When Children Assume Command of the Boardroom : Management: Passing a family business on to a son or daughter can be easy--if the relationships are healthy to begin with.
It was the little changes Frank Perdue found hard to watch after he turned over his chicken empire to his son.
Jim Perdue wanted to replace the red Perdue sign on the company’s trucks with a blue-and-yellow winged logo. The elder Perdue, who still comes to the office every day, didn’t like it. He complained. He sent memos.
“I think he’s still uncomfortable with the change, and that’s all it is--change,” Jim Perdue said. “Change isn’t easy for anyone. But I haven’t gotten any notes lately on the logo, so maybe that one’s completed.”
Since Jim Perdue took a full-time job with the company out of college in 1983, the Perdues have had a relationship that, despite differences like the disagreement over the logo, lets them avoid playing out family rivalries in the corporate boardroom.
Their relationship smoothed their path through what business consultants call the toughest obstacle facing family businesses: handing control of the company to the next generation.
Frank Perdue turned over the chairmanship of the company in 1992, and Jim Perdue took over his father’s job as advertising pitchman this year. At Chicago-based Playboy Enterprises, Christie Hefner took over from the company’s public face, Hugh Hefner, in the 1980s. And Johnson Publishing Co. founder John H. Johnson has installed his daughter as heir-apparent with little corporate turmoil.
*
It doesn’t always work out that way. Fewer than one in three businesses are inherited by a second generation, and only 13% pass on to a third-generation amily member, according to John Ward, a psychology professor at Loyola University in Chicago and author of “Keeping the Family Business Healthy.”
Business consultants say corporate fiascoes--such as the $100-million lawsuit that Dart Group Corp. chairman Herbert Haft is pursuing against son Ronald Haft in a struggle for the family’s retail empire--begin at home.
“The key is that senior person, whether it’s Haft or Frank Perdue or whoever, can either make it work or not make it work,” Jim Perdue said. “The big difference here is Dad obviously wants this to work.”
Starting with strong family ties helps, said Alan Plotkin, a business consultant and psychology professor at Loyola College in Baltimore.
“Healthy families work things out well,” Plotkin said. “But families that have problems they don’t work out then have business problems.”
Many family businesses, such as Perdue Farms, hire consultants to guide them through the change, while other business owners, like Johnson, go it alone.
Owners simply need to show a united front to employees when handing over a business, Johnson said. Johnson, who is chairman and chief executive officer, plans to turn over the publishing of magazines such as Jet and Ebony to daughter and company president Linda Rice.
To make his daughter’s authority clear, Johnson refuses to allow workers to appeal her decisions to him.
“Whoever is in charge has to make it known to employees that this family member has power,” he said. “If I’m not here, she’s completely in charge.”
Johnson, 77, said he isn’t ready to retire from the publishing empire he founded in 1942 with $500 he borrowed. But because his 37-year-old daughter has proved her ability to manage and bring new ideas, including redesigning a cosmetics line the company now sells in 2,000 stores, he won’t worry when the next generation takes over.
“If and when I decide to retire, I’ll feel very comfortable with her being in charge,” Johnson said.
Workers often have to adjust themselves to a change in style, as Perdue employees adapted to the lower-key style of Jim Perdue, which contrasts dramatically with Frank Perdue’s hands-on approach.
One company manager despaired at getting calls from Frank Perdue every Sunday morning. Eventually the executive, who wasn’t the most senior manager in his department, asked why.
“It turns out he was the only one not in church,” Perdue spokesman Dan Prince said.
By contrast, Jim Perdue coaches his son’s soccer team, delegates more and reserves weekends for family.
“To me, the family was a source of strength and a source of stability, and I do believe that, just like work, you’ve got to put time into something in order to get something out of it,” Jim Perdue said.
At Playboy, the change in leadership meant a change in focus. While founder Hugh Hefner delegated financial oversight to company managers and concentrated on the magazine’s contents, Christie Hefner concentrated on the finances and marketing of the Playboy empire.
*
“Hef enjoyed the creative aspects of the business,” Playboy spokeswoman Terri Tomcisin said. “He was never really interested or involved in the financial aspects of the business.”
It is often the second generation that provides the innovative spark to set the business afire, according to Howard Muson, publisher of Philadelphia-based Family Business magazine.
“One of the greatest benefits of succession in a business is freshness,” Muson said. “Entrepreneurial genes can surface in the second, third or fourth generation.”
Muson recalls the legend of J. F. Hillerich, a carpenter who carved bedposts, bowling pins and butter churns until his 17-year-old son, John Andrew (Bud) Hillerich, had an idea.
In 1884, the young apprentice carved a bat for a Louisville Eclipse baseball star in a batting slump. The Louisville Slugger, later used by the likes of Babe Ruth and Ty Cobb, helped turn Hillerich & Bradsby into a $100-million sporting goods manufacturer under fourth-generation owner Jack Hillerich.
In the end, Frank Perdue said, family business owners simply have to let their successors make their own mistakes, as his own father did when Frank Perdue invested heavily in whey that he planned to sell to Maryland chicken farmers as feed.
“I never sold a dime of that stuff,” he said. “My dad watched me make some pretty big decisions that were not very smart. Those are lessons you really remember.”
