- Email: [email protected]
Conversation with Richard Beckhard
with Richard Beckhard d.h
e prevalence of family-owned and family-controlled businesses in this country and some overseas countries--reports have it that 95 percent of all U.S. companies are either family-owned or family-controlled -have created a need for people with a special knowledge of the dynamics of such businesses. In this conversation, Ivan Lansberg S., assistant professor of organizational behavior at the Yale School of Organization and Management, discusses these dynamics with Richard Beckhard, known as a founding father of organization development. Beckhard is a long-term faculty member of the Massachusetts Institute of Technology’s Alfred P. Sloan School of MRnagement. Also one of the editors of the Addison-Wesley series on organization development, Beckhard has written influential books and articles in the field. While his research interest in family firms is relatively recent, he has worked extensively with many family-owned firms. Over the past four years Dick and his wife, Elaine Kepner (who is a Gestalt psychologist experienced in family therapy), have been directly involved in a project that concerns Professor Lansberg’s own family’s business.
LANSBERG:
How did you become interested in family firms?
BECKHARD:
Well, basically I backed into it. It happened that one of my first clients back in the 1950s was a small, family-owned corporation. I found that
American
Organizational Management
Dynamics, Associations.
Summer 1983. @ 1983, Periodicals Division, All rights reserved. 0090-2616/83/0014-0029/$02.00/O
29
as I worked with the firm over the years I became involved with the family - its ownership and its role in the firm. Subsequently I worked with a number of other small and medium-size companies that were predominantly family-owned or closely held. As I worked with a significant number of family firms, I began to find some common patterns. I realized that one cannot, in fact, work with such a firm-beyond certain kinds of projects- without getting involved with the family and the ownership-management issues.
30
LAN~BERG:
Are you saying that it was partly a coincidence that so many of your clients were family-owned firms?
BECKHARD:
I’ve asked myself the same question as I began delving into what little was written about family businesses way back in the sixties. I found then that well over 95 percent of all firms in the United States were either family-owned or family-controlled. In fact, about 42 percent of the U.S. workforce is employed in a family firm. By the way, I’ve found that some of those statistics also apply in other parts of the Western world. Recently, I have become very interested in trying to expand our understanding of family firms. A basic problem is how to identify the central issues facing this type of organization. It’s a tricky business -working with the family and working with the firm-and I began to think that we needed more information on the problem. Several years ago I developed a research project at the Sloan School of Management that is just finishing. It involved some of my colleagues and a number of family owners and their families.
LANsBERG:
My understanding of the data available is that only three out of ten family-owned firms survive beyond the founder’s tenure in the firm. Is there anything that could be done to save those family firms that don’t survive?
BECKHARD:
That is one of the things that we have been looking at. It appears that for some of those firms that go under, death is the appropriate next step. Other firms could and probably should have survived. We have found that among this latter group, the thing that has kept the family firm from surviving is inadequate planning for continuity.
LANSBERG:
I would think that the vulnerability of family cial consequences, especially for one-company economies where the unemployment problems these firms goes under are quite significant.
BECKHARD:
True. Typically, I think you’ll find that family firms, particularly in developing countries, tend to be very significantly intertwined with the life of the community in which they operate. Thus, characteristically, the consequences of the family firm’s fate go way beyond its own economic consequences.
firms has important sotowns or in developing that result when one of Do you agree?
LANSBERG:
The odds you cite of a family firm’s surviving the founder are pretty remarkable statistics. It seems to me that the succession problem is always at the heart of it. What is it about succession in family firms that makes it such a critical issue?
BECKHARD:
Succession in any business is critical. The literature and history are full of stories of what happens when an enterprise is saddled with the wrong leadership at any stage of its development. Succession in family firms involves all of the normal issues but, in addition, it includes the central question of blood versus competency. For instance, if a founder is committed to having a family member as chief executive officer [CEO], regardless of that person’s managerial competence, the effects of succession decisions on the company’s key professional managers will be profound. In a family firm there is not much that anyone else can do about it because the control is, by definition, in the family’s hands. Therefore, in many cases in which such a decision was made strictly on the basis of blood rather than caompetence, massive resignations of essential managerial resources have occurred and organizations have been split apart. Another special aspect of succession in family firms occurs when one family member succeeds the founder as the central figure in the business. That family member thus develops a significant increase in power over the others-a situation that frequently produces jealousy, mistrust, and heavy politicking. Again, the literature is replete with cases of family fights over power when one of a group of siblings succeeds the founder.
LANSBERG:
Let me move on to examine your own conceptual framework toward family firms. Have you over the years developed your own theoretical approach to understanding family businesses?
