and ownership structures all promoted corporate control by owner-managers and aimed at providing speed and agility. Partnership agreements between the siblings and participation policies for their heirs were also developed with an eye to avoiding encumbered decision-making or paralysis in the next generation.

Discussion Questions

  1. What leadership, management, and governance best practices have the firm and the owning family already implemented? How do they seem to be working?

The Chairman-CEO, A. L. Ferré, created the governance bodies found to contribute to the effective management of the relationship between owning families and their enterprises: a board of directors with independent outsiders (although family members remained a majority on the board), a family council, and family retreats that included the in-laws. Only after these governance features were in place did he begin to transfer power to the next generation. The Chairman also set a target date for succession and allowed ten years for education, planning, and execution of the succession and continuity process.

The CEO spouse, Luisa, held a variety of positions in the firm but acted primarily as the chief trust officer of the owning family. She promoted open communications, conflict-resolution among the siblings, developmental conversations across generations, and was active in both family council meetings and family retreats.

The next generation developed into leadership positions through education and positions of responsibility within the various business units. They also developed their own vision for the company in their generation and became active in the new venture creation and strategic planning process.

The holding company sponsored a renewed strategic planning process to promote appropriate growth in the various business units.

Top-notch nonfamily managers complemented the skills of the owner-managers in responsible staff and operating positions in the management team and witnessed promotion and career opportunities as a result of the strategic planning effort and the restructuring of the organization. The new organization pushed more responsibility and autonomy to the business unit level.

A family council was formed ten years before the transfer of power was scheduled to take place and in conjunction with the family retreats became the primary forum for communication, education, and conflict resolution.

The board of directors welcomed independent outsiders to its membership. Several additional boards, also with independent outsiders, were created at the business unit level. These boards helped carry out financial and strategic reviews of the units; held next-generation owner-managers and key nonfamily managers accountable; and provided greater objectivity on the successor development, succession, and continuity process.

Finally in late 2002, and as a result of the renewed commitment to running the enterprise by next-generation family members, corporate statutes, buy–sell agreements, and estate plans were finalized and funded. A, B, and C class stock were created to differentiate between generations and between owner-managers and other heirs. (Heirs with no involvement in the management of the enterprise received a class of stock that had no voting rights.) These legal documents and new ownership structures all promoted corporate control by owner-managers and aimed at providing speed and agility in the next generation. Partnership agreements between the siblings and participation policies for their heirs were also developed with an eye to avoiding encumbered decision-making or paralysis in this next generation.

  1. What does the CEO need to do next to ensure continuation of the legacy of the enterprise and its history of innovation?
  2. L. Ferré is the architect of this enterprise and co-architect of this family. His legacy is already embedded in the family culture and the company culture. It is also now captured in the more decentralized organization and decision-making structure and in the buy–sell and shareholder agreements that the next generation helped shape. What is next for A. L. Ferré? He could continue to contribute to continuity by remaining active on the board of directors, remaining active as a coach-senior advisor to the next-generation members running the holding company and the various business units, focusing his efforts outside the corporation—as an ambassador of goodwill and a scout for strategic opportunities, making plenty of room for the visions of five next-generation members continuously engaged in strategic thinking on behalf of the corporation, and transferring all power and responsibility.
  3. How can corporate governance and control contribute to the continuity of this family-owned business?

Precisely what he has recently done.

  • Through new corporate statutes, shareholder agreements and buy–sell agreements, he has continued to ensure agile control by owner-managers running the company. Other shareholders can achieve liquidity and pursue other dreams, if so inclined.
  • Through family council meetings and family retreats that include the in-laws, he has continued to promote ample communication, trust, and positive-sum dynamics in the extended family-business relationship. (These promote shareholder loyalty and continue to provide the companies with patient capital for continued entrepreneurial activity.) An initiative of A. L. Ferré in early 2003 charged next-generation members and their spouses with developing a policy for the participation and development of leadership skills among their children, from 1 to 11 years old.
  • And finally through the newly created business unit and holding company boards of directors with independent outsiders, he has designed a governance system that ensures that professional family and nonfamily management will be held accountable, and that both customer and shareholder interests will be represented in setting company strategy.
  • While not in the cards right now, the business unit structure and the variety of new ventures sponsored over the past decade also bode well for any reorganization of businesses or business assets that next-generation members may choose to do in the future in A. L. Ferré´s absence. If a separation by some member of the next generation were sought, both the buy–sell agreement and the corporate structure would support a change to easily take place without harming family relationships and family unity, a primary objective for A. L. Ferré.

Case 4 Small Family Business: “She’ll Always Be My Little Sister”

Unfreeze the Family

Joseph H. Astrachan

Marty and Bobby see Dotty in her fam­ily role, as daughter and sister, rather than in her potential business role. They also seem to view her in a traditionally gender-biased manner—they think that she and all women are generally frail and that they lack competence and assertiveness. They also may be unwilling to share control of the company.

On the other hand, by saying that “as a family member, I should be allowed to join,” Dotty may be communicating that entering the business is a birthright rather than something she must earn with valuable skills, expertise, and effort.

Inaccurate perceptions and inappropriate communications are major impediments to working through the succession issues that this family business faces. Marty, Bobby, and Dotty must unfreeze their current views to acknowledge one another’s qualities properly. They need to be able to envision one another as being capable of more than their roles in the family. They can begin expanding their views by explicitly discussing their roles, traits, strengths, and weaknesses in the family and in other settings. The positive as well as negative impact of Dotty’s gender on her effectiveness in the business should be open for discussion.

This process often requires the help of a “facilitator”—a trained professional or trusted friend who can keep discussion focused on important issues, keep them from becom­ing arguments, and ensure that every­one is heard.

Once views begin to thaw, it will be easier to work on other crucial succes­sion issues. These should include Marty’s, Bobby’s, and Dotty’s visions of the future of the business, ways that they can fit themselves into these vi­sions, changes they may need to make in order to turn their aspirations into reality, and the plans for action they will use to accomplish their goals.

Broaden the Lens

Mary Whiteside

Each person’s concerns can best be ad­dressed if the family as a whole—includ­ing the estranged son—will take time for a family council meeting to assess suc­cession planning, current and future ownership structure, goals for Schmidt Works, and everyone’s hopes for family relationships.

The council can address such questions as: Is there a commitment to use Schmidt Works as a leadership training ground for all children interested? What type of leadership does Schmidt Works need, and how can the children’s leader­ship abilities be evaluated?

It is possible that unresolved issues surrounding the fall­ing out between the father and the oldest child have led to less flexibility and more protectiveness now for both Robert and Dorothy. Robert may have heard the message, “Don’t rock the boat,” even if he also realizes that a fast-growing international business requires organizational innovation.

Dorothy may have to differentiate among her needs for recognition and approval within the family, her career aims, and her loyalty to Schmidt Works. It will help if she asks herself if the business is the only place she can interact with her father, learn from him, and prove herself. How does her career dream fit with opportunities at Schmidt Works? Dis­cussions with other professional wom­en can help Dorothy gain support and confirmation, hear ideas from others in similar situations, and enlarge her op­portunities.

If Dorothy is to join the business, it is important that her training and eval­uation be under the supervision of an experienced and trusted nonfamily manager and that she have her own domain in which to work, separate from Robert’s area of responsibility. Robert’s role should be one of collabo­rator in working toward joint family goals, not protector or competitor.

Case 5: The Vega Food Company

Suggestions for Use

This is a case rich in family culture, family dynamics, and the unique challenges to the effective governance of the family–business relationship. Its discussion will benefit from a certain level of sophistication in the complexity of family businesses. It is therefore recommended for the later sessions of the class, after the material in Chapters 1 through 7 has been covered. But I have also used it as an “awareness accelerator” into the complexities of family business, early in my course.

The Vega Food Company case’s aim is to promote discussion of all the things that conspire against shareholder loyalty. So many things attempt against it: growing families, differing financial needs, the influence of spouses, the immediate gratification–shareholder value mantra of Wall Street today, the propensity for zero-sum dynamics in the absence of business growth, differences in perspective across generations or branches or employment status in the firm. Vega Food Company also aims to promote learning about family, management, and ownership practices that can go into building shareholder loyalty and keeping the family–business relationship healthy.

Executive Brief

The Vega Food Company was a Spanish meat-processing business that produced hams, sausages, and other delicacies for domestic and export markets. The $100 million company, owned and managed by the Valle family, had a Randall reputation for quality products in the marketplace. Francisco Jr., 45, had worked with his father Francisco Valle since 1986 and became president in March 2004, when his 72-year-old father was killed in an automobile accident.

Francisco Valle, Jr., held the first family council meeting in the family’s history in February 2007. While he liked the concept of a family council as a forum for family issues, he was most concerned that the problems he was having with his youngest sister, Mari, and possibly his other sisters, needed to be addressed.

The ownership structure of Vega Foods included two classes of stock, responding to Francisco’s concern with the possible loss of control of the enterprise in his absence. Francisco Jr. and Isabel, Francisco Valle Sr.’s surviving spouse, each held 50% of the voting shares and therefore controlled the corporation. Nonvoting dividend-paying shares were held by each of Francisco’s five sisters (15% each), Isabel (5%), and Francisco (20%).

