A grave matter for family businesses

Family business founders often want their ideas to last for generations. Indeed, the legacies of some leaders are so strong that they end up controlling their companies from beyond the grave. Such a strong legacy can have benefits, but it can also have truly terrible consequences.

I’ve seen many examples of this “control from the grave” phenomenon, but the Carlson family story, as told in Invent Reinvent Thrive, is a great example that demonstrates how the final result of this control can be difficult to predict.

Curtis Carlson started his company in 1938 with a US$55 loan and grew it into an enterprise valued at more than US$37b in 2008. Its holdings included the Radisson hotels, TGI Friday’s restaurants and Carlson Wagonlit Travel.

Brilliant and prescient about business trends, Curt, as he was better known, was also focused on maintaining absolute power within the family. He aimed for “100 years of family control” and said he conducted board meetings “looking in the mirror while shaving.”

His opinions and sense of control extended to gender issues, anchored by his firm belief that women should be at home raising the kids.

So, when the time came for his replacement, Curt’s strong preference was for a male relative to be his successor, and he appointed his son-in-law Skip Gage as the next CEO.

The problem was Skip failed to meet Curt’s expectations, and there wasn’t another well-qualified male among the second generation. Eventually, Curt’s daughter Marilyn Carlson Nelson was named his successor, replacing him in 1998, a year before his death.

As second-generation CEO, Marilyn was expected to maintain absolute control. She did that, but not in the way her father might originally have hoped. Marilyn recruited and supported women at all business and governance levels, including her daughters Diana and Wendy.

Marilyn also parted ways from her father on the issue of control. She established not only that the CEO could be a non-family member – her successor, Hubert Joly, was from outside the family – but also that the CEO could have complete control over strategic decisions, such as what businesses to keep, sell or acquire.

As a result, her actions prevented the worst aspects of “control from the grave,” but also upheld the best. Remember that Curt’s ultimate goal was to create a 100-year company dynasty; Marilyn understood that reinventions were critical if that 100-year goal was to be met.

There are two big lessons in the Carlson example:

  • Attempts at control are intimately dependent on circumstance. In the Carlson case, the founder’s preference for having a family member lead the business trumped his gender bias, allowing Marilyn to rise to power.
  • Control from the grave can create paradoxes – in this case