BECKHARD:
I would say yes - at least a theory of practice. Basically, my own approach to family firms is a systems approach. I start by recognizing the existence of three basic components: the firm as an entity with a life of its own, the family as an entity with a life of its own, and the founder- who has a life of his own and who, typically, heads both of the other two systems. I would argue that, to manage the complex interdependence between them, it is necessary to acknowledge the existence of these three subsystems. Moreover, I believe that there is no way that one can be useful at the strategic l.evel, at the executive-planning level, without thinking in terms of these three interdependent subsystems.
LANSBERG:
How would you describe the dynamic properties
of this complex
system? BECKHARD:
Let’s take, for instance, the ownership-management dilemma. If you think of these three subsystems during the founder’s life, ownership and management are all embodied in one person. The moment that
31
the founder moves out of the picture, ownership and management frequently get split among various parties. Unless structures and mechanisms are developed to manage these processes, the probabilities of survival are sharply curtailed.
32
LANSBERG:
Why don’t you say more about how you actually use what I would call this “wholistic” model of family firms.
BECKHARD:
Obviously, you usually start working with the founder. Because the founder is the only person who is a member of all three subsystems, it is crucial from a strategic point of view for him or her to “buy into” the wholistic model when thinking about the family firm. A second variable that needs to be addressed is whether the founder is willing to involve the family in any of the decisions about how the enterprise will operate after he or she is gone. Hence helping the founder examine the consequences both for the family and for the firm becomes a critical issue. A third very important issue is the need to establish a dialogue between key family members, particularly across generations. In addition, it is important to establish a dialogue between key family members and the firm’s key executive members. These individuals need to examine and think about how the total system will look after the founder is gone. It is significantly preferable if that can be done while the founder is still in control and can manage the process.
LANSBERG:
If I understand you correctly, proach to these problems.
BECKHARD:
Right. Pragmatically, I don’t think it’s a choice of preventive as being better than nonpreventive-as the case may be in physical health. I believe that in this case, without a preventive or planned situation, we have hard data showing that the firm will rapidly fall apart, that key employees will leave after the founder goes, and that the family will disintegrate as they squabble over the allocation of power and assets. According to the data, there is really no choice.
LANSBERG:
I’d like to sharpen, for a moment, some of the differences between your approach to family business and some of the other perspectives around. For instance, Harry Levinson argues that the best course of action for a family firm is to get the family out of the business and leave the running of the firm to professionals. Are you saying that you would not necessarily make the same recommendation?
BECKHARD:
I would not necessarily make that recommendation because basically my approach looks at the dynamics of family firms from a contingency perspective. I don’t believe that there is one right prescriptive answer - that, for example, you should always go professional or should always stay with the family. I just don’t believe that. I think the answer really is, “It depends.”
you are advocating
a preventive
ap-
LANSBERG:
Given that you espouse a contingency perspective, what are some of the factors that you think the founder should take into consideration in dealing with the succession issue?
BECKHARD:
In addition to all the things that any chief executive officer or board would look at, such as competence and creativity, ability to understand the business and the competition, courage, leadership skills, good financial sense, and so forth, there is a whole set of questions that the founder should consider. For example: Will the successor carry on my values? Will the successor get the support of my family? Will he or she receive the support of the professional executives? How will the successor get along with key clients and customers? To what degree should I take my wife’s feelings into consideration? If I select one of my children, how will the others feel? When considering the succession problem, the founder frequently needs help with a whole set of psychodynamic issues. These issues raise such questions as the following in the founder’s mind: Can I let this person take on my role and my responsibilities? Do I want my son or daughter to be better than me? Do I want to face mortality and really move out? What will I do with the rest of my life? And so forth.
LANSBERG:
I would imagine, particularly with regard to these questions, that the degree of self-insight and emotional maturity of the founder is a key factor in determining his or her ability to manage succession effectively.
BECKHARD:
Unquestionably. Without that, founders have a very hard time separating themselves from the problem.
LANSBERG:
What other factors have to be considered in terms of the succession issue?
BECKHARD:
Well, one also needs to think about the relationships between the founder and the other family members and the kind of family it iswhether it is close-knit or distant; whether individual members are interested in going into the business and for what reasons. Also, what kinds of perceptions or misperceptions does the family have about the business? Do they see it purely as an economic asset or do they see it as a way of perpetuating the founder’s dreams and ideals? All of these questions need to be addressed.
LANSBERG:
That makes sense. I’d like to move on to examine the kinds of interventions that you as an outsider rely on when working with family firms. Let’s start by looking at the entry process. To bring about any real change, do you need to gain entry to all three subsystems making up a family business?
BECKHARD:
Probably, but I never know that I will be able to do so at the entry stage. In my experience, entry into a family firm always, well, prac-
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tically always; there are a couple of exceptions-begins with the founder wanting help, either with some aspect of succession or with changing a management structure to assure continuity in the future. Once in a great while a second-generation sibling will contact me as a consultant because he or she is unable to get the founder to think about the future of the “system.” In such cases, entry begins with the family. But usually it is the other way around-working with the founder in the firm and moving from firm to family issues.