Isabel was also a very positive influence in the family’s culture. Her daughters described Isabel as the glue that kept the family together. Francisco considered her a wise advisor and a positive influence with his sisters.

Except for brief stints, none of the Valle daughters had worked in the business prior to their father’s death. But in 2004, Teresa, encouraged by Francisco to return from Latin America to assist in running the company, joined the top management team.

Mari, the youngest, was concerned about her future and the financial security of her own young family in the absence of her father, whom she trusted completely. As for Francisco, well, she was not so sure. Neither were her sisters, some of whom no longer lived in Spain, knew little about the business, but considered Francisco an ambitious man with extravagant tastes.

Francisco succeeded his father also in a Senate seat he had run for and been elected to before his death. As a result, Francisco was spending three to four days a week on political/governmental issues. This left little time for running and overseeing Vega Foods.

Relations between family members were warm. Siblings did admit to being deficient in their communication abilities. They all tended to be rather closed and private, led very different lives in sometimes different countries, and as adults had had few shared experiences. The fact that Francisco was the only one who worked in the company for many years and that several of his sisters were now divorced seemed to create a large gulf around the economic value of the business to individual members of the next generation. The perception of opportunity and the reality of “what they took home” as a result of the business differed greatly. Dividend distributions had been small in the last few years. And during Francisco Sr.’s tenure as founder/CEO, distributions were more a function of need and family generosity than a result of an established dividend or earnings distribution policy. Mari, the youngest daughter, who grew up with the most evidence of wealth around her, seemed particularly favored in those days.

The first family council meeting followed a daylong shareholder meeting where Francisco and the company’s accountant presented and explained financial information and the state of the business. While sales continued to increase, profits had plummeted in the last couple of years and dividend distributions had been cut. The financial information was not particularly well presented or understood. The information did not necessarily respond to the questions that individual shareholders had, and only two of the six siblings had any business experience. Shareholders were not pleased. An external family business advisor facilitated the family council meeting. It started with a call for greater transparency of the ownership structure, the estate plan, and the financial fortunes of the company going forward. The following family council meeting was held in September 2007, and the bulk of the meeting focused on reviewing progress in the action plan drafted in the previous meeting. Little progress had been made on the business valuation, ownership structure, and liquidity concerns of shareholders.

The next family council meeting was scheduled for May 2008. A day before the meeting, Mari fell ill and checked herself into a hospital. She sent her two attorneys to represent her in the family council meeting. The meeting was cancelled, after a brief conversation with the attorneys. Francisco was hurt and angry. Over the next several months, negotiations were carried on with Mari’s attorneys and a final buy-out of Mari’s shares by Francisco was executed.

After an 18-month hiatus, family council meetings began again. By this time, there was much more financial transparency. Francisco had not run for another Senate term and was dedicated to the company full-time. He had replaced several members of the top management team he had inherited from his father with top-notch professionals and had embarked on a growth strategy for the business.  Revenues and net profits improved, dividends increased significantly, and shareholder loyalty seemed re-established.

Discussion Questions

  1. What are the key facts of this case? List the factors that, in your opinion, led Mari to sell her shares.
  • Francisco did not immediately gain the respect of shareholders, his siblings, upon the death of their father and founder of Vega Foods.
  • The fact that he was the only male offspring, not the eldest child, and yet was the pre-ordained CEO successor meant that gender issues were at the heart of this succession situation.
  • Francisco, by succeeding his father in his Senate seat, did not provide the leadership that the significant transition in Vega Foods ownership, management, and family dynamics required.
  • Isabel, Francisco Valle’s surviving spouse, was the one steady source of family unity and hope for business continuity.
  • Her sisters shared Mari’s shareholder distrust. Little financial education, little corporate transparency, and a perception that Francisco’s extravagant lifestyle was funded by a corporation that was their shared inheritance led to powerful zero-sum dynamics, with Francisco the winner, the sisters the losers.
  • The fact that Mari was the youngest sister and that her husband’s family had legal and banking connections made her a perfect candidate to lead the shareholder revolt. There is evidence in the family business literature that younger siblings often exhibit more rebellious behavior. “The company you keep” or your networks of associates also make certain actions easier to take; a network of legal and banking professionals was more likely to influence Mari in the direction of legal and financial solutions to her plight.
  1. Would you have called a family council meeting when Francisco Jr. did? Why, or why not?

It depends. The family-business consultant who acted as their family council facilitator is certain that while beginning the process took a lot longer than originally anticipated, because of Francisco’s political career, there was enough goodwill and maternal leadership that holding a family council meeting at the time was an entirely appropriate and timely intervention to rebuild shareholder loyalty. Absence of meaningful follow-up and significant improvement between the first and second family council meetings, on the other hand, may have convinced Mari that progress would be slow. On the other hand, to the extent that shareholder liquidity was Mari and her husband’s goal, the progress that just holding family council meetings represented may have posed a threat to their own agenda, a forced liquidation of the company. It could be argued that what happened with Mari would have happened anyway. But the ability to keep the other shareholders loyal was a function of an up and running family council and the progress it and Francisco made in reassuring shareholders that their inheritance was safe.

A case could be also made that it was already too late and that rather than creating a family council, what Francisco had to do, first and foremost, was quit the Senate seat, provide leadership in the company, buy out any dissident shareholders, replace management team members that were not performing, improve financial results, and increase the dividend to remaining shareholders.

  1. To what do you attribute the improvement in Valle family–business relationships over the last couple of years?

The healthy growth of the business created the sense of business opportunity for all shareholders. Increased dividends made the case for win-win or positive-sum dynamics and strengthened shareholder loyalty. The more active involvement of shareholders in a variety of projects, committees, family events, and family philanthropy helped strengthen the ties. Improved communications through the disciplined holding of informative shareholder meetings and family council meetings also aided in this development.

  1. What major issues should Francisco and the rest of the Valle family continue to address in order to ensure the survival of the business? Select one to three issues, and support your selection with the facts of the case.
  • Continue to pay close attention to the competitive strategy of the business and keep it growing, so that dividends are assured, reinvestment requirements met, and opportunities exist for third-generation members of the family.
  • Continue to invest in family communication and family unity.
  • Retain and motivate all high-performing nonfamily management. They complement the skills of family members who are active in the management of the company and assure others that the firm is being run professionally and with the intent of having it continue.
  1. What actions should Francisco take next? What should he do to promote shareholder loyalty and the effective governance of the family–business relationship in the future?
  • Provide a return to shareholders for their investment in the business. Maintain and if possible increase, but certainly protect, dividends.
  • Regularly hold shareholder meetings and family council meetings to educate, communicate, and plan on behalf of all Valle family members.
  • Launch a board of directors or board of advisors with independent outsiders to review company performance and hold management, including Francisco, accountable. Select one or two at-large representatives of the family to the board. Hold quarterly board meetings to review strategy and financial results and inspire confidence in the professional and fair management of the business and its assets.

Case 6: Gupta Garments and Amit’s First 100 Days

Suggestions for Use

This case is ideal for use with MBA students taking entrepreneurship and family business courses. While recent graduates may enjoy a knowledge advantage regarding best practices in management and governance of a family enterprise over the incumbent generation, they face predictable re-entry and resistance to change dynamics upon returning to their respective family businesses. How they manage themselves, their leadership, and their relationships to other key stakeholders in the context of that useful knowledge will determine their success in helping their firms adapt and innovate in the service of sustainability and continuity across generations of owner-managers.

Executive Brief:

Gupta Garments and Amit’s First 100 Days captures the predictable tension between the generations of a family in business. The incumbent generation knows the secrets to the business’ current success; the next generation joins the business with its own vision of what the future holds and the opportunities that changes in the marketplace, technology, supply chains and degree of globalization represent. Both legacy and opportunity (or tradition and innovation) are fundamental elements of the successful strategy for continuity of the family-owned business.

Amit is returning to his family business in India after successfully completing the requirements of a master’s in business administration in the United States. How can he most productively re-join the family business and make the knowledge he has acquired abroad available and useful to its owner-managers and the enterprise they lead?

Suggested Discussion Questions

The discussion guide contains two sets of questions. The first set is general in nature and is aimed at helping students focus on the case issues and prepare for class discussion. Some questions may be assigned as short essays in advance of class and used to open discussion. The second set of questions is designed to focus the class discussion on key learning outcomes.

  1. Pre-class Preparation Questions (assign as short essays)
  • Amit plans to return to work in the family business immediately after graduating from his MBA program. What alternatives, if any, would you suggest he consider and why?
  • What cultural forces may be at play in his decision and how might he approach them, especially with regard to family and organizational issues?
  • Identify the key stakeholders in Amit’s world as he returns to work at Gupta Garments and consider how Amit should deal with them upon his return. What relationships should he develop further and whose support should he enlist?
  • Amit needs a plan upon re-entry to India and Gupta Garments. What should he do first and what should he be careful not to do? What should be the core elements of Amit’s action plan short- and long-term in order to improve his overall chances of success in bringing about the changes he wants to implement?
  1. Class Organization

20 minutes – introduction to the case, the students discuss their case prep essays

30 minutes – the class analyzes and lays out the facts of the case

30 minutes – the instructor guides discussion about the key core family business concepts

10 minutes – the class devises an action plan for Amit that the instructor reproduces on a flip chart or whiteboard

  1. What should Amit do first upon returning to Gupta Garments?

It is evident from the case that Gupta Garments is a successfully run family business with a long tradition of quality. It has been managed and run by its founders, Anil and Ajay Namally with a lot of passion and drive. After Ajay, Amit’s father, passed away, Anil took the onus upon himself, providing steadfast leadership and spearheading business growth. But there are some questions about whether the family-owned company is being run professionally and whether the governance of the family-business relationship is effective, based on the facts of the case.

