Book Review: Keeping the Family Business Healthy: How to Plan for Continuing Growth,Profitability,and Family Leadership

Ward and the 1980s

The foreword to Ward’s Keeping the Family Business Healthy was written by Léon Danco, frequently referred to as the “grandfather of family business consulting.” This endorsement suggests that the book is targeted toward families in business. As Danco saw it, “family business owners typically fail to recognize the needs of the future in managing their businesses.” Ward goes on to say in the preface that the book’s purpose “is to show family businessmen and women how to keep that dream [that the business should last forever] alive and realize it through good planning.” He provides practical steps for professional management of the firm, coaching family members on applying effective planning measures to succeed. Ward offers advice on marketing, finance and strategic management, encouraging business owners to engage the actions that might be found in many management textbooks. He goes beyond standard prescriptions for success by addressing how family relationships and interactions tend to affect decisions made about the business.

In Guzzo’s review of Keeping the Family Business Healthy, he described many of Ward’s recommendations as representing common sense. He concluded that common sense was the best that could be offered because of the lack of research on management practices in family firms. Many of Ward’s prescriptions are fundamental management principles with no reference to family involvement. But Ward follows those prescriptions with analyses of how family comes into play in implementing professional business practices. He typically introduces a number of likely contradictions or conflicts that may result from family involvement. These chapters are designed to warn family business owners about how family issues may jeopardize the success of the firm. Readers are encouraged to engage in those “common sense” activities.

For example, in Chapter 7, Ward presents 22 alternative strategies for leaders to consider in advancing their companies. Family is only mentioned in the 22nd alternative, selling the business. That alternative is recommended to avoid deterioration of family capital when the business lacks market opportunities. Immediately after the listing of alternatives, Ward begins a section on family considerations, citing them as factors that can narrow the choices among the alternatives. In this example and others, Ward moved beyond “common sense” by basing his descriptions on a study of 20 family firms. Here we find the family literature taking a step beyond the anecdotal reports of consultants to introducing the findings from the analysis of a database. Such extensions from standard normative management principles permeate the book.

Thus, Ward becomes a critical contributor to the family business literature in the 1980s. Even though he was speaking to practitioners, his message was based on research evidence. And he was representative of much of the literature at that point in that his writings were intended to improve the operations of family-owned enterprises by advising them to engage in professional managerial behavior.

J. L. Ward (personal interview, September 29, 2011) explains that he found Danco’s work to be influential on both academics and consultants. From Ward’s perspective, Danco and other consultants displayed empathy with their family business clients. They were showing that the business owners were not alone. Ward wanted his contribution to bridge the gap between what had been written about business planning and books that were addressing family issues. He derived his ideas of integrating the worlds of family and business from research that analyzed survey responses and databases and a historical study of 200 family businesses. Underlying his conclusions were empirical findings, something new to books for family business owners.

Gersick et al. and the 1990s

In his retrospective, Ward views the decade of the 1990s as the beginning of a period in which other researchers were reporting best practices that family business owners could apply. This led to the growth of family councils and other mechanisms for formalizing the family and business relationship. A shift was beginning from simply telling owners how to run their businesses more effectively to learning from the successes that family firms achieved, a shift reflected in the book by Gersick, Davis, Hampton, and Lansberg (1997).

The four authors of Generation to Generation straddle academia and consulting. They are trained researchers who have collected and analyzed data and reported their findings in peer-reviewed journals. To that, they added their direct personal experience in counseling families in business. In their preface, they attributed their desire to formalize and present a developmental model of family business to their work with a family-owned corporation, Caterpillar, Inc., and with 70 Caterpillar dealers, the vast majority of which were family businesses. Their consulting work had concentrated on ensuring the continuity of those dealerships. The authors were able to document issues that they subsequently observed were consistent with those faced by firms beyond their initial sample and, in fact, beyond international boundaries.

In Generation to Generation, we find an approach often used by scholarly researchers, but less by practitioners—building on the foundation laid by others. In this case, Gersick et al. review conceptual models designed by others, acknowledging the significant role played by consultants. They explain how the notion of family and business as overlapping circles was elaborated on by Tagiuri and Davis (1982) into the “three-circle model,” family–ownership–business, perhaps the most widely known and accepted model in family business research and consulting. The sense of Gersick et al. was that the three-circle model gives a snapshot of a point in time; therefore, a more elaborate model was needed to examine how each of the circles might change as people come and go over time.

The authors proceeded to explain how each circle in the Tagiuri and Davis model can be extended into a dimension by including the time factor. They explored what can be concluded about the family business by applying the model stages, specifically through considering generational transitions from controlling owner to sibling partnership to cousin consortium. From their empirical analyses, the authors introduce “lessons from experience.” These go beyond their combined individual observations. They reference the investigative work of others that supports propositions of best practices.

It is interesting to revisit Aronoff’s (1996) original review of Generation to Generation. He concluded that the developmental model “serves primarily as integration and recapitulation” of prior work. He predicted that the model would “not achieve the widespread acceptance of the family–ownership–business three-circle conceptualization.” In my own opinion, the Tagiuri and Davis model remains dominant in education and consulting practice. As I wrote this review, I performed a Google Scholar search, however, and found over twice as many citations for Gersick et al. as for Tagiuri and Davis. I further acknowledge employing both models in my own work (Hoy & Sharma, 2010), drawing predominantly on Gersick et al. to extend life stage analysis beyond the three circles to individuals, products, industries and more.