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LANSBERG:
It seems quite obvious from the statistics that you quoted earlier that founders don’t like to deal with succession. I mean, the last thing in the world that a successful entrepreneur wants to do is to cut her- or himself off from where the real action is and to let go of power and influence. What kinds of things can you do in terms of helping founders overcome their resistance and address the succession problem?
BECKHARD:
That’s a good question and a tricky one. In the first place, I think the key is to recognize that this resistance is OK. It is absolutely natural and predictable that an entrepreneur, who started something and is about to give it up, is symbolically facing death. None of us wants to do that. It is natural that the leader will find many “good” reasons for not letting go. One thing I try to do is to bring the resistance to the surface so the founder can recognize what is really going on and accept the fact that the resistance needs to be faced, acknowledged, and accepted. Founders need counseling on what they want to do with the next phase of their lives. Very often I find that they have not done a lot of explicit thinking about this, primarily because they are afraid of being put out to pasture. One of the things I try to help founders do is to take a look at what other dreams they have besides. running the enterprise. For instance, some are interested in starting an institute of some sort. Others want to create a new enterprise or consult with smaller businesses. Some chose to go into teaching and academia.
LANSBERG:
Your basic premise is that moving into a vacuum makes the letting go much harder.
BECKHARD:
Yes, I believe that unless the founder has something to look forward to, he or she will have a much harder time accepting the succession. I also try to find out what kind of support the founder is getting from his or her spouse, what kind of communication they have about this issue, what kind of joint planning they are doing, how they are thinking about the future together. I believe that spouses can and should play an important role in helping the founder address these issues. Another dimension to this problem is that when one is about to let go of something, one also wants to be sure that what one lets go of survives and is a “monument” to one’s values, beliefs, and achievements. The founder needs to know that his or her image will forever be an important piece of the history of the enterprise.
LANSBERG:
So far we’ve talked a little about the founder, but what about the leadership in the firm? I’m sure that for succession to be accomplished well, the various consequences that the announcement of succession has in the organization must also be addressed. The thought of dealing with a new leadership, family or not, must trigger all kinds of fears and fantasies among the key employees. After all, these people’s destinies, professional and financial, are in the hands of the family leadership. Also, in most cases, the firm’s key executives have a lot of shared experiences and historical connections with the founder, and these must be extremely hard to replace. What kinds of interventions can be put in place in order to help manage the succession process in the firm?
BECKHARD:
I think you’ve pretty well described the issues. Intervention goals should be to help a founder understand the particular set of conditions involved and encourage him or her to pinpoint essential individuals who must be kept to assure the firm’s future.
LANSBERG:
Aside from acknowledging these consequences, how do you get the founder to actually bring the successor on board?
BECKHARD:
That’s really part of a larger issue. The key to the whole process is that the founder has to manage it. He or she is the only one who can. Management involves helping key professionals to cope with their anxieties and ambivalences about the new leadership. The founder needs to use his or her power and influence to lay the necessary groundwork. Also, he or she needs to create transition mechanisms of one kind or another, such as the type of “succession committee” that your father used when coping with his problems in the firm. The founder may also take on a different informational role with key individuals in the firm to provide them with the necessary data for understanding the complexity of the total system. Finally, the founder may also put together a series of acts that are designed both to inform the people in the firm of what’s going on and to publicly endorse the future successor.
LANSBERG:
How do you prevent the employees from wanting to cling to the founder’s skirts?
BECKHARD:
You don’t prevent them from wanting
to; you find ways of helping
them deal with the dependency issue. You wean them just as you wean a child away from its dependency on its mother. LANSBERG:
Dick, I think that one of the most innovative aspects of your own approach to family business is your recognition of the importance of integrating the family into the planning process. Why don’t you talk a little bit about the kinds of things that you and Elaine have been doing in my family. I’m particularly interested in your idea of bringing the family and the top management team together so that we could all learn from each other.
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36
BECKHARD:
Well, your family offers an exciting example of this whole process that we’ve been discussing. In the first place, yours is a healthy family. Relationships are good, and there is a long history of significant communication and participation by all family members. When your father began to concern himself with the problem of succession, one of the things that became very clear from the start was that the dilemma of succession and continuity went well beyond typical business issues. Your father was quick to realize that the problem had profound implications for you as a family, not only in terms of ownership but also in terms of the continuity of family.values, the family’s social standing, and so forth. Furthermore, it was clear in your family’s case that- with the exception of your brother, who is in the business - the family was not informed in a significant way about the nature and scope of the business. They had never had to worry about that. So the trigger for starting our work was to think of your father as becoming chief educator for the family. The basic idea was that to be responsible owners, you all needed to learn about the difference between ownership and management. We also arranged a number of meetings between the family and the firm’s top managers in which the family had an opportunity to learn about the nature of the business directly from the key managers themselves.