More recently, the Indian undergarments market has experienced significant growth. Gupta Garments could benefit handsomely from this market opportunity. Since Amit is in charge of marketing but has been absent from the company for the last two years, it may be smart for him to determine first-hand (management by traveling around to the customer base) the current marketplace situation and then team up with Anil on a review and development of a timely marketing strategy. This will add value to the firm, get Amit’s feet firmly planted on current customer/marketplace demands and help re-develop a trusting top-team member relationship directly with Anil, the Chairman and chief marketing and sales officer.

  1. What should Amit be careful not to do?

As the first MBA in his family business, Amit returns with advanced knowledge and broad global vision, which can help him contribute to the company. But this knowledge and education can also give rise to conflicts with the other owners and key managers who do not see or understand the situation in the same way. Therefore, Amit would be well served by listening a lot, moving slowly internally, having his education remain in a low-profile mode and avoid too many disagreements and/or arguments with Anil, Gupta and Sumit for the first 100 days. Amit also has to be realistic about his own expectations. Even though he has an MBA and is going back to a very strategically important function at Gupta Garments, global marketing, Karan (Anil’s son) seems to be the natural heir. In the absence of a formal succession plan, primogeniture and family hierarchy may overrule meritocracy in this case.

  1. What relationships should Amit develop further and whose support should he enlist?

Anil is expected to be active for another five years in the family business and Amit is now working directly with him on marketing. Enlisting Anil’s continued support is the most important relationship element for Amit to work on, especially until he can show his talent through successful implementation of his strategies and their accompanying financial results.

As the family’s culture appears strong and quite closed (no nonfamily manager in a top management position and a policy of “no cousins of fourth generation family member as employees”) Amit would be well served to work on re-developing a good working relationship with Karan, who will most likely be Anil’s successor five years from now. Although Amit might eventually hold approximately 30% of the voting shares in the future (his mother, Vidya, is a 30% owner), in the absence of a succession plan, Karan seems to be the most likely successor by both current title and ownership stake.

Amit also needs to preserve a strong relationship with his mother, Vidya, as she is currently 30% owner of the business and will probably be his major supporter when he suggests changes in the business.

  1. What is Amit’s power base for bringing about the change that will allow Gupta Garments to benefit from the opportunities seen and what is likely to be his biggest source of influence going forward?

First, Amit should gain support from Anil to bring about any needed changes. Having a company leader champion the changes can largely reduce the internal barriers and doubts. And besides being Chairman and family elder, Anil is still in charge of marketing and sales. Amit should persuade Anil and reach consensus with him before making any changes. Second, it’s very important for Amit to develop a solid relationship with his cousins, Karan and Sumit because they oversee other daily operations and will constitute the rest of the successor management team. Amit needs help from his cousins in areas, like production, finance…to support any changes in marketing strategies. Finally, although nonfamily managers don’t seem to have much authority, Amit still needs to engage them and make them active partners in any changes. As a newly-minted MBA, Amit should use his new knowledge and skills to lucidly explain his strategies to the entire organization, so that managers understand the reasons for and the benefits of any proposed changes.

  1. How can Amit improve his overall chances of success in bringing about the needed changes?

Although Amit planned to help Gupta become one of the top five national players, he might be better off establishing a more conservative target. An improvement in the rankings, even a small one, when the next industry rankings are published, can demonstrate to others Amit’s contribution to the business. However, if an aggressive goal, like being in the top five is not reached, Amit’s capability may unfairly be questioned, and his young reputation could suffer as a result.

  1. What approaches or family business best practices should be implemented in the interest of continued success across generations at Gupta Garments?

First, in order to maintain and improve relationships and promote clear communication of business ideas among family members, Amit could suggest setting up a formal family council and organizing routine family meetings. Notice that the family already shares a homestead and kitchen and therefore works on its relationships and family unity daily. The family council would just add the capacity to focus on discussing family-business matters among family members. Second, although setting up a board with independent advisors is likely not a priority for Anil, Amit might be able to organize some specific advisory teams that include nonfamily business members to assist with growth strategies or succession, for example.

Third, begin to develop a succession plan. A big reason for Gupta’s success is the fact that, even as a fourth generation family business, it is being run as an entrepreneurial firm that exploits the advantage of speed and agility. It is essential that the company retain this characteristic as it is passed on to the next generation. Although Anil is expected to remain active in the business for another 5 years, there is no clear succession plan. Unlike ownership, the authority to lead is earned rather than inherited. Karan, being the eldest son in the family seems to be the natural heir, but Amit must implore his uncle to ensure that ownership-transfer policies are not purely based on a desire to love and treat all heirs based on their place in the family hierarchy, to the detriment of the company’s continued agility and competitiveness.

`           Fourth, only Amit’s own performance and contribution to the business can ultimately consolidate his position in the company. Therefore, Amit should utilize his marketing research and analysis skills to address the key growth opportunities faced by Gupta in the current market and provide successful strategies and solutions early in the process. Amit has sensed great potential for current products in overseas markets. Being the first person to hold an MBA in the family business, this is Amit’s golden opportunity to test his newly acquired MBA skills. He must spearhead the company’s efforts to grow its overseas market share. This initiative would also provide Amit the right opportunity to prove his mettle. While growing the company’s export market, he must also not lose sight of the huge untapped domestic market. Since there is a growing preference for well-known and premium brands domestically, he must make every attempt to improve the brand image and positioning of Gupta Garments in the Indian market. Also given the opportunity facing Indian manufacturers of undergarments to partner with global luxury brands, Amit must aim to extend the company’s product portfolio to cover luxury, super premium and premium segment products in India.

Concluding comments:

Amit’s superior international business understanding and experience as well as his strong global network of personal relationships are a tremendous asset in Gupta Garment’s future domestic and global expansion. Perhaps as a result of Amit’s newly acquired family business knowledge while in business school, some family business best practices could help Gupta Garments capitalize on its existing strengths while being receptive to the changes proposed by next generation members like Amit.

Case 7: Small Family Business: The Ambivalent CEO of the Construction Company

Try to Understand Family Influences

Thomas M. Hubler

Family influences often cloud an other­wise straightforward process of leader­ship selection and development. In order to address the management-selection issues in his business. Dick needs to understand the impact of his family on the process of succession. At the same time, he must begin to “professionalize” the company, both for the sake of the children and for the continu­ity of the business. Dick should begin to explore, perhaps with the help of a therapist, the history of his own relationship with his father. By understanding its impact on him and gaining the ability to honor his own love for his father, Dick will find that he is more able to deal objectively and realistically with Alan and Harry and the demands they are making on him.

The Symanskis also need to understand the negative effect that the first wife’s alcoholism still has on the family. Through reading about the impact of alcohol on families, family thera­py, and participation in Alanon, a national organization for relatives of alcoholics, Dick and his sons will begin to see how alcoholism has impeded their closeness. Such understanding should increase their ability to express feelings and communi­cate effectively and should help dispel Dick’s fears of a family split.

Finally, the family should adopt rules governing members’ participation in the business. A program of career development should be instituted for Alan, Harry, and the younger children so that they are prepared to offer their best to the business and so that it becomes ap­parent when the strongest candidate for the next generation of leadership emerges. Such an approach will help al­leviate the emotions surrounding suc­cession and turn the final choice into a solid business decision.

It’s Time to Take a Giant Step

Paul Frishkoff

Unlike some legendary command-control tycoons in the construction industry, Dick is an “analyzer.” He is thorough and cautious, craving data before reaching a decision. (Wit­ness the conservative balance sheet and the “sharp pencil” bidding tactics that have sustained his company.)

Analyzers hate being pushed to make decisions—and his sons are pushing. It is doubtful, by the way, that Dick’s interactions with his own father or the difficulties of his first marriage are the causes of his “passive and indecisive” style; rather, those rifts exacerbated a tendency that Dick already had.

Dick is in a paradoxical situation. He wants to please every­body, so he ends up pleasing nobody, including himself, in the succession decision.

Further, the Symanskis are a family suffering from, and probably still unable to face, the issues surrounding the moth­er’s alcoholism. Dick and his sons don’t trust each other at a profound level, certainly don’t speak (about what really matters to them), and don’t feel—or at least don’t communicate about feelings. A beginning toward a solution would be a family retreat, facilitated by a con­sultant or therapist with considerable expertise in dysfunctional families and in alcoholism particularly.

The mere opportunity to verbalize, in a neutral, safe setting, what each person wants (family peace, recognition, free­dom to compete, and—underneath all this—love) will be a giant step toward resolving the succession issue and re-creating the family.