Looking back on the book’s impact, K. E. Gersick (personal interview, August 17, 2011) reiterates that its purpose was to extend the three-circle model by taking a developmental approach. He feels that the Generation to Generation model has been validated and elaborated on by others. Although Gersick contends that there is nothing he and his coauthors would regret, he does believe they would write the family dimension differently today. He now views that dimension as moving from nuclear to multigenerational to networks of families.

Gersick’s assessment is that when the book was published, there was still a question of whether family business would be a field or a fad. He sees their book as making its appearance at a time when the field was moving beyond story-telling and into in-depth data analysis, with the client base of the coauthors being a major source of data. He describes the collaborations of the four authors as meeting-time well spent, working together, and exchanging ideas. According to Gersick, the four authors have followed different streams of research interest, but that the book is still their touchstone.

An advancement in the field that Gersick sees in the 21st century is the clarification of the central role played family businesses in the global economy. There is both economic significance and conceptual interest. The breadth of empirical research is encouraging. He believes that succession and competition for power remain sources of tension, and he raises the question of how to recruit positive family talent.

Miller and Le Breton-Miller in the 2000s

Rather than emphasizing the problems of family firms, Miller and Le Breton-Miller in Managing for the Long Run identify their advantages. In Ward’s view, this book marked the point at which the family business literature moved beyond best practices and began proposing that there were competitive advantages that nonfamily firms could learn from.

Miller and Le Breton-Miller do not have the same length or breadth of experience in family business as do Ward and the Generation to Generation coauthors. In the Acknowledgements section of the book, they credit some of the pioneers in family business research and education—John Ward, Ivan Lansberg, and especially Lloyd Steier—as having stimulated their interest and commented on their studies.

This book sprang from watching widely considered well-managed corporations stumble and sometimes collapse. How could such organizations go wrong? Why could they not sustain their successes? Miller and Le Breton-Miller decided that they should examine firms that had survived decades and more, firms that had overcome economic and competitive obstacles, not merely surviving but prospering. They discovered that such businesses often were family controlled. They then compiled a group of firms that had outperformed peer nonfamily firms. The median age of the companies they studied was 104 years. The objective was to find out how companies sustain success.

The research methodology is presented in detail in the appendices of the book. From the data collected and analyzed, the authors identified four driving priorities that they labeled “the four Cs”:

Continuity: Pursuing the dream

As Sharma (2005) observed in her original review of Managing for the Long Run, the priorities do not constitute a firm’s strategy. Rather, using a configurational approach, Miller and Le Breton-Miller explained how the four priorities and their supporting practices may be blended differently to enhance successful implementation of five distinct archetypal strategies, including building brands, mastering operations and quality, and leading in innovation.

In the concluding chapter of their book, the authors cautioned readers not to oversimplify the strategies for achieving long-term success. Nevertheless, they introduced two tables that effectively summarize what they discovered through their research that differ from dominant practice in nonfamily firms. Table 9-1 contrasts the practices of the family-controlled business that were studied with common practices of governance, leader philosophy and organizational design. In Table 9-2, they offered similar contrasts for functional approaches to management—human resources, marketing, operations, and so on. In this way, they communicated to readers the comprehensiveness and complexity of the steps to be taken, but with clarity of purpose.

In reflection, Miller and Le Breton-Miller feel that the lessons they extracted from the family-controlled companies are, given our recent economic crisis and accelerating globalization, even more relevant for nonfamily firms today than when the book appeared. If they had to specify the most valuable lessons, they would select the time perspective, that is, taking a long view of implementing strategies and achieving goals, and the treatment the family firms exercised with partners, through building trust, cultivating and maintaining relationships.

D. Miller and I. Le Breton-Miller (personal interview, August 8, 2011) describe their venture into family business research as eye-opening. They report being struck during their conversations with the family business leaders about their felt responsibilities as stewards of both company and family. At the beginning, the authors were looking for a model that would help corporate leaders move away from short-term orientations. They found moral values underlying the desire to sustain enterprises and that trust among family members filled a void that can occur in nonfamily businesses.

The Authors’ Reflections

As we look back at 25 years of evolution in the study of family businesses, the three books described in this review are not only major contributors to the body of knowledge and not only instigators of research streams. They are also representative of the progress of the field. In tracing family business-related publications over time, Ward acknowledges the role the work of consultants played in what he produced in 1987. His intention was to guide family business owners to think about their businesses and manage them more professionally. He sees Gersick et al. as beginning the era of identifying best practices for families to follow in sustaining their firms.

Then in the 2000s, Miller and Le Breton-Miller move beyond advising owner/managers by introducing competitive advantages of family businesses to leaders of nonfamily corporations. As we embark on the next decade, Ward feels we are addressing the arts of family business practice, with an emphasis on implementation of what has been learned.

Gersick has a parallel view, but he adds a cautionary note that empirical investigations are exploding without a corresponding development of conceptual frameworks. He hopes to see scholars build from his model and others and examine societal and economic phenomena that underlie ownership changes, particularly as enterprising families transform from operating systems to asset management systems. He asks the question, how do families hang together when they are asset allocators and sequential investors instead of business managers?

A final observation offered by Miller and Le Breton-Miller is that we may need to reexamine what we think we have learned. Early attention of the field was on solving the problems of families in business, helping them adopt effective management practices. Their work and that of others suggests that we study and teach regarding helping families overcome problems may be different from the factors that make them successful and sustainable both as families and businesses in the long term.

Rereading these three books has been an enlightening experience, reminding me of how much each has to offer. They continue to guide us to the work that needs to be done.