LANSBERG:
In addition,
BECKHARD:
Right. It was important for you all to think about the family’s future -particularly with regard to such issues as parental mortality and changes in the shape of the family, changes in the distribution of power among siblings, the role of in-laws, the future of the grandchildren, and so forth.
LANSBERG:
One very interesting thing that you both did was to use the task as a vehicle for addressing the more psychologically threatening issues.
BECKH.~RD:
There were always two agendas that needed to be worked. One, the more implicit one, focused on assuring the family that you would all stay together despite any future adversities. The other, which was the explicit or defined one, dealt with such issues as learning about the business system, separating ownership from management, and so forth.
LANSBERG:
One other thing was very helpful to us: Getting to know the top management in the business and having some firsthand experience with their professional competence really drove home the importance of separating the ownership piece from the management piece.
BECKHARD:
That’s a good point. Vlhat was created was a mechanism through which the key professionals-that is, those your father thought your
we also worked with family issues.
family ought to know-became a new group. This group had the double mission of advising your father ab’out the firm’s future and of becoming a faculty for the family student body for whom they would ultimately be working. This was a tricky role and, as you know, there was a lot of nervousness on everybody’s part. But because the managers knew more about the business, they could teach the family effectively. LANSBERG:
In addition, I think that this process also helped the managers learn something about the family. I’m sure they must have sensed a genuine concern both for them as individuals and ifor their future in the firm. I think a lot of respect for their professional competence was also communicated to them.
BECKHARD:
Unquestionably. It also did one other thing. This process helped the managers think about the family in less stereotypical terms. It helped differentiate family members so that the firm’s business leaders really came to see the specific individuals with their flat and round sides. That was significant.
LANSBERG:
Clearly, the health of the family system is a key determinant of the kinds of interventions one can make in these cases. As you mentioned earlier, all things considered, our family is an unusually close and healthy one. To what extent do you think that this kind of intervention could work in a more fragmented family system?
BECKHARD:
Frankly, I don’t think that this would ever have worked in a very conflict-ridden family. That’s why I fear the “canned” intervention for family firms. I believe, as you say, that the health of the family system is a very important variable that must be explicitly considered when planning what to do. For instance, if one has a family that has been torn in various ways, if there are new wives or new relationships and subfamilies with children from various different marriages, it might be much the better part of valor to treat the ownership question strictly from the economic viewpoint. For example, the founder might set up a series of trusts that allow the children to do whatever they want with their share of the profits. There may be a need, in such cases, for family meetings to allocate resources and to discuss wills or things like that. But bringing that kind of family system together to collaborate on the future of the family firm system would be disastrous.
LANSBERG:
Dick, as I hear you talk about the complex realities of family firms and also as I look back on the emotionally difficult times that we went through in my own family, I can’t help thinking about the potential dangers of having family business become a new fad among OD consultants. Such a fad might attract someone who was not adequately qualified to deal with the risks involved in dealing with a family firm. Apart from what I would call the typical OD tools, what kinds of
37
skills do you think are essential for someone working with these potentially volatile systems?
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BECKHARD:
First I want to agree totally with your statement. Working with family-owned firms and with the families that own them is different from working with other kinds of organizations. It requires different sensitivities and different understanding. Of course, a lot of OD consultants, by professional training and by practice, have the necessary combination of skills-so I’m in no sense assuming that this isn’t a market or a field for them. I am, however, very concerned that the attractiveness and pervasiveness of the problems might lead to inadequate attention to the complexities of the dynamics of family firms. Because one needs to keep track of the fact that one is working with a complex system, one needs systems knowledge, systems skills, and a systems point of view. Second, I think that because one is constantly dealing with family dynamics, one needs to know how family systems operate. Third, in these situations one is dealing with problems in which a strong clinical background helps tremendously in facilitating the work. Finally, I feel strongly that someone working with the owning family ought to have a consulting team that includes people of both sexes. I can’t tell you what a difference it makes when there is a woman as a consulting resource. For example, when working with family firms there are many situations in which men want to talk to men and women want to talk to women. There are other times when men want to talk to women, and women want to talk to men. Having a male-female team of advisors helps tremendously in these cases.
LANSBERG:
Absolutely; this clearly was a critical factor influencing the success of our experience. Let me try to summarize what we’ve been discussing: There are unique issues in family firms that must be addressed if real help is to occur. The issue of succession is both central and critical. Founders need to think for and plan for the whole system-family, founder, and firm- as well as about the interactions between these elements. Founders don’t easily give up their role. Succession is not just an economic or even a rational process. Family involvement in planning the future is highly desirable but not always possible. Advisors need to be aware of systems dynamics, family dynamics, and organizational behavior plus the usual issues. In addition, male-female advisory teams are highly desirable. Does that capture the essence?