Case 8: Small Family Business: Adams Funeral Home


  1. Should Charlie be chosen as the next president of Adams Funeral Homes? Why or why not? Should this happen in the meeting schedule for the following Thursday?  Answer:  A group of 25 funeral home directors were posed this question and they responded that the evidence on Charlie is that he is ready to be a successful successor. Nevertheless, most of them thought that the problem in his selection is the process that has been followed so far. The difficulties in the relationship between Richard Adams and Rick, his brother are evident and playing out in Charlie’s succession process. No decision should be made in the meeting scheduled for Thursday. This appears more as an “end run” engineered by Rick to get his son appointed in a hurry. Instead Richard should insist on slowing the whole thing down and following due process with the formation of a succession committee as detailed below.
  2. What process should be used to arrive at a plan and a final decision? Answer: What should happen here next is that Richard and Rick agree to form a succession committee (perhaps a succession committee of the board of directors or of their advisory board, if they have one with a couple of independent advisors) and which could also include Dr. White. Richard and Rick would deliver to this committee a list of criteria and/or benchmarks to be met by the potential successor. Then Charlie’s performance and track record so far would be matched against the criteria by members of the succession committee who would make a recommendation to the full board of directors or advisory board.
  3. What actions or steps should be included in that plan? Answer: Once a recommendation is issued, ideally by the board and based on the succession committee’s work, this would be a plausible plan of action:
  4. If indeed the committee and the board agree with the panel of funeral home directors surveyed and approve of Charlie as successor, Charlie should be informed of the board’s recommendation by Richard, president, or in a meeting that includes both Richard and Rick.
  5. This would be followed by an announcement to all employees of Adams Funeral Home by Richard of the decision and the process followed. A series of meetings with key associations, community organizations, churches, other referral sources and key suppliers would be held next. These meetings should include Richard, incumbent president and Charlie, successor. In this way Richard would be passing the baton on key relationships in the supply chain to his new successor, while in full command of his power as current president. This would go a long way in transferring the authority needed to perform the responsibilities now given to Charlie as the next generation president.
  6. Should the committee instead recommend casting a wider net and looking outside the family for potential successors, then a more traditional search process should begin immediately. According to the panel of experts, fellow funeral home directors, this would not be a likely option.

Case 9: Fasteners for Retail: A Question of Succession (Part A)

Suggestions for Use

Fasteners for Retail (Part A) can generate detailed discussions of leadership of the various stakeholder groups in a family business as well as a variety of managerial and governance practices often employed to promote successful succession and continuity.

Paradoxically, given the effective use of many of the best practices for family business continuity, the owning family ultimately agrees to a buy-out by a financial buyer. This makes this case an effective tool for discussions about end goals, the family’s goals, and whether continuity under the same family’s ownership is always an appropriate goal. Fasteners for Retail, as a company, certainly continues very successfully and even ramps up its growth trend by becoming a preferred supplier to a number of large retailers such as Wal-Mart.

Executive Brief

Gerry Conway, the entrepreneur, had founded FFr in 1962. In December of 1999, he faced the toughest decision of his 37 years as a business owner. Should he continue to strive to identify a CEO successor in the family? At the age of 69, did it make sense to commit ever greater amounts of money to fund the company’s growth this late in his life and career?

There were no dominant players in FFr’s niche, so opportunities abounded. But Gerry’s son Paul, his heir apparent, had just announced that he did not want to become the next President and CEO but instead wanted to leave and become a teacher.

Gerry Conway was the classic entrepreneur, having learned about the retail business (FFr’s customer base) from his dad. Gerry acquired a taste for independence from him too. At 31 and with $600 in the bank, he started the company.

The company’s products are display and merchandising accessories—such as point-of-purchase displays in supermarkets, movie release posters and sign holders at Blockbuster, and credit card literature holders at Citibank. The company designed them in response to customer needs and marketed them, outsourcing the manufacturing to firms in Asia. Clones were not much of a concern because new product development kept cranking out new designs and the designs were all proprietary. (Patented products accounted for 20% of all products offered and products developed in the last five years accounted for about 30% of total sales.)The company enjoyed a healthy growth rate (in 1980 the company had five employees and sales of $3 million; by 1999, sales had grown to over $60 million) and profit margins were spectacular. There was no debt on the books.

FFr’s culture was entrepreneurial, opportunistic, and innovative. It included a sense of urgency and a customer-first orientation.

In the early 1990s, Gerry and his wife Marty joined Case Western Reserve’s Partnership for Family Business. Through the program, Gerry began to see the need for several new managerial and governance practices. He established an Advisory Board with independent outsiders, launched a strategic planning process in the top management team, and held the first family council meeting. After having turned over several nonfamily presidents to complement his entrepreneurial orientation, he settled on Don Kimmel and got him to lead the strategic planning work. This resulted in the realization of all the opportunities for growth that existed. The company made its first significant sale to Wal-Mart in 1998, but only a few years later, 20% of sales came from program sales to major retailers.

Several of the Conway children were involved in the company over the years. Only Paul seemed genuinely interested in being the successor as of 1998. Family meetings in their family council promoted much education and communication, and the agenda of the meetings shifted over time to the business of the family from family business.

Estate planning and ownership transfer were addressed in these meetings and estate planning attorneys were brought in to educate family members on the topic. A GRAT, or grantor-retained annuity trust, was chosen and significant estate tax savings ultimately realized.

Paul joined the firm after a year working for another company and receiving both a promotion and an award. He started as a marketing assistant, became the international sales manager, served later as the company’s marketing manager, and eventually was asked to serve as assistant to the president, Don Kimmel.

It was in that position, and seeing the growth in the business that the strategic plan contemplated, that Paul began to have misgivings about running the company. His managerial style was different from Gerry’s, but more important, the company was no longer the small, family-oriented company he had joined.

The new strategic plan made a Randall case for a significant capital investment to grow the business into the opportunities that customers were presenting FFr with. But Gerry was not sure he wanted to fund that plan with his own financial resources nor take on debt at this stage in his life.

A board of advisors meeting and a family meeting were both scheduled. Gerry was committed to working through this dilemma with the assistance of others.

Discussion Questions

  1. What was Gerald Conway doing to lead these three key constituencies: (a) non-family employees, (b) family members working in the business, and (c) other family shareholders?

Nonfamily employees—Providing them with attractive compensation and benefits, involving them in setting the direction for the business, providing equity participation in the business (particularly just prior to the sale of the company to a financial buyer), charging them with the responsibility to coach and help next-generation members develop, delegating much top management responsibility (especially to Don Kimmel, the bridging president), educating them in the unique qualities and challenges of family-owned businesses, making them feel like extended family through much social contact, and involving them in the discussions regarding succession planning. Gerry Conway also initiated a board with independent outsiders communicating expectations of professionalism and merit-based opportunities instead of family favoritism. Gerry was decidedly the company cheerleader and primary creator of product and business opportunities (“the rainmaker”) through his creativity and intimate knowledge of the customer.

Family members working in the business—Providing them with career and business opportunities, challenging them to grow and improve the company, creating a vision for family business continuity that foresaw them as the future leaders, developing differentiated roles that gave each family member in the company much discretion and some degree of independence, requiring that they earn the authority to lead while supporting their increasing responsibility and leadership, involving them in the planning for succession, providing them with equity participation, initiating the family council (a forum that would facilitate a successor’s leadership of the family/shareholder group), and providing them with much support.

Family shareholders not active as employees of the firm—Through the creation of the family council, Gerry set in motion the education of family members in responsible ownership and stewardship. Through the family council, family members also further developed communication and problem-solving skills and were given the opportunity to effectively influence the CEO succession and business continuity process at Fasteners for Retail. The family’s interests were also represented in the board through Stuart, the at-large family representative.

  1. What managerial and governance best practices was Gerry Conway relying on to promote family business continuity? Please discuss each practice and how it was used.

All three leadership imperatives were present in this situation. Gerry Conway initiated the process of developing the next generation, created the board and family council to govern the family–business relationship, and began the transfer of power in both management and ownership (though retaining voting control through the end of the case). Trust was promoted in this case primarily via Marty, the CEO spouse and chief trust officer, but with the assistance of several members of the next generation who had facilitation skills and Gerry’s openness to the process. The next generation had an opportunity to create a vision for the enterprise in the next generation although ultimately their vision (of a smaller niche company) seemed to run against the grain of the evolving strategy for the firm and the opportunities it faced.

Estate planning and ownership transfer with business agility in mindThe GRATs and other estate-planning vehicles used allowed for estate tax savings that protected capital for growth and reinvestment while allowing for voting and nonvoting stock. The plan was to transfer the voting stock only to family members active in the management of the business.

Strategic thinking and planningAt the heart of the final series of family council and board meetings was the request for direction from company management as to family strategy or shareholder preferences. Company management had clearly come to the conclusion that business opportunities for growth were significant and worth pursuing as a result of the strategic planning process. Similarly, the family, through the family council and its deliberations, had developed a family strategy and a contingency plan should Paul decide not to want to be the next CEO successor.

