Three Types Of Founders
—And Their Dark Sides

Though all founders of family businesses are entrepreneurs, not all entrepreneurs become founders. Founders are typically intuitive and emotional people. They obviously have the drive and ambition to build a great business. But they also have a feeling about the place, a love of what they have created that makes them want to perpetuate it through the generations.

They do not always succeed. One analyst of business executives, Manfred Kets de Vries, has written that there are two sides to the founder's personality—the bright side and the dark side. The bright side supports the doing of great deeds and the creation of great enterprises. It also makes founders want to take care of the enterprise they have built and the people who work in it. But founders also have a special relationship to that which they have created: the business. Therein lies the dark side.

Much of the difficulty in passing the business to a new generation arises because many founders are not aware of, or willing to deal with, this dark, less constructive side of the personality. In my research on family businesses, I have identified three types of founders: proprietors, conductors, and technicians. Each type behaves in characteristic ways and has a typical set of responses when he nears retirement age and is forced to confront his dark side.

The proprietors are the legendary characters of family business. Their identity is so totally wrapped up in the company that their attitude toward it resembles Louis XIV's "L'état, c'est moi." They say, in effect, "I'm the company, the company is me"—and, sometimes, "I control the company, and you don't."

Proprietors remain at the center of all the major decisions. They tend to have little trust in others and to treat their nonfamily managers as "the help." As a result, the corporate culture is highly paternalistic.

The children are controlled like everyone else. To them, father is an all-powerful figure, almost God-like. Sons are expected to enter the business as a matter of loyalty; they are given little choice. The role of daughters is to marry, raise children, and be looked after. The children's behavior depends a lot on the relationship between father and mother. If the mother accepts the father's behavior uncritically, the children will probably choose not to fight, in order to survive; they may become passive and submissive. When they join the business, they may keep their distance from the founder, generally seeking positions in some far-flung company operation.

If the mother is independent and resists the father's controlling behavior, the kids are going to learn to fight back. This may produce a pattern in which the children lead a rebellion against the father's authority, and may eventually be fired for it. Not infrequently, the business is destroyed in the wake of the battles between powerful egos.

Perhaps the best example of a proprietor in family business history is Henry Ford, who built the greatest industrial enterprise on earth from the turn of the century to the 1930s. Ford's need for control and his paranoia about unions became so acute that he resorted to hiring goon squads and gangsters to carry out his will. His son Edsel became a pawn in a massive power play and ended up a broken man. By 1946, the enterprise was virtually bankrupt.

When one individual so dominates a business that others cannot share in power, responsibility, and feelings of ownership, succession is a virtual impossibility. Some companies like Ford do manage to survive. But only when the enterprise reaches a certain size can it persist despite the founder's destructive forces and be passed on to future generations.

The second type of founders are like orchestra conductors. They are also very much in control and are central to all key decisions in the company. But the conductors are concerned about harmony, about looking good to their children and being respected in the business community. They typically invite their children into the business, often enticing them with promises of money, power, and prestige. To preserve harmony, they may encourage them to work in different areas of the business—one may be assigned to finance, another to production, and a third to sales. Stew Leonard of the Norwalk, Connecticut, food emporium and Malcolm Forbes of Forbes magazine are examples of conductors who have orchestrated roles for their children.

Conductors build a strong sense of loyalty to the family and work to develop norms that encourage sacrifice for the greater good of the group. They very much enjoy the warmth of family; their offices are usually full of family portraits, the more smiling faces the better. Unlike proprietors, they are able to delegate and give their kids real opportunities.

The dark side does not appear until much later on. In the early phases of the family business, all is hopeful. The children approach their first jobs with enthusiasm and energy and become big assets to the parent. When the sons and daughters marry, they may bring in-laws into the business and finally children of their own. The family business is the nest that provides security, warmth, and closeness for family and nonfamily employees alike.

If the business is expanding and profitable, the conductor has created Camelot. But, like Camelot, it isn't real.

Under the surface, tensions are brewing. As the sons and daughters gain more experience, their personal ambitions begin to intrude on family harmony. They no longer want to be just players in a family orchestra; they want to be conductors too. They are uncertain if they will ever get to conduct the family firm, since nobody ever talks seriously about succession. They are starting to think about pursuing activities outside the firm.