BECKHARD:
I couldn’t have said it better myself.
e prevalence of family-owned and family-controlled businesses in this country and some overseas countries--reports have it that 95 percent of all U.S. companies are either family-owned or family-controlled -have created a need for people with a special knowledge of the dynamics of such businesses. In this conversation, Ivan Lansberg S., assistant professor of organizational behavior at the Yale School of Organization and Management, discusses these dynamics with Richard Beckhard, known as a founding father of organization development. Beckhard is a long-term faculty member of the Massachusetts Institute of Technology’s Alfred P. Sloan School of MRnagement. Also one of the editors of the Addison-Wesley series on organization development, Beckhard has written influential books and articles in the field. While his research interest in family firms is relatively recent, he has worked extensively with many family-owned firms. Over the past four years Dick and his wife, Elaine Kepner (who is a Gestalt psychologist experienced in family therapy), have been directly involved in a project that concerns Professor Lansberg’s own family’s business.
LANSBERG:
How did you become interested in family firms?
BECKHARD:
Well, basically I backed into it. It happened that one of my first clients back in the 1950s was a small, family-owned corporation. I found that
American
Organizational Management
Dynamics, Associations.
Summer 1983. @ 1983, Periodicals Division, All rights reserved. 0090-2616/83/0014-0029/$02.00/O
29
as I worked with the firm over the years I became involved with the family - its ownership and its role in the firm. Subsequently I worked with a number of other small and medium-size companies that were predominantly family-owned or closely held. As I worked with a significant number of family firms, I began to find some common patterns. I realized that one cannot, in fact, work with such a firm-beyond certain kinds of projects- without getting involved with the family and the ownership-management issues.
30
LAN~BERG:
Are you saying that it was partly a coincidence that so many of your clients were family-owned firms?
BECKHARD:
I’ve asked myself the same question as I began delving into what little was written about family businesses way back in the sixties. I found then that well over 95 percent of all firms in the United States were either family-owned or family-controlled. In fact, about 42 percent of the U.S. workforce is employed in a family firm. By the way, I’ve found that some of those statistics also apply in other parts of the Western world. Recently, I have become very interested in trying to expand our understanding of family firms. A basic problem is how to identify the central issues facing this type of organization. It’s a tricky business -working with the family and working with the firm-and I began to think that we needed more information on the problem. Several years ago I developed a research project at the Sloan School of Management that is just finishing. It involved some of my colleagues and a number of family owners and their families.
LANsBERG:
My understanding of the data available is that only three out of ten family-owned firms survive beyond the founder’s tenure in the firm. Is there anything that could be done to save those family firms that don’t survive?
BECKHARD:
That is one of the things that we have been looking at. It appears that for some of those firms that go under, death is the appropriate next step. Other firms could and probably should have survived. We have found that among this latter group, the thing that has kept the family firm from surviving is inadequate planning for continuity.
LANSBERG:
I would think that the vulnerability of family cial consequences, especially for one-company economies where the unemployment problems these firms goes under are quite significant.
BECKHARD:
True. Typically, I think you’ll find that family firms, particularly in developing countries, tend to be very significantly intertwined with the life of the community in which they operate. Thus, characteristically, the consequences of the family firm’s fate go way beyond its own economic consequences.
firms has important sotowns or in developing that result when one of Do you agree?
LANSBERG:
The odds you cite of a family firm’s surviving the founder are pretty remarkable statistics. It seems to me that the succession problem is always at the heart of it. What is it about succession in family firms that makes it such a critical issue?
BECKHARD:
Succession in any business is critical. The literature and history are full of stories of what happens when an enterprise is saddled with the wrong leadership at any stage of its development. Succession in family firms involves all of the normal issues but, in addition, it includes the central question of blood versus competency. For instance, if a founder is committed to having a family member as chief executive officer [CEO], regardless of that person’s managerial competence, the effects of succession decisions on the company’s key professional managers will be profound. In a family firm there is not much that anyone else can do about it because the control is, by definition, in the family’s hands. Therefore, in many cases in which such a decision was made strictly on the basis of blood rather than caompetence, massive resignations of essential managerial resources have occurred and organizations have been split apart. Another special aspect of succession in family firms occurs when one family member succeeds the founder as the central figure in the business. That family member thus develops a significant increase in power over the others-a situation that frequently produces jealousy, mistrust, and heavy politicking. Again, the literature is replete with cases of family fights over power when one of a group of siblings succeeds the founder.
LANSBERG:
Let me move on to examine your own conceptual framework toward family firms. Have you over the years developed your own theoretical approach to understanding family businesses?