Nonfamily managers in top management complement the Conway family’s skill setWhether in marketing, engineering, product development, finance, even the presidency, the Conways made very capable nonfamily management an influential part of company leadership. They greatly influenced the ultimate strategy to grow the company further and professionalized the running of the business.

Board of directors or board of advisors with independent outsidersGerry Conway launched this board with independent outsiders. The board held Gerry Conway accountable for progress in the strategic planning and succession planning process. It also created expectations of professional management of the firm. Board members with their wide network of contacts helped identify other advisors and business opportunities. They also made the final strategy and succession deliberations much more objective and thorough than an entrepreneur flying solo would have been able to do.

Family meetings, family councilGerry and Marty Conway launched the family council with a two-day family retreat in upstate New York. Education on business topics of family members not active in the business took place in this forum. Education on estate-planning issues also took place. Family communications skills were further developed. Common goals were set and trust enhanced. This forum evolved from focusing on the family business to the business of the family. It was a key forum in developing the family’s strategy and its desired relationship to the business in the next generation

  1. What do you predict will happen in this case? Explain your reasoning.

The family will decide to sell all but a minority of the shares to a financial buyer. This will provide the company the capital to grow, keep the company as an employer in this community, and perhaps do an IPO or a sale to a larger company or strategic buyer in five to seven years.

This outcome provides for continuity of the business, significant growth in fact, and many options for family members who have achieved liquidity of their estate.

Here is a question to further explore with students using Fasteners for Retail (Part B): Is this a favorable outcome? Why or why not?

Fasteners for Retail: A Question of Succession (Part B)

Suggestions for Use

This case follows Fasteners for Retail: A Question of Succession (Part A) and tells the student what happened after a series of board and family meetings where succession, family strategy, and company strategy were discussed. The aim of the case is primarily to help students explore the desirability of selling the family business in order to ensure its competitiveness and continuity. Does this represent a successful outcome or not? The case also helps explore the paradox of the FFr/Conway family situation: After several years of planning for succession and continuity within the family and implementing a variety of succession and continuity best practices, the juxtaposition of company strategy and family strategy leads to the decision to sell.

Executive Brief

The board and family council (minus the next-generation spouses) meet. The decision is made to pursue the transaction with a financial buyer. While this option might “leave some money on the table” relative to a sale to a strategic buyer, it ensures that the company will stay in Cleveland for at least a few more years, and perhaps forever as it grows and develops critical mass in this city.

Equity is distributed and additional purchases made available to key nonfamily employees to reward their contribution to FFr’s success.

Don Kimmel remains as president, Gerry Conway becomes Chairman Emeritus, and Eric Bacon, from Linsalata Partners, the financial buyer, becomes the new CEO of Fasteners for Retail. Family members pursue other interests and achieve liquidity of their estate. The family continues to hold its family meetings and has the Fairfax Foundation, the family foundation, continue to provide a reason to work together.

Discussion Questions

  1. What other options were there? Was there anything Gerry Conway should have done to change the outcome of this case?

Coaches and board members could have further aided Paul. He could have ultimately come to the conclusion that he could run the larger company using a different approach from the one his father, Gerry Conway, used to run the smaller FFr.

Stuart could have been Randallly urged to take over the business, but he had a successful career running his own nonprofit organization.

Gerry could have stonewalled the new strategic plan and chosen to remain a niche player, but at the risk of turning FFr into a lifestyle business, one with little growth and few opportunities in the future.

  1. Was the decision to sell to a financial partner a successful outcome for the business and the Conway family? Why? Why not?

The author’s experience with this case is that it polarizes students into a fundamental ideological or emotional preference. For some, the outcome of the FFr case represents success, growth, and moving on. For others, it represents a failure in much of what family business represents: continuity under family control and the opportunity to pass on not just assets, but a legacy using the company as the vehicle.

This is often a very provocative and rich discussion.

Case 10: The Cousins Tournament

Suggestions for Use

This is a longer but still introductory case in the book aimed at generating a discussion about a unique and central theme of family companies, CEO succession. The student is asked to assume the role of a family business consultant to the CEO, the Blanchard family, and Grandview Industries, step into the complex set of forces acting on the CEO, and recommend a course of action.

While the standard recommendations to generate criteria for the successor and then select against these criteria apply, the richness of the family–ownership–management data bring this case to life and can make a sensible and executable recommendation to the CEO truly a work of art.

This case can be used in conjunction with discussions of Chapters 2 and 4, concerning the CEO and next-generation leadership imperatives.

Executive Brief

“At the Blanchard family’s 1993 New Year’s Eve party, Al Blanchard talks for the first time about retiring as president of Grandview Industries. Al, 67, is standing on the back porch of his rambling Southern California home, sharing brandy and cigars with his younger brother, Morris, with whom he has worked for 27 years. ‘I only want to do this for one more year, Morris,’ he confides. ‘I’ve had enough.’ Then he asks: ‘Do you want to run the company, or should we turn it over to one of the kids?’”

Grandview is a $200 million company with 2,000 employees. George Blanchard, Al and Morris’s father, founded Grandview Industries in 1934. The original company made small motors for windshield wipers and other automobile components. Under Al’s leadership, the company has grown into a diversified manufacturer of a variety of electrical systems for vehicles and small aircraft, with five divisions in California as well as distribution outlets abroad.

Morris often expressed impatience and frustration with Al’s conservative leadership, privately. But he and Al had separate responsibilities, and conflicts were seldom evident.

In more recent years, the two brothers had developed a greater appreciation of each other’s contributions and roles; they had become closer. Morris is vice president of marketing. Al respects his brother’s opinions but remains the undisputed leader.

Their New Year’s Eve conversation stirred up a lot of old feelings. George Blanchard died at age 73. The founder left equal amounts of Grandview stock to the five children. By then, Al was already running the company. Al saw himself as the guardian of the family’s wealth and legacy. Al was determined to protect dividends and follow George Blanchard’s advice that this was the ultimate recipe for success. Still, the company reinvested and grew solidly. Al had brought four outsiders onto the board, which originally consisted of all five siblings and the company’s banker. In the early 1980s, he took the company public but kept family control by creating different classes of stock and a holding company. The strategy worked. The company continued to grow while providing a good income to family members. The five siblings retained equal voting control of the holding company, in keeping with the wishes of the parents.

In the spring of 1993, at an engagement party for Sarah’s daughter (Sarah is one of Al’s sisters), Al announced to the family his decision to retire. Al’s announcement raised concerns about the future. Arnold, the other brother, argued that Al should remain the CEO for another 8 or 10 years. Germaine, the other sister, joked about calling her lawyer and selling her stock before morning.

Al decided to create a succession committee to lay out a plan for selecting the next CEO. Peter Franklin, the owner of a large freight shipping company, and the first non-family member added to the Grandview board in 1980, agreed to serve. Peter knew Grandview was way behind in preparing the next generation for leadership. Peter figured that two family members stood out as contenders for the top job: Al’s oldest son, Joe, 42, was the oldest member of the third generation. An engineer by training, Joe worked in production for most of his career at Grandview. Morris’s oldest son, Bill, 41, worked in Europe and turned around one of Grandview’s subsidiaries. The other cousins in the company were either too young or had not yet demonstrated their ability for the top job. The cousin he admired most, Edward Chafee, 40, Sarah’s oldest son, wasn’t in the company. Using the stock he had received as a young man, Ed built a very successful electronic hardware business in Silicon Valley.

At the first meeting of the succession committee, the members agreed that no one individual stood out as the obvious choice. But Al did not want to continue as president after the end of the year. Therefore, Morris agreed to take over the CEO role for an interim period. But the committee was very troubled by this scenario and wanted Al to stay on the job. At the next meetings of the committee, the members could not agree on a plan or a list of candidates.

A short time later, Peter talked with Ed Chafee. Ed Chafee appeared to be willing to be considered for the job, if it was offered. He asked Peter to keep the conversation going.

Discussion Questions

  1. What are the central challenges facing Al Blanchard, Grandview Industries, and the Blanchard family.

Al Blanchard—Succession. The transfer of power in an orderly way (in a way that corporate control and business strategy favor the successful continuity of the business) and the promotion of continued family harmony.

Grandview Industries—Successful succession and continuity that preserves the company’s competitive fitness, retains key nonfamily managers, and continues to create shareholder value.

Blanchard family—Succession. Preserving family wealth and continued family unity during this multiyear transition process across generations.

  1. What does your answer to question 1 say about what is truly unique about family-owned businesses?

Succession is the greatest challenge to family businesses. The overlap of family, management, and ownership in family-owned and family-controlled companies, coupled with the product life and growth cycle of a company’s strategy, makes these companies very vulnerable during the transition across generations.

Developing processes and solutions that appropriately differentiate between management, ownership, and family issues in order to do well by all and ensure continuity of the business is very difficult leadership work.

