Trials of The Prodigal Child

Trials of the Prodigal Child
E s ta b l i s h i n g yo u r a u t h o r i t y w i t h i n
t h e f a m i ly e n t e r p r i s e
Jean-Jacques Rousseau wrote, “no man has any natural authority over
his fellow men.” It’s a wise caution for the sons and daughters of prominent
families who wish to join their families’ enterprises. While power can be
granted by edict, legitimate authority must be earned in the eyes of those
who would be led. Those who understand the dynamics of establishing
authority, and fully embrace the challenges, will be in a far better position
to become an effective and enduring leader.
Is this what you really want?
The first step in establishing authority
in a family enterprise is for would-be
successors to reflect on whether that
is what they really want in their life,
and whether it is worth overcoming the requisite challenges. Glenn
Kurlander, Head of Family Governance
and Dynamics for Morgan Stanley
Private Wealth Management, notes
that many who grow up with the assumption that they will join the family
business or foundation overlook this
seemingly obvious step. In addition to
the issues one considers before taking
any position, Kurlander suggests that
young scions consider the impact their
participation will have on both the
family enterprise and on their family relationships and decide whether
they are prepared to deal with any
consequences. He adds, “It’s important to understand what the business
means to the family and whether it
means the same thing to the child;
how will the child’s status as a family member affect how he or she is
evaluated, compensated, promoted,
etc.” If the child is comfortable with
all those answers, it’s time to take
the next step.
Am I in good hands?
News that the boss’s child is taking
an active role in the family business is
rarely met with universal enthusiasm.
Absent any other inputs, the base assumption is that the new associate has
gained influence not because he or she
has earned that right, but because of
his or her parentage. Employees, customers, shareholders and even other
family members are likely to harbor
some degree of skepticism and perhaps
resentment. All will be watching carefully to see if the aspiring new leader is
capable of handling the responsibilities
he or she has been given.
According to family enterprise expert
Ivan Lansberg, a frequent speaker at
Morgan Stanley Private Wealth Management symposia, successors of family businesses often do everything in
their power to confirm the worst suspicions of skeptical stakeholders. Having
grown up within the family enterprise,
they have witnessed the respect and
deference shown to their predecessors
and assume the same loyalties will
be conferred upon them. As a result,
they do not adequately prepare themselves. They make promises they can’t
keep, panic in the face of adversity
and are shocked when stakeholders
turn against them. In essence, they
fail the tests they never knew they
were taking.
Every stakeholder silently asks whether
he or she will be in good hands when
this scion ascends to the top. “I lead
because it’s my turn,” is not likely to
inspire confidence.
At the same time, Kurlander notes,
the child may be insecure about his or
her own abilities, particularly where
the senior generation family member
casts a huge shadow. The child may
be wracked with insecurity as to how
he or she will ever measure up. “Having to take the reins and live up to the
expectations of family members and
other constituents, while we try to quiet
our own demons, can be immensely
daunting,” Kurlander says.
Trials of the Prodigal Child
“Nearly all men can
stand adversity, but
if you want to test a
man’s character, give
him power.“
—-Abraham Lincoln
The tests of a leader
In his book, “Succeeding Generations:
Realizing the Dream of Families in
Business,” Dr. Lansberg suggests that
aspiring leaders must pass a series of
“iterative tests” to establish their authority1. He defines these as the trials that allow followers to assess and
interpret the ability of the leader to
lead1, including:
• Qualifying tests that show how well
the successor has prepared for his or
her new position
• Self-imposed tests that determine
whether the successor keeps his or
her promises
• Circumstantial tests that uncover how the successor responds
to a crisis
• Political tests that reveal how well
the successor can handle challenges
to his or her authority
As the potential successor steps into
the spotlight, the iterative tests allow
followers to form opinions about his
or her capabilities and character and
to decide how well this leader will help
them achieve their own ends. The success of a new leader depends on his or
her capacity to understand, accept and
manage this iterative testing process.
Qualifying tests
The first tests for successors come
before they enter the family enterprise. Stakeholders will look to
satisfy themselves that successors
are prepared to assume positions of
responsibility, preferably by establishing a track record of legitimate
achievement outside of the family
embrace: Where did they go to school?
Have they distinguished themselves
through military, community or other
relevant service? Has anyone outside
the family been willing to hire and
promote them, and if so, what did
they do to deserve it?
2
In essence, stakeholders want to know
what a successor has done to qualify for
the position, other than being born to
the right parents. The results of this assessment will greatly color perceptions
on the successor’s early performance
within the enterprise. As the inevitable
on-the-job missteps occur, stakeholders
are more likely to give a pass to those
they feel are well qualified for the job.
They will be more likely to attribute a
new leader’s mistakes to preexisting
circumstances, or write them off as
adjustments to the new organization.
To pass the qualifying tests, Lansberg
has two recommendations:
• Undertake a rigorous education
• Establish a performance record in
the outside world before joining the
family enterprise
Understanding that many successful
families value practical experience over
formal business education, academic
achievement carries weight beyond the
skills and talents it conveys. Schooling
at prestigious institutions carries an
implicit endorsement by a respected,
independent party. It indicates that
the young scion has been recognized
as possessing outstanding potential.
“A scion’s willingness to undertake a
rigorous education,” Lansberg notes,
“has always been a powerful antidote to
stakeholders’ concerns about privilege
and patronage.”
Regardless of where, or whether, successors go to college, they are well
served by working outside the family
enterprise before joining the fold. This
conveys that the successor is willing to
be held accountable within an organization where he or she has no home-field
advantage. It also demonstrates that
the successor has other options and has
joined the family enterprise because
that is the one place he or she wants to
be, and not the only place the successor is welcome. “If they’ve succeeded
in another venture,” Kurlander notes,
“they come to the family business with
a significant reservoir of credibility,
which they can draw on as necessary.”