BECKHARD:
I would say yes - at least a theory of practice. Basically, my own approach to family firms is a systems approach. I start by recognizing the existence of three basic components: the firm as an entity with a life of its own, the family as an entity with a life of its own, and the founder- who has a life of his own and who, typically, heads both of the other two systems. I would argue that, to manage the complex interdependence between them, it is necessary to acknowledge the existence of these three subsystems. Moreover, I believe that there is no way that one can be useful at the strategic l.evel, at the executive-planning level, without thinking in terms of these three interdependent subsystems.
LANSBERG:
How would you describe the dynamic properties
of this complex
system? BECKHARD:
Let’s take, for instance, the ownership-management dilemma. If you think of these three subsystems during the founder’s life, ownership and management are all embodied in one person. The moment that
31
the founder moves out of the picture, ownership and management frequently get split among various parties. Unless structures and mechanisms are developed to manage these processes, the probabilities of survival are sharply curtailed.
32
LANSBERG:
Why don’t you say more about how you actually use what I would call this “wholistic” model of family firms.
BECKHARD:
Obviously, you usually start working with the founder. Because the founder is the only person who is a member of all three subsystems, it is crucial from a strategic point of view for him or her to “buy into” the wholistic model when thinking about the family firm. A second variable that needs to be addressed is whether the founder is willing to involve the family in any of the decisions about how the enterprise will operate after he or she is gone. Hence helping the founder examine the consequences both for the family and for the firm becomes a critical issue. A third very important issue is the need to establish a dialogue between key family members, particularly across generations. In addition, it is important to establish a dialogue between key family members and the firm’s key executive members. These individuals need to examine and think about how the total system will look after the founder is gone. It is significantly preferable if that can be done while the founder is still in control and can manage the process.
LANSBERG:
If I understand you correctly, proach to these problems.
BECKHARD:
Right. Pragmatically, I don’t think it’s a choice of preventive as being better than nonpreventive-as the case may be in physical health. I believe that in this case, without a preventive or planned situation, we have hard data showing that the firm will rapidly fall apart, that key employees will leave after the founder goes, and that the family will disintegrate as they squabble over the allocation of power and assets. According to the data, there is really no choice.
LANSBERG:
I’d like to sharpen, for a moment, some of the differences between your approach to family business and some of the other perspectives around. For instance, Harry Levinson argues that the best course of action for a family firm is to get the family out of the business and leave the running of the firm to professionals. Are you saying that you would not necessarily make the same recommendation?
BECKHARD:
I would not necessarily make that recommendation because basically my approach looks at the dynamics of family firms from a contingency perspective. I don’t believe that there is one right prescriptive answer - that, for example, you should always go professional or should always stay with the family. I just don’t believe that. I think the answer really is, “It depends.”
you are advocating
a preventive
ap-
LANSBERG:
Given that you espouse a contingency perspective, what are some of the factors that you think the founder should take into consideration in dealing with the succession issue?
BECKHARD:
In addition to all the things that any chief executive officer or board would look at, such as competence and creativity, ability to understand the business and the competition, courage, leadership skills, good financial sense, and so forth, there is a whole set of questions that the founder should consider. For example: Will the successor carry on my values? Will the successor get the support of my family? Will he or she receive the support of the professional executives? How will the successor get along with key clients and customers? To what degree should I take my wife’s feelings into consideration? If I select one of my children, how will the others feel? When considering the succession problem, the founder frequently needs help with a whole set of psychodynamic issues. These issues raise such questions as the following in the founder’s mind: Can I let this person take on my role and my responsibilities? Do I want my son or daughter to be better than me? Do I want to face mortality and really move out? What will I do with the rest of my life? And so forth.
LANSBERG:
I would imagine, particularly with regard to these questions, that the degree of self-insight and emotional maturity of the founder is a key factor in determining his or her ability to manage succession effectively.
BECKHARD:
Unquestionably. Without that, founders have a very hard time separating themselves from the problem.
LANSBERG:
What other factors have to be considered in terms of the succession issue?
BECKHARD:
Well, one also needs to think about the relationships between the founder and the other family members and the kind of family it iswhether it is close-knit or distant; whether individual members are interested in going into the business and for what reasons. Also, what kinds of perceptions or misperceptions does the family have about the business? Do they see it purely as an economic asset or do they see it as a way of perpetuating the founder’s dreams and ideals? All of these questions need to be addressed.
LANSBERG:
That makes sense. I’d like to move on to examine the kinds of interventions that you as an outsider rely on when working with family firms. Let’s start by looking at the entry process. To bring about any real change, do you need to gain entry to all three subsystems making up a family business?
BECKHARD:
Probably, but I never know that I will be able to do so at the entry stage. In my experience, entry into a family firm always, well, prac-
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tically always; there are a couple of exceptions-begins with the founder wanting help, either with some aspect of succession or with changing a management structure to assure continuity in the future. Once in a great while a second-generation sibling will contact me as a consultant because he or she is unable to get the founder to think about the future of the “system.” In such cases, entry begins with the family. But usually it is the other way around-working with the founder in the firm and moving from firm to family issues.