  1. What would you recommend Al Blanchard do, in his leadership capacity, on behalf of Grandview Industries and its shareholders?
  • Postpone his retirement and assume the “transition czar” (see Chapter 2) role.
  • Initiate a series of family meetings (or a family council) to begin to educate the Blanchard family about the succession and generational transition challenges. Promote ample communication and the development of policies and plans that support the family’s goals.
  • Put all potential candidates in positions where they can demonstrate their capabilities and commitment to the business while developing themselves for general or upper management. (Jobs that, for example, have profit and loss responsibility for a whole operating company, product division, or region or location are ideal.)
  • If he has not already done so, work with the corporate attorney to develop buy–sell agreements, perform a company valuation, and begin the transfer of stock to the next generation in a form so that those who are actively involved in management will be able to lead in their generation.
  • Make sure that the board with its four outside directors, and not just the succession committee, is active in the succession process. The board is his best ally in the development of successor criteria and in proclaiming that the process will be fair, objective, and in the interest of Grandview Industries and all its shareholders.
  1. What should the process for choosing the next president be?

See the information in the previous answer. Also:

  • Expand the search, perhaps using a search firm, to include candidates from outside the family and the firm. This will create “benchmarks” that are market-based and that communicate the concept that merit is essential to the decision. It will also force the issue of becoming much clearer about successor criteria.
  • Ensure that the succession committee and the board continue to bring to the process a sense of objectivity and fairness, rather than a sense of favoritism and the successor choice being a pre-ordained fact.

Sample Paper on The Cousins Tournament

Assignment: As a family business consultant to Grandview Industries and the Blanchard Family, what would you recommend Al Blanchard do to promote a successful succession and family business continuity?

Grandview Industries and the Blanchard family are far from ready for succession. Neither has considered the subject of succession to this point.

The president, Al Blanchard, is tired of his long tenure and ready to retire. While his desires are understandable, springing this surprise on everybody at this time is quite irresponsible. He has no succession plan and no apparent strategic plan in place. How does he expect to have the business continue successfully without the needed planning and preparation?

Convincing Al Blanchard that he has a lot more work to do leading the transition across generations before he can retire is not going to be easy, but it has to be done. Delegating CEO leadership to his brother Morris seems out of the question. Their history is one of sibling rivalry, even the next generation appreciates that. Morris taking over on an interim basis would probably lead to his branch of the family wanting to even the score a little bit because of their sense that Morris has been under-appreciated in the family. This could result in win-lose dynamics or “tit for tat” behavior by the cousins and undermine family unity and the commitment to family business continuity.

Since the second generation owns the company equally and has equal shares of voting stock, Al Blanchard does not control the situation as much as he might like to. Nobody does. This puts the corporation at risk as it enters the succession process.

My recommendation is that Al Blanchard stay as CEO of Grandview Industries for another three to five years. He is the only one with the reputation and position power to help the succession be orderly and not degenerate into a family feud. He needs to make a concerted effort to educate, communicate with, and lead the Blanchard family into some planning that captures family and shareholder interests and preferences. Perhaps the Blanchards need to create a family council as their forum for this activity or at least schedule a series of family meetings focused on developing the family’s goals and policies to guide the succession and transfer of ownership.

Grandview Industries, with its board and succession committee, can continue making progress in strategic planning, successor development, and successor selection over the next couple of years. Then and only then could Al transfer power to either an appointed successor or a bridging nonfamily CEO and have corporate control and business continuity assured.

Company ownership should be looked at with regards to the next generation. It is probably not too early to adopt shareholder buy–sell agreements in order to facilitate “pruning the family tree” or enabling those that would rather achieve liquidity of their estate to do so and keeping the rest committed to the company for the long term. Having a new and therefore less “proven leader” than Al have to continue to deliver ever-increasing dividends in order to keep family peace is a prescription for disaster in the middle of a succession process. (And in the middle of a deep manufacturing recession.)

The succession committee can increase the probability of the family not permanently locking-in on conflict but on the other hand it will likely create some tensions and hurt feelings. Al therefore has to make the ultimate decision. The committee and the board can help identify and analyze more facts related to the successors and company needs and make the decision appear more objective and just, but will not be able to nor should it make the decision on its own.

Given the nature of the case, we need to know a lot more about Joe Blanchard, Bill Blanchard, and Ed Chafee’s commitment to and vision for the business in their generation. Maybe hiring a search firm to help the succession committee on this task is a good idea. The search firm could easily identify other candidates, including nonfamily candidates, and therefore create a better benchmark for the ultimate selection decision; regardless of whether the Blanchards and Grandview want to have a nonfamily CEO or not.

This will all take time and continuing effort by Al Blanchard and hopefully a very cooperative group of cousins. But the continuity of this business, the family’s wealth, and its legacy are all at stake.

Case 11 – no notes available

Case 12: Reliance Industries (Part A)

Suggestions for Use

The Reliance Industries case features several important elements of  family enterprise – leadership, best management practices, and successful growth and evolution .  The case promotes discussion about family culture with a specific focus on business leadership, trust, and use of influence. The case also offers the opportunity to identify relevant issues and practices related to national culture and practices which transcend national boundaries.

Executive Brief

Summary – Over the span of 44 years, Dhirubhai Ambani built a conglomerate that, at the time of his death, accounted for more than 3% of India’s GDP. An ambitious and innovative man, he transformed the practices of Indian enterprise by bringing public stock offerings to the Indian public and by adopting world class practices that were later imitated by others. The case notes these entrepreneurial achievements and addresses the family and corporate conflicts that arose when Dhirubhai Ambani’s died without a will and his  sons, Mukesh and Anil, battled for control of the company.


Corporate history & profile – Reliance Industries began as a trading company in 1958 and quickly shifted its focus to textiles, to take advantage of emerging market opportunities. Reliance initially produced synthetic fibers, expanded to textiles manufacture, and eventually developed retail outlets offering fabrics and clothing. After earning his first million from textiles, Dhirubhai began to expand through integration; he built chemical factories to produce the ingredients for textile fibers; developed chemicals used in plastics, and entered the oil and gas exploration and pipeline businesses. Reliance entered other promising markets and developed initiatives in telecommunications, financial services, insurance, life sciences, financial services, mutual funds, and infrastructure for petroleum products.

Financial Strategy – Reliance Industries financial strategy reflects both India’s transition from government control to a free market system and increased participation in world financial markets. In the late 1970s, Indian financial institutions were largely government controlled and not always willing to make loans to small business. In the face of this obstacle, Dhirubhai launched India’s first initial public offering. By selling shares to the public, Reliance was able to finance its growth and build “a culture of equity” in India. Reliance’s other financial firsts include being the first private company in India to raise funds through international capital markets, and the first to be rated by international credit agencies.

Although Reliance was a shareholder owned company, the leadership ranks included many well-qualified Ambani family members and long-time friends. In addition, an effort was made to locate facilities in Dhirubahai’s home state, Gujarat, to boost the economy there and to take advantage of longstanding  and strong relationships.


Family History & Profile – The Ambani family consist consists of the father and Reliance founder, Dhirubhai; his wife, Kokilaben; his two sons, Mukesh and Anil, and his two daughters, Nina and Dipti. Mukesh and Anil, were each raised for a career at Reliance. Each was educated first at prestigious Indian schools and then at an American business school prior to beginning his career at Reliance.

Things began to change after Dhirubhai’s first paralytic stroke in 1986.  Mukesh and Anil became Co-Managing Directors.  Mukesh was given an additional title of Vice Chairman.  Dhirubhai remained as chairman and very active in the day-to-day running of the company. During the next 16 years and under the direction of these three men, Reliance grew and became a $22 (US) billion company.

Mukesh and Anil have very different personalities, strengths, and skills. Mukesh was reportedly his father’s favorite son while Anil was his mother’s favorite. Reliance was large enough that each son had his own responsibilities and their functions did not overlap. Their father, as chairman, privately mitigated any disagreement.  To outsiders, all was peaceful and profitable.

It is clear that Reliance was Dhirubhai’s legacy and he wanted to keep it together. In 2002, one month before his second stroke, Dhirubhai supervised the merger of Reliance Industries and Reliance Petroleum.  At the time, it was the largest merger in India’s business.

One year after Dhirubhai’s death, Mukesh and Anil began to publicly question the other’s management ability after clashing over decisions of governance and corporate strategy. By 2004, their disagreement had become public and nasty. At the heart of the discord was Mukesh’s belief that he had proven his ability to lead and that, as the eldest son, he was destined to succeed his father.  Anil’s saw his networking and influencing skills as the qualifications that made him the natural successor; for years he had been the public face of Reliance. Each son pictured himself as their father’s rightful successor.

After months of a public quarreling, their mother, Kokilaben Ambani stepped in.  Her involvement in this matter was significant because during her husband’s lifetime, Kokilaben appeared focus her energy on her family.  Kokilaben wanted to preserve her husband’s legacy.  With the help of family friend and banker, K.V. Kamath, Kokilaben was able to foster a settlement between her sons.

Peace was declared on June 18, 2005, almost seven months after Anil’s public questioning of Mukesh Ambani’s authority. According to the settlement, Mukesh received the flagship Reliance Industries and a smaller petro-chemical business.  Anil received the energy, capital and infocomm businesses and a billion dollar payment. The next chapter of the Ambani story is written as Mukesh and Anil develop their respective parts of Reliance.

The companies that Mukesh and Anil lead today have both thrived since the settlement between the siblings. Shareholders have been rewarded handsomely over the past eight years.