Self-imposed tests
Many young scions entering their family enterprises want to make their mark
quickly. They understand they are in
the spotlight and want to show the
world that they have what it takes to
carry the family enterprise to the next
level. They establish exceptionally ambitious goals and set highly aggressive
timeframes to achieve them. With the
best of intentions, they make promises that can only be kept if everything
proceeds according to plan. Perhaps
unwittingly, they have said, “Here is
my plan. Judge me by its success.” They
soon learn that everything rarely goes
according to plan.
New successors often underestimate
the importance of predictability in
earning stakeholders’ trust. Rather
than setting the bar too high, new leaders should set relatively modest goals,
and seek low-risk growth strategies to
achieve them. By under-promising and
over-delivering, they will earn the trust
of stakeholders, laying the groundwork
for more ambitious goals further down
the line. “Just as in the case of prior
experience in the non-family enterprise,” Kurlander says, “early successes
build up a store of credibility, which the
new leader can draw upon when the
going gets rough.”
For scions who enter their family enterprise at a senior level, one of the
first self-imposed tests will come in
assembling their team of key executives
and advisors. The most certain way for
the insecure successor to fail this test
is to exclude executives with talent
and experience superior to their own.
“Smart leaders,” Lansberg says, “pick
seasoned collaborators who challenge
their thinking and complement their
deficiencies.”
Political tests
No one ever ran a successful enterprise
by trying to make everyone happy all
the time. In the course of exercising
leadership, a successor is certain to
upset various stakeholders. Some of
the affected individuals are likely to
turn into rivals who want to enhance
their own influence by undermining
the leader.
Successors who lack the mettle to
confront these rivals are likely to lose
the respect of their stakeholders and
embolden others who may subvert
their authority.
The best time to head off challenges
to authority is before they begin. By
connecting the needs and aspirations of
stakeholders to their vision of the enterprises’ future, effective leaders create a
shared vision and a common mission.
Those who believe that the new leader
has their best interests at heart are less
likely to oppose him or her.
It’s easier to
pa ss a t es t
when you
know you are
ta k i n g o n e
It’s easier to pass a test when you
know you are taking one. To establish
your own authority within the family
enterprise, you will be subject to four
trials… whether you like it or not, or
even whether you know it or not:
1. P
ass the qualifying test by getting
a strong education and establishing
a solid track record outside the
family enterprise.
2. P
ass the self-imposed test by setting
clear and measurable objectives and
keeping your promises.
3. P
ass the circumstantial test by
leading your team effectively through
trying times.
4. P
ass the political test by controlling
those who seek to undermine
your authority.
Of course, not everyone will be won
over. New leaders must also learn to
pick their battles with care and to fight
them with the best interests of the company in mind. Stakeholders tend to
understand when someone is protecting
the firm’s interest and when that person
is just protecting his or her own.
Circumstantial tests
The current economic environment
provides ample opportunities for a successor to demonstrate that he or she
has the stuff to lead an organization
through difficult times. How well he or
she copes with unplanned challenges
will go a long way toward establishing
or deteriorating that successor’s author3
Trials of the Prodigal Child
ity within the family enterprise. When
the shells are flying, no one cares who
your parents are.
These circumstantial tests are particularly important in that they allow followers to “write” narratives
about their leaders. Such narratives
are deeply ingrained in the culture.
From Odysseus to Beowulf to Luke
Skywalker, the scions of illustrious
parents become legendary leaders by
displaying courage in the face of adversity. Effective performance in times
of crises tends to trump contextual
factors, such as birthright, allowing
the emerging leaders to establish their
own legend.
Of course, performance cannot be
judged effectively if the successor is
not in a position that allows him or
her to clearly demonstrate what he
or she can do. Those who run family
enterprises are strongly advised to
avoid assigning young successors to
amorphous titles without clear accountability. Young executives, including successors, need the opportunity to
succeed and fail on their own merits.
Failure, on a manageable scale, is ultimately less corrosive to their authority than the inability to ever judge
whether or not they have succeeded.
Support instead of shelter
Many parents who have built a substantial enterprise hope that their
children will follow in their footsteps.
Those who have earned the mantle
of authority through their own trials
are tempted to protect their children
from the hard glare of judgment. They
assign them to ambiguous roles, exaggerate their contributions and fight
their political battles for them. In the
process, they deny their heirs opportunities to establish their own authority. Dr. Lansberg maintains that this
problem can be particularly acute in
situations in which parents maintain
a highly active presence in the institution after tacitly ceding control to
their successors. In trying to decrease
the risk of short-term failures, they
make it substantially more difficult
for their successors to defend their
positions over the long term. As Kurlander warns, “If the parent creates
the impression that even he or she
lacks confidence in the new leader,
it may be very difficult for the new
leader to recover.”
Embracing the challenge
In “The Prince,” Machiavelli wrote
that those who become “princes by
good fortune do so with little exertion on their own part, but subsequently, they maintain their position
only through considerable exertion”
while those “who become rulers by
prowess acquire their principalities
with difficulty but hold them with
ease.” In other words, parents can
appoint their children to leadership
positions, but only followers can grant
them the authority to actually lead.
Only the successors themselves can
decide whether entering the family
enterprise is worth the considerable
efforts it will take to succeed. Young
scions who understand and embrace
these challenges are in a far better
position to develop into effective and
enduring successors, able to carry the
family enterprise into the future.
1
Lansberg, Ivan; “The Tests of a Prince,”
Harvard Business Review.
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