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LANSBERG:
It seems quite obvious from the statistics that you quoted earlier that founders don’t like to deal with succession. I mean, the last thing in the world that a successful entrepreneur wants to do is to cut her- or himself off from where the real action is and to let go of power and influence. What kinds of things can you do in terms of helping founders overcome their resistance and address the succession problem?
BECKHARD:
That’s a good question and a tricky one. In the first place, I think the key is to recognize that this resistance is OK. It is absolutely natural and predictable that an entrepreneur, who started something and is about to give it up, is symbolically facing death. None of us wants to do that. It is natural that the leader will find many “good” reasons for not letting go. One thing I try to do is to bring the resistance to the surface so the founder can recognize what is really going on and accept the fact that the resistance needs to be faced, acknowledged, and accepted. Founders need counseling on what they want to do with the next phase of their lives. Very often I find that they have not done a lot of explicit thinking about this, primarily because they are afraid of being put out to pasture. One of the things I try to help founders do is to take a look at what other dreams they have besides. running the enterprise. For instance, some are interested in starting an institute of some sort. Others want to create a new enterprise or consult with smaller businesses. Some chose to go into teaching and academia.
LANSBERG:
Your basic premise is that moving into a vacuum makes the letting go much harder.
BECKHARD:
Yes, I believe that unless the founder has something to look forward to, he or she will have a much harder time accepting the succession. I also try to find out what kind of support the founder is getting from his or her spouse, what kind of communication they have about this issue, what kind of joint planning they are doing, how they are thinking about the future together. I believe that spouses can and should play an important role in helping the founder address these issues. Another dimension to this problem is that when one is about to let go of something, one also wants to be sure that what one lets go of survives and is a “monument” to one’s values, beliefs, and achievements. The founder needs to know that his or her image will forever be an important piece of the history of the enterprise.
LANSBERG:
So far we’ve talked a little about the founder, but what about the leadership in the firm? I’m sure that for succession to be accomplished well, the various consequences that the announcement of succession has in the organization must also be addressed. The thought of dealing with a new leadership, family or not, must trigger all kinds of fears and fantasies among the key employees. After all, these people’s destinies, professional and financial, are in the hands of the family leadership. Also, in most cases, the firm’s key executives have a lot of shared experiences and historical connections with the founder, and these must be extremely hard to replace. What kinds of interventions can be put in place in order to help manage the succession process in the firm?
BECKHARD:
I think you’ve pretty well described the issues. Intervention goals should be to help a founder understand the particular set of conditions involved and encourage him or her to pinpoint essential individuals who must be kept to assure the firm’s future.
LANSBERG:
Aside from acknowledging these consequences, how do you get the founder to actually bring the successor on board?
BECKHARD:
That’s really part of a larger issue. The key to the whole process is that the founder has to manage it. He or she is the only one who can. Management involves helping key professionals to cope with their anxieties and ambivalences about the new leadership. The founder needs to use his or her power and influence to lay the necessary groundwork. Also, he or she needs to create transition mechanisms of one kind or another, such as the type of “succession committee” that your father used when coping with his problems in the firm. The founder may also take on a different informational role with key individuals in the firm to provide them with the necessary data for understanding the complexity of the total system. Finally, the founder may also put together a series of acts that are designed both to inform the people in the firm of what’s going on and to publicly endorse the future successor.
LANSBERG:
How do you prevent the employees from wanting to cling to the founder’s skirts?
BECKHARD:
You don’t prevent them from wanting
to; you find ways of helping
them deal with the dependency issue. You wean them just as you wean a child away from its dependency on its mother. LANSBERG:
Dick, I think that one of the most innovative aspects of your own approach to family business is your recognition of the importance of integrating the family into the planning process. Why don’t you talk a little bit about the kinds of things that you and Elaine have been doing in my family. I’m particularly interested in your idea of bringing the family and the top management team together so that we could all learn from each other.
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BECKHARD:
Well, your family offers an exciting example of this whole process that we’ve been discussing. In the first place, yours is a healthy family. Relationships are good, and there is a long history of significant communication and participation by all family members. When your father began to concern himself with the problem of succession, one of the things that became very clear from the start was that the dilemma of succession and continuity went well beyond typical business issues. Your father was quick to realize that the problem had profound implications for you as a family, not only in terms of ownership but also in terms of the continuity of family.values, the family’s social standing, and so forth. Furthermore, it was clear in your family’s case that- with the exception of your brother, who is in the business - the family was not informed in a significant way about the nature and scope of the business. They had never had to worry about that. So the trigger for starting our work was to think of your father as becoming chief educator for the family. The basic idea was that to be responsible owners, you all needed to learn about the difference between ownership and management. We also arranged a number of meetings between the family and the firm’s top managers in which the family had an opportunity to learn about the nature of the business directly from the key managers themselves.