Discussion Questions

  1. How would you describe the culture and communication style of the Ambani family?

Culture –During Dhirubhai’s lifetime, the family was guided by his patriarchal style and the respect and admiration he engendered from his family. This hierarchical structure may have contributed to the development of the zero-sum relationship between Mukesh and Anil, where each views the other’s gain as his loss. By interceding and forcing solutions in his sons disagreements, Dhirubhai did not create an environment where Mukesh and Anil could develop trust and the conflict management skills with one another that would enable them to successfully adapt and transition after his death.

A second aspect of family culture is reflected in the family’s traditional style. Kokilaben’s role was to raise her children and to manage the household. The children were expected to follow traditional paths marrying spouses selected or approved by their parents, and where the daughters follow traditional expectations as homemakers.


Communication – Although the Ambani family lived collectively and frequently saw each other, they did not create a process to discuss difficult family and business issues. For example, the negative feelings resulting from Anil’s marriage to Tina Munim were never successfully addressed in the 11 years between the marriage and Dhirubhai’s death. This kind of ill-will makes it difficult for family members to work together to solve the normal challenges that every family faces and the unusual challenges faced by high profile families.

While the communication channels between Dhirubhai and each of his sons were effective, Mukesh and Anil’s communication with each other was not. And, in the absence of effective communication, they were left to guess at the motives of the other. An interesting aspect of the Ambani’s relationship is that while each son shared their father’s vision —grow Reliance and communicate the message that India is a wonderful place to invest– they did not share a commitment toward that vision with each other.

Perhaps the greatest communication failure is reflected in Dhirubhai’s not making his wishes regarding succession clear. Some suggest that this was an intentional choice because he felt it would force his sons together while others suggest that near the end of his life, his health made planning impossible.

  1. Discuss the ways in which Kokilaben used her formal and informal power to influence the settlement between Mukesh and Anil.

Kokilaben’s power was primarily informal and she was reluctant to use it, initially saying that she did not have sufficient knowledge of the business to intervene. As time passed, she did intervene, suggesting that her role in the family had changed with the death of her husband. In Dhirubhai’s absence, Kokilaben was steward of her family’s legacy, seeking to end a conflict that could damage her late husband’s image and the people of India who had come to rely on the Reliance name.

Her children held her in high regard and she, in turn, served as a “trust officer” and emotional touchstone for her sons as they negotiated to settlement and for her daughters as they waited for a settlement to be reached.  Throughout the negotiation Kokilaben spoke with each of her sons almost daily and maintained a strong relationship with each.

  1. What role did the outside consultant, K.V. Kamath, play in the on-going negotiations? What role did company valuations play in the final settlement?

K.V. Kamath held the trust of Kokilaben, Mukesh, and Anil. He also was highly regarded within the business community. He was uniquely, trusted by the Ambani family and the business community, to act as an honest broker and to advance the negotiations. When asked about his role, Kamath said that he was simply “helping two people communicate.” He did more than that; he identified unbiased analysts to prepare the evaluation of Reliance’s assets, provided several options for what a division of the assets might look like, and he mediated and sold the settlement to Mukesh and Anil.

  1. From a family perspective, would you characterize this succession as

successful or unsuccessful? Why?

The succession can be viewed as having both successful and unsuccessful aspects. A central element of family success is that Dhirubhai’s legacy and the family’s reputation remains in tact. A second important success factor is that the family retains control of its wealth and, with it,  the opportunity for future generations to provide family business and philanthropic continuity.

The succession’s lack of success is noteworthy in two ways. First, the succession was not planned and Dhirubhai’s wishes were not known. As a result, the succession process was lengthy, public, and acrimonious.  Second, the succession process (or lack thereof) increased, rather than diminished, the ill will between Mukesh and Anil. Lastly, Dhirubhai’s wish that Reliance remain as one company was not achieved.

  1. From a business perspective, would you characterize this succession as successful or unsuccessful? Why?

From a business perspective, the succession was successful in three ways. First, the agreement between Mukesh and Anil  left Mukesh with the petroleum and petrochemical businesses, and Anil with the energy, infocomm, and financial businesses.  This solution puts Mukesh and Anil on different strategic paths, enabling each to seek his own success and not run into the other. Not only does this arrangement afford each the chance to assume his father’s mantle, but it maintains Dhirubhai’s legacy by keeping the family out a public and nasty court battle. Second, Reliance’s assets were divided in a way that makes strategic sense—putting the industrial properties together and grouping the service sector businesses together retains the strengths of each. And lastly, the solution retains value for Reliance’s shareholders and employees.

The unsuccessful impacts of succession are primarily limited to the several month battle between Mukesh and Anil, not the outcome. First, the battle between the brothers caused Reliance shares to loose value, which they later regained. Second,  the Reliance businesses lost some valuable employees who left the company because of the uncertainty created by the dispute. And finally, while no charges have been filed, the accusations and counter-accusations of corruption and self-dealing that Mukesh and Anil lobbed at one another have not enhanced the public’s view of the Reliance companies.

Case 13: Small Family Business: The Son-in-Law

Address the Root Causes

Barbara Hollander

Two key root factors are contributing to the tension here—the “triangled” rela­tionship involving Ed, Jim, and Eric, and the family “rules.”

In a triangle, two people with a con­flict avoid discussing it by focusing on a third person as the problem. Although the heat is ostensibly between the two younger men, Jim’s lack of acknowledgment stems from an unsatisfactory relationship with his father, not Eric. Eric is the lightning rod. It is Ed who permits Eric’s latitude while expecting Jim’s hard work. Ed needs to start communicating directly with Jim about the issues that are troubling the two of them. As their communication and rela­tionship improve, it is likely that the electricity between Jim and Eric will diminish.

Family rules—unwritten and often unconscious—deter­mine beliefs, values, and behavior. Three powerful rules in the Martin family are: “Fair is equal”; “Conflict is to be unexpressed and avoided”; and “Women are not candidates for the business.”

Ed needs to recognize that in providing for equal compen­sation and stock distribution, he is following a pattern set by his father, when, instead, he could ex­plore other options. He also needs to see that he avoids choosing a successor out of fear of confrontation over the decision. However, his indecision only increases the competitiveness between Jim and Eric instead of encouraging them to work as a team. The fact that the young men are working in the same division fuels the conflict further. They would benefit from some separation.

Finally, Sarah has never been consid­ered for a role in the business. Thus she has “appointed” her husband to be the liaison to her prime asset. Ed would do well to legitimize her role as poten­tial shareholder of influence by includ­ing her in appropriate decisions.

Use This Opportunity

Robert B. Williams

Jim’s resignation has opened the door to frank communication. I would encour­age Ed to look at this as an opportunity and to approach it constructively.

If Jim’s concerns are not openly dis­cussed and resolved, the business and family will suffer. Ed might talk with Jim and Eric about implementing an incentive or “cafeteria” compensation plan where levels of performance would be set and bonuses awarded according to the performance achieved. If Eric can achieve high sales with less effort, he may deserve the same compensation as Jim. Or, Eric may opt for shorter hours, more vacation, and less pay. The program should reward individual excellence and promote team building and coopera­tion between Jim and Eric.

If Ed divides the stock equally between Sarah and Jim, provision should be made through a shareholder’s agreement that either can buy out the other or that the business can be divided fairly. This will help avoid indecision and a logger­head that may weaken the business and the family. Some of the stock might be made available to Eric as long as he remains an executive. The family also should consider invit­ing Sarah to take a more active role in the business, particularly if she is to be an equal owner.

As an alternative, Ed could leave controlling stock interest to Jim and equalize the value of Sarah’s inheri­tance with nonbusiness assets.

In any event, Ed should move for­ward with a succession plan with which there is general agreement. It should provide for gradual transfer of the stock to the successors, gradual in­crease of control by the successors, and assurance that the company and shareholders will have sufficient liquidity to allow the business to survive after pay­ment of death taxes and other obliga­tions.

Case 14 – no notes available


Case 15 – no additional notes available, refer to Case 12.

Notes to Online Cases

Small Family Business: The New MBA

Make Suggestions and Start Looking

Paul Frishkoff

Even if Rudy had more experience, this would appear to be an extremely thank­less situation for him. For reasons of his own financial stability and mental health, I would strongly advise him to look im­mediately and seriously outside the company for a long-term career. Still, because of his family loyalty, and with the slim possibility that he may turn out to be the family’s hero, he might at least propose the following to his father:

  • Dismiss Duke. He is a spreader of discontent, and, no matter what his skills, he is undermining the business and its founder. Besides, he spends irresponsibly, which is a large part of the company’s problem. If severance is called for, negotiate it so that it is not an immediate drain and so that Duke is not the most preferred creditor should insolvency actually occur.
  • Give somebody—Rudy, or the controller if Will wavers about Rudy’s inexperience—tight and immediate authority over spending.
  • Initiate honest communication with the employees. They need to understand that an inflexible, above-competition wage scale will make them all losers. Perhaps Chuck, who has played the role of confidant to the blue-collar staff, can be of help here (and feel like a big shot in doing it).
  • Also initiate good communication with secured creditors, particularly the bank. Rudy’s education and numerical skills may help here. However, he will participate in this effort only as a mem­ber of Will’s staff, since it is to Will that the bank has really extended the credit.

