For Many Firms, It’s Not All in the Family

If history is any kind of teacher, the key to success in running a large, publicly owned family business often is to let someone else do it.

“The test of history has shown that it is very dangerous for a family to run a big firm,” said Alfred Chandler, retired professor of business history at Harvard University’s business school.

The resignation of Frederick A. Wang this week as president of Wang Laboratories Inc. may be a case in point.

Wang Laboratories, founded by Frederick’s father, An Wang, until recently had phenomenal success, growing into a $3-billion company largely on the success of its word processors.

But keeping family members running the business may no longer be possible as the company struggles to fend off lenders, boost a sagging stock price and shore up mounting losses.

Not Pleased

Chandler points out that some of the best names in business are those of prestigious families such as the Rockefellers and Du Ponts who preserved their fortunes by installing well-paid professional managers while keeping tight control over their companies through stock holdings.

Perhaps the classic case of a dynasty losing control of a company is Ford Motor Co., which eventually turned the reins over from Henry Ford II to Philip Caldwell in 1979.

Since then, family members such as Edsel Ford II and William Clay Ford Jr. have made clear their displeasure with the lack of family in top company posts.

Many family-owned businesses, however, fight to retain their dynasties, often sparking dissension among other family members or unhappiness among board members.

In entrepreneurial companies such as Wang, it often is impossible for a son or daughter to replicate the success of the founder.

“The tendency is to look at Fred Wang and wonder why he isn’t able to solve the company’s problems or have the same vision his father had,” said Abraham Zeleznik, a professor at Harvard University Business School.

The younger Wang might take comfort in remembering the plight of Robert W. Sarnoff, who proved unable to duplicate the success of a highly inventive father.

Sarnoff was ousted as chief executive of RCA by the company’s board in 1975, ending a family reign that started with his father David 45 years earlier.

At the time, it was assumed that Sarnoff’s removal was due to a failed effort in computers and his inability to repeat his father’s successful gamble in the color television market.

Experts in family succession say nepotism does not have to kill a company and many succeed through generations of family management--particularly if they are not publicly held.

“It’s a crap shoot,” said Robert Dewar, professor of organizational behavior at Northwestern University’s Kellogg Graduate School of Management. “There have been tremendous successes, and there are mega-disasters where you can’t get the family out of there.”