LANSBERG:
In addition,
BECKHARD:
Right. It was important for you all to think about the family’s future -particularly with regard to such issues as parental mortality and changes in the shape of the family, changes in the distribution of power among siblings, the role of in-laws, the future of the grandchildren, and so forth.
LANSBERG:
One very interesting thing that you both did was to use the task as a vehicle for addressing the more psychologically threatening issues.
BECKH.~RD:
There were always two agendas that needed to be worked. One, the more implicit one, focused on assuring the family that you would all stay together despite any future adversities. The other, which was the explicit or defined one, dealt with such issues as learning about the business system, separating ownership from management, and so forth.
LANSBERG:
One other thing was very helpful to us: Getting to know the top management in the business and having some firsthand experience with their professional competence really drove home the importance of separating the ownership piece from the management piece.
BECKHARD:
That’s a good point. Vlhat was created was a mechanism through which the key professionals-that is, those your father thought your
we also worked with family issues.
family ought to know-became a new group. This group had the double mission of advising your father ab’out the firm’s future and of becoming a faculty for the family student body for whom they would ultimately be working. This was a tricky role and, as you know, there was a lot of nervousness on everybody’s part. But because the managers knew more about the business, they could teach the family effectively. LANSBERG:
In addition, I think that this process also helped the managers learn something about the family. I’m sure they must have sensed a genuine concern both for them as individuals and ifor their future in the firm. I think a lot of respect for their professional competence was also communicated to them.
BECKHARD:
Unquestionably. It also did one other thing. This process helped the managers think about the family in less stereotypical terms. It helped differentiate family members so that the firm’s business leaders really came to see the specific individuals with their flat and round sides. That was significant.
LANSBERG:
Clearly, the health of the family system is a key determinant of the kinds of interventions one can make in these cases. As you mentioned earlier, all things considered, our family is an unusually close and healthy one. To what extent do you think that this kind of intervention could work in a more fragmented family system?
BECKHARD:
Frankly, I don’t think that this would ever have worked in a very conflict-ridden family. That’s why I fear the “canned” intervention for family firms. I believe, as you say, that the health of the family system is a very important variable that must be explicitly considered when planning what to do. For instance, if one has a family that has been torn in various ways, if there are new wives or new relationships and subfamilies with children from various different marriages, it might be much the better part of valor to treat the ownership question strictly from the economic viewpoint. For example, the founder might set up a series of trusts that allow the children to do whatever they want with their share of the profits. There may be a need, in such cases, for family meetings to allocate resources and to discuss wills or things like that. But bringing that kind of family system together to collaborate on the future of the family firm system would be disastrous.
LANSBERG:
Dick, as I hear you talk about the complex realities of family firms and also as I look back on the emotionally difficult times that we went through in my own family, I can’t help thinking about the potential dangers of having family business become a new fad among OD consultants. Such a fad might attract someone who was not adequately qualified to deal with the risks involved in dealing with a family firm. Apart from what I would call the typical OD tools, what kinds of
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skills do you think are essential for someone working with these potentially volatile systems?
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BECKHARD:
First I want to agree totally with your statement. Working with family-owned firms and with the families that own them is different from working with other kinds of organizations. It requires different sensitivities and different understanding. Of course, a lot of OD consultants, by professional training and by practice, have the necessary combination of skills-so I’m in no sense assuming that this isn’t a market or a field for them. I am, however, very concerned that the attractiveness and pervasiveness of the problems might lead to inadequate attention to the complexities of the dynamics of family firms. Because one needs to keep track of the fact that one is working with a complex system, one needs systems knowledge, systems skills, and a systems point of view. Second, I think that because one is constantly dealing with family dynamics, one needs to know how family systems operate. Third, in these situations one is dealing with problems in which a strong clinical background helps tremendously in facilitating the work. Finally, I feel strongly that someone working with the owning family ought to have a consulting team that includes people of both sexes. I can’t tell you what a difference it makes when there is a woman as a consulting resource. For example, when working with family firms there are many situations in which men want to talk to men and women want to talk to women. There are other times when men want to talk to women, and women want to talk to men. Having a male-female team of advisors helps tremendously in these cases.
LANSBERG:
Absolutely; this clearly was a critical factor influencing the success of our experience. Let me try to summarize what we’ve been discussing: There are unique issues in family firms that must be addressed if real help is to occur. The issue of succession is both central and critical. Founders need to think for and plan for the whole system-family, founder, and firm- as well as about the interactions between these elements. Founders don’t easily give up their role. Succession is not just an economic or even a rational process. Family involvement in planning the future is highly desirable but not always possible. Advisors need to be aware of systems dynamics, family dynamics, and organizational behavior plus the usual issues. In addition, male-female advisory teams are highly desirable. Does that capture the essence?
BECKHARD:
I couldn’t have said it better myself.