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GEL Brings Together Next-Generation Family Business Leaders

2016-08-11 · New York

Next-generation scions of Western and Asian family-owned companies learned to meet the challenges of corporate leadership and family business in CKGSB and Cornell University’s joint Global Emerging Leaders in Family Enterprises (GEL) program.

 

Taught by faculty from both CKGSB and Cornell, students in the program, which held summer sessions in both New York City and Ithaca, NY, learned how to develop succession strategies for sustaining their enterprise over generations. They also got tips from peers and innovators on expanding the global business network and exploring the commercial and cultural differences between China and the US while gaining insight into best practices. CKGSB Chief Representative for the Americas, Mary Wadsworth Darby, and Daniel Van Der Vliet, Executive Director of the Smith Family Business Initiative at Cornell University, served as academic co-directors.

 

Despite the family business focus, “these are sound business practices that should benefit anybody in business,” Mr. Van Der Vliet told a July 11 session at CKGSB Americas’ Manhattan learning center. “About 30 percent of family businesses at each generation fail,” he said. “Only about one in every three businesses makes it through to the next generation.”

 

Leadership transition

Family businesses – defined as those maintaining at least 15 percent ownership control – are expected to represent nearly 40 percent of the world’s large enterprises by 2025.

 

Notwithstanding traits such as concern for family relationships and the dream of continuity across generations, succession for these firms is a major US issue. Just over 39 percent of US family businesses will face a leadership transition in the next five years. Meanwhile, in China, where many businesses are still run by their founders, 80 percent of children do not wish to join in the founder’s business, Mr. Van Der Vliet said.

 

“Think about changes in education, changes in global travel, changes in technology,” he said. “The lives that each of you live are very different from the lives that your parents live and are very different from the lives their parents lived. As the world changes, sometimes being in [a particular field] is not as appealing to you as it was to your parents or the senior generation.”

 

Yet there is little doubt that firms that clearly identify who will be responsible for succession and have good communication about business issues find success in the decades ahead, Mr. Van Der Vliet said. As complexity increases in terms of ownership, management, family and governance, “structure is your friend,” he said. The key is clearly delineating decision rights and making decisions “in the right place with the right inputs.”

 

The program participants represented a range of enterprises confronting a fast-changing technological landscape. A case in point was the student whose family operates “Car Life,” a one-stop shop for driving lessons, car buying, vehicle support, and insurance policies. The student was concerned about how the advent of driverless car technology might disrupt the driving-instruction market and even the concept of car ownership. Mr. Van Der Vliet pointed out that the student was not alone: car-rental firm Enterprise Rent-A-Car also ponders how autonomous driving technology may affect car rentals. Earlier this year, Greg Stubblefield, the Executive Vice President and Chief Strategy Officer for Enterprise-Rent-A-Car’s holding company, said the US car-rental industry may be one of the early adopters of autonomous cars, since the firms are well poised to to manage the vehicles.

 

Disruptive technology

Mr. Van Der Vliet also cited a parallel with ride-sharing service Uber’s disruptive influence on the New York City taxi industry. For years, the city has issued medallions which allowed taxi companies to operate. Due to their high cost and limited availability, medallions were a highly prized commodity, often handed down through generations by family-run taxi operators. “Uber can be more convenient, provide a little better service at times, has nice cars, so you see cities fighting, do we really let Uber in or not, because it’s going to disrupt a source of revenue for the city?” Mr. Van Der Vliet said.

 

Concerns such as these underscore the challenges of “dealing with change,” he said. “It can be difficult (for a leader) to understand what’s coming.”

 

Students received another view of leadership from Livingston L. Biddle, the former Senior Vice President of Real Estate for multinational mass media company Comcast. Mr. Biddle, who is now Head of Real Estate at Hajoca, told how Comcast’s then-aging company founder Ralph Roberts managed high-level input in the manner of a gardener tending his crops.

 

“The senior people in the company would meet once and week – and argue,” he said. “Ralph was the referee, and you could say anything you wanted to. The only thing they talked about was what was wrong. The point was to get everything on the table. That is so unusual. Most times you find people only want to say what is politically correct,” Mr. Biddle said. “At then, at the end of the day, Ralph would say: ‘I like that, I like that, I like that. Let’s combine them. Any problem with that?’ And that was it.”

 

Mr. Biddle’s father was Livingston L. Biddle Jr., a descendant of the Philadelphia family who authored the law that led to the creation of the National Council on the Arts and the National Endowment for the Arts and was a chairman of the endowment. He died in 2002. Mr. Biddle’s ancestors and relatives included William Biddle, a friend of William Penn, founder of Pennsylvania; Nicholas Biddle, founder of the Second Bank of the United States; and Francis Biddle, attorney general under US President Franklin D. Roosevelt.

 

Wealth and values

Mr. Biddle also talked about James Buchanan Duke, the US tobacco and electric power magnate who introduced modern cigarette manufacturing and marketing, and his involvement with Duke University. On his death, Mr. Duke left about half of his estate to The Duke Endowment, which gave another $67 million – equivalent to $904 million in 2015 – to the trust fund in support of Duke University, not-for-profit hospitals, children's homes and other schools and causes. The Duke and Biddle families have intermarried twice.

 

The topic of family wealth and values also received an in-depth treatment from Sharna Goldseker and Adina Schwartz, the Executive Director and Director of Client Engagement with 21/64, a non-profit practice specializing in next-generation and multigenerational engagement in philanthropy and family enterprise. Students participated in group exercises aimed at drawing out their feelings about being the future leaders of family businesses.

 

The program shifted to The University Club, where Peter Rockefeller O’Neill, a member of New York’s legendary Rockefeller family, spoke. Mr. O’Neill chairs the 5600 Operating Committee for the Rockefeller Family Office, and previously chaired the Rockefeller Family Council. He is a current member and previous chair of the finance and investment committee of the Rockefeller Family Fund.

 

Company visits on the Manhattan itinerary included a visit to Morgan Stanley.

 

The week included lectures and activities at CKGSB’s New York office on leadership self-awareness and critical thinking and entrepreneurship and innovation business creation and growth. At Cornell’s Ithaca, New York, campus, the program included a look at leadership cultural and social values taught by CKGSB’s Ms. Darby.

 

Ms. Darby took participants in the July 14 Cornell session through a comprehensive look at global leadership principles. Her lecture and presentation illustrated that while Western and Eastern notions of leadership have traditionally differed, China’s recent emergence as a global economic powerhouse has sparked both interest in leadership in Asia and China and an awareness that emerging Asian leaders likely will be shaped by their historical, cultural and business contexts.

 

Western leadership traits have been learned primarily through the study of the characteristics of “great men in war or other competition,” Ms. Darby said. She highlighted the work of Harvard Business School leadership scholars Warren Bennis and Michael Jensen, with a discussion of their acclaimed theories on the psychological foundations of leadership. By contrast, Chinese leadership views have been mainly grounded in the Confucian and Taoist schools of thought developed in 6th century B.C.