Meanwhile, as the business grows bigger and more complex, disturbing questions begin to be asked. Too much is at stake, too many people depend on the company for their livelihoods; the future cannot be ignored. What would happen if the founder were hit by a truck? Who would provide leadership? Would other family members accept it? It is clear, although never discussed, that the conductor will die one day. One of the children will very likely have to become chief executive. But how can the conductor favor one of them and risk breaking up the team?

Planning the succession thus presents a huge dilemma that the conductor would prefer to avoid, and usually does avoid for far too long. The frustration of the sons and daughters grows, and they have trouble dealing with it because of their tremendous loyalty to the family and the business. When they reach their thirties, the atmosphere at the office begins to go sour, and everyone's performance suffers. Most often, a conflict erupts, and one or more of the sons and daughters may leave the business, thus destroying the fabric of family relationships.

The third type of founder, the technician, has a special talent for creative work or the ability to understand and apply technology. Typically, the business is built almost entirely on his special skill and so depends for its growth on one man's ideas and effort.

The technicians are not uncommonly geniuses at what they do, but they hate administration. The details of managing the payroll, recruiting personnel, collecting accounts receivable, and the like are necessary chores that they would rather not deal with. The managing is done very poorly or delegated to a loyal nonfamily member who provides some structure and cleans up the mess left by the technician-founder.

Although only too happy to give up the administrative details, technicians tend to keep their specialized knowledge to themselves and don't pay much attention to passing it on to the next generation. Their knowledge and skill is like a magical sword, an Excalibur endowing them with the prestige and power they need to get what they want. The last thing they want to do is to give it away, especially to their children, who might eventually usurp their position.

The children decide early in life that they will never be as good as the old man in his area of expertise. They try not to compete with him and, instead, tend to move into areas in which he has little knowledge, for example, marketing or computer systems. Often they develop skills that are sorely needed in the firm. But to have an impact on management, they must deal with nonfamily managers who are the father's entrenched partners and who desperately resist change. And although the children may be very good administrators, the father doesn't respect that.

The technician may not be eager to turn over the business to his children because he feels they lack the right stuff, that is, his technical aptitude. But curiously, as he gets older, as he begins to think about slowing down a bit, he may have no choice but to turn it over to them. The founder may be so vital to the operation of the business that it has little value—and no one will be interested in buying it—without his presence there.

Often, what turns the technician around is his strong desire to see what he has built over a lifetime survive, and his feelings of obligation to the employees, who will be out of jobs unless it does. To achieve a successful transition, the technician must begin passing his knowledge of the core processes of the company on to others. He has to open a dialogue with the next generation, who bring different skills to the business. He must set more realistic standards of performance than he has in the past, and must be tolerant of mistakes. He must learn to delegate key tasks to teams and see that they are properly carried out.

The learning process goes on until the organization can generate the innovations that one genius was able to create alone. (It was perhaps the lack of such a process that got Wang Labs into trouble when An Wang installed his son, Frederick, as president.)

Most founders fall into one of the three categories I have described, though many exhibit some characteristics of all three. To succeed in passing on the business, each may require different kinds of help.

The failure rate for proprietors is extremely high. If the proprietor is willing to let go, he must let go completely. Strong nonfamily managers must thus play a vital role in stabilizing the company and managing the transition. Usually, a nonfamily chief executive is necessary for success.

Conductors usually have better success than the proprietors in working out conflict and perpetuating the business. Not infrequently, however, they will sell the company rather than face the pain of transition. Those who are able to pass on the business typically do so with a lot of assistance from outside consultants or advisors. In addition, an impartial board of directors can often help them face up to the tough decisions called for in succession planning.

Conductors must cope with the anxiety that comes from losing control over events, but they learn to play with the orchestra without insisting on directing every note. As for the children, they grow up rapidly during the planning process and realize they have to accept limits on their personal plans. Once they do, they can negotiate their own interests and participate fully in the give-and-take that will determine the future of the business.

The technicians succeed in perpetuating the business by forming partnerships either with family members or strong nonfamily administrators. Estée Lauder remained the creative force behind her company's products while the business side was handled first by her husband and then by their son, Leonard. David Packard found a partner-manager in Bill Hewlett. And Mary Kay joined forces with her son, Richard, to insure the survival of Mary Kay Cosmetics.

By describing patterns of succession, researchers hold up a mirror in which founders may recognize some of their own qualities. They may not always like what they see, but by acknowledging their dark side, many learn how to keep it from destroying all that the bright side has built.

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