Leadership is one of the most studied and yet perhaps least understood management disciplines. There have been innumerable theories and case studies that seek to illuminate the mystique of the great and heroic leader. There have not been as many studies that specifically emphasize leadership styles and their consequences in family businesses. There is evidence that family businesses that have made the transition from the first to second and then subsequent generations are increasingly implementing co-leadership. That intriguing model will be explored in later articles. The focus for today is the leadership style of the founder –that larger than life entrepreneur whose novel idea, willingness to take risk and unrivalled hard work has resulted in a successful business that could provide handsomely for generations to come. Except that sometimes the leadership style of this founding father often precludes the possibility that the organization will outlive him and indeed be passed onto generations.
Indeed, frequently the founder has devoted little time and energy in building an organization. I regularly say that these founders operate like a star-boy with plenty helpers and do not build team within the business and the family. Their leadership style can be characterized as autocratic. They bring laser attention to what they want to achieve; make decisions without discussions and can be described as “bulls in a china shop.” Alternately, I have encountered situations where the entrepreneurial founder professes to understand the need for more organizational structure and puts mechanisms in place for shared decision making only to overturn the joint position with impunity and often without informing others. The effects of these actions are multifold: decreased morale within the business; poor execution of decisions; hurt feelings among family members. Key players in the company and the business often resign themselves that their efforts are for naught and they simply wait the next bidding of the Lone Ranger. There may be a “Tonto” in the wings but that position is often not held by the same person all the time as the founder may seek out different allies as the situation dictates.
King versus Rich
This fierce independence of thought and emphasis on action has served the founder well. Indeed, it is one of the driving personality forces in those who strike out on their own in their desire to bring an undeveloped idea to fruition. They take chances, eschew too much sharing, have little time and patience for systems and structures and reward followers well for hanging onto their coat tails. Without these entrepreneurs, there would be no new businesses, family or otherwise, to contribute to the world’s economies. They have achieved success in establishing a new business and they go for ultimate command and control. While this approach may have served the company in its start-up phase, the expansion phase usually requires different leadership skills. I read recently of a test that a venture capital firm puts to a company that applies for funds. It requires a determination of whether the owner wishes to be “king or rich.” Those who insist on retaining leadership even if the company will be better served by new blood choose to remain kings, often at the expense of growing the company and becoming rich.
The “big man on campus” approach that founders often embrace within the business often extends into their families. The founders also devote little or no energy to family dynamics. By definition, their entrepreneurial instincts preclude involvement and teaching. They claim that they are too busy fulfilling their dreams in the interest of providing materially for the family. They have little interest in developing next generation members to be leaders, either individually or as part of a team. It is almost as if they expect leadership to be transmitted to their children by osmosis. Then they complain bitterly that their children are not prepared to take over the business so they are “forced” to stay on till God calls them home and He alone knows what will happen after that final event.
Building to Last
If business founders want to build a family business that lasts, they need to recognize the value in differing styles of leadership. Not only is the business environment rapidly changing and the company needs to adapt, but to survive, the company should have moved to a new phase of development. This phase of growth and expansion entails a shift to more participative and collaborative styles of leadership. Founders, who are nimble enough to make that modification, stay on and work on developing leadership within the family and the company. They eventually give up the crown and go for a larger treasury and longer succession line. I know that some of you readers may be ready to send me comments about founders (Gates and Jobs among them) who left leadership positions and had to be called back in to rescue their ailing companies. And I invite you to take a second look at those stories –the founders leave, undergo a transformation in approach and then re-enter the companies, often not as the CEO and for a defined and declared time as well.
For family businesses who are not publicly traded and have Boards of Directors who can enforce change, the onus is on the founder to evolve in his style and approach. It is a tall order, but no more so than starting a brand-new business. Founders with the grit to overcome the challenges of a start-up business have the courage and foresight to make the necessary changes to their own leadership style and to devote resources to developing next generation leaders. They just need to make that decision.