Although professional counseling would benefit the family and the busi­ness in the long run, right now time is of the essence. Later, whether or not the business survives, the family should seek assistance to overcome poor com­munication, mutual distrust, and lack of planning.

Rudy Must Clarify His Own Goals

Wendy C. Handler

Members of the next generation often enter the family business without clear personal goals and expectations. With their undergraduate or graduate busi­ness degrees, they may believe they are equipped to master the challenges of a family business. How­ever, experience—outside as well as inside the family busi­ness—is the only real training.

In this case, Rudy has entered Schmitz Sand and Gravel ready to make his mark. He finds that the business is misman­aged. However, he cannot simply “fix” the company as he did with his cases in business school. It will not work. Even though he has an advanced degree, he lacks real-world experi­ence. He also lacks credibility with both family and nonfamily members working in the firm.

Rudy needs to define his own goals and objectives. Ideally, he should have done this while he was working on his master’s degree, asking himself such questions as: What areas of the firm do I want to work in when I enter? Does this fit with where I may be needed? Do I have the necessary skills and abilities?

While reflection is important, this is time for action. Rudy needs to stay on his father’s side and use his accounting background to research labor rates in the industry, negotiate better terms with the bank, and deter­mine unnecessary expenses to cut.

For Will, Chuck, and Rudy, ongoing communication about critical issues is necessary.

In the short term, they will need to decide whether Duke should stay with the firm, how to tighten wage policies, and how to improve the financial outlook. If the company makes it through the immediate crisis, then the focus should turn to determining the future direction of the business, the role of each brother in management, and plan­ning succession.

Real Estate Development Partners, Inc.

Suggestions for Use

This brief case is a platform for a discussion on change in the family business. It documents an action-research or survey-feedback initiated change effort. The case could foster a discussion about the advisability of having third-party consultants assess a family business and collaborate in developing an improvement or positive change plan. It should also promote discussions about how motivation for change can be created in the interest of a constructive succession even when the CEO has not previously shown any interest in transferring assets or power.

Executive Brief

This is a simple real estate–based business that as a result of hard work, the post-war growth period in the United States, and real asset inflation in the 1960s, 1970s, and 1980s has been very successful. Growth in revenues and asset value has outpaced the industry, which also speaks to location advantages, managerial effectiveness, or both. Job opportunities and wealth have been created for third-generation family members. Three sons and one daughter currently work in the company.

The first test of leadership greatness lies immediately ahead. Dick Randall is in his late sixties and he has done nothing to plan for succession in management (other than the development of next-generation members through work in the company) or succession in ownership by transferring significant numbers of properties and stock.

The results of the family and family business surveys indicate serious challenges lie ahead regarding succession and ownership transfer—the kinds of challenges that often derail business continuity and sabotage family harmony.

Dick Randall has been willing to open the doors to outside assessment. How willing will he be to take constructive action on the basis of the survey findings?

Discussion Questions

  1. Based on the data collected and the facts presented in the case, what are the key issues, problems, or opportunities facing Real Estate Development Partners and the Randall family?

This appears to be a classic successful entrepreneurial/family business story. The business has been doing very well but as the transition across generations approaches, the corporation appears vulnerable. Why?

  • Nobody knows how much longer Dick Randall will remain the CEO. He apparently has not been doing a great job of delegating (which may be undermining the development of the required capabilities of both family and nonfamily managers) nor of transferring his power (still both President and CEO and the owner of most of the stock).
  • Nonfamily managers are much less satisfied with the company overall than family managers, suggesting that the extended family concept may not have been applied in this corporation and key nonfamily manager motivation and retention during the succession period may be at risk.
  • Nobody (family members in the business, nonfamily managers, or family members not active in the business) knows the standards and processes by which succession will take place at Real Estate Development Partners, Inc.
  • Nevertheless, there appears to be some measure of goodwill as both family and nonfamily managers agree that the company should remain a family business.
  • There are gender issues. Women family members employed in the firm (only one active now, but both of Dick’s daughters have worked in the company at some point) do not believe that career opportunities are equitable.
  • Given that succession is becoming imminent, the absence of a board of directors or advisors with independent outsiders may be a handicap.
  • Family members do not meet regularly, have a diverse set of opinions, agree that they need to communicate better, and are not confident that they address their differences constructively.
  • Estate planning and ownership transfer is still inconclusive.
  1. How might this feedback process influence future prospects for continuity in this family-owned business? What constructive changes do you see the Randalls making in response to the survey?
  • It might motivate the creation of a family council or the holding of family meetings.
  • It might motivate more disciplined and on-going planning work with the family’s estate planning attorney.
  • It might motivate the Randalls, particularly the next-generation members, to take on the initiative of creating a board with independent outsiders serving on it.
  • It might help motivate the involvement and education of the fourth generation (Dick Randall’s grandchildren) in the family meetings. This would be very timely since several of them are starting or about to start college.)
  • It might prompt a healthy, if perhaps difficult, conversation about gender roles and the family’s culture and whether they want to change elements of that culture so that Dick Randall’s granddaughters enjoy equal opportunities.
  • Dick Randall may be persuaded to create a succession timeframe, at least for the transfer of power, even if he chooses not to retire totally for personal reasons. (Dick Randall likes his work and wants to continue to come to the office as long as his health allows.)
  1. What is your prediction of what will happen in this family-owned business over the next three years? Use the survey data and the facts in the case to support your prediction.
  • The willingness that Dick Randall demonstrated to open his company and his family to outside assessment bodes well for this family and business.
  • He will more than likely begin to meet regularly with his estate planning attorney and involve his sons and daughters in some of those meetings.
  • He will likely sponsor a family meeting that includes his grandchildren, since he is interested in having this company be there for them.
  • As a result of the work with the estate planning attorney and the holding of family meetings, Dick Randall is likely to communicate his plans for the transfer of ownership and assets and begin to transfer managerial power by naming his eldest son President of Real Estate Development Partners, Inc.

Note: All of the immediately above indeed happened in a two-year period. Dick Randall also began to send third-generation siblings to school to learn about family business management. The discussion on unequal career opportunities based on gender was difficult. But the family participation policy developed in one of the family meetings encouraged both male and female fourth-generation members to pursue education and managerial experience outside the company to prepare themselves for top management positions in the firm. As of this writing, no independent outsiders have been invited to the board, nor has a new board of advisors been created.

Small Family Business: GlassKing Distributor Company

Remember the Advantages

John A. Davis

Marilyn Green has her hands full con­tending with family conflicts in GlassKing’s dealership network and the reluc­tance of older dealership owners to re­tire. However, she should not lose sight of the advantages that family dealer­ships offer to a large company like hers.

All market share is local, in my view, and family dealerships generally serve local markets better because of their connec­tion with the community. Their ties with customers and their families can span generations and help the supplier dominate markets for decades. The family dealership also often contrib­utes a great deal of capital that the supplier would otherwise need to invest.

If GlassKing is committed to family dealerships for its distribution system, it should take steps to preserve them for the long haul.

Recognizing that the supplier-dealer relationship has some built-in conflicts, Marilyn should not try to work directly with the dealership families to facilitate family conversations and planning. Families won’t be open to talk about their issues and plans in front of GlassKing management. Instead, she should sponsor educational programs and consultation services to make sure that the predictable problems of managing a family business are addressed. In particular, I would recommend a program to introduce dealers and their families to ways of managing a family company and han­dling the process of succession.

Marilyn should also encourage each dealer family to create a family coun­cil—a discussion group that would ex­plore the family’s interest in the business and family issues that arise because they have a business. These discussions are best facilitated by a con­sultant familiar with family-business is­sues. Setting up such a program of edu­cation and family discussions is not inexpensive. But how much would GlassKing lose if just one major dealer went under?

Find Ways to be Supportive

John E. Messervey

Top management of many large compa­nies that depend on independent dealers, distributors, and franchisees often say, “We’re one big happy family.” And, like real families, they run for cover when the conflict starts. In one sense, you can’t blame them. Until family-systems theories merged with sound business practice, there was little help available. Although the stakes of unresolved family con­flict are higher than ever for large companies that deal with family firms, there are now some solutions.

Marilyn should keep in mind that succession is almost al­ways an once-in-a-lifetime event, yet we expect the business owner to hit a home run the first time at bat. In reality, most family-business owners have few models to follow. GlassKing can help by finding successful succession stories within its dealer network and sharing those stories with all its dealers. Moreover, GlassKing must be committed for the long haul. Succession planning is a process that takes years. Marilyn could also create a “family-business succession audit,” asking each dealership a few questions: How old are your owners? Does the chief executive have a designated successor? Do you have a written succession plan? (If it’s not in writing, it doesn’t exist!) Armed with this information, Marilyn will know which dealers need the most assistance with succession. GlassKing could also add a family consultant to its corporate team. However, GlassKing will need to be patient and realistic in its expecta­tions. No consultant should be expected to undo 30 years of family behaviors in a couple of annual meeting presentations. The key is to create awareness of the issues and to present potential solu­tions.

Finally, GlassKing must respect the families’ privacy and not become in­volved in emotional matters. While GlassKing can provide resources to help families deal with family issues, it should restrict its relationships with its dealers to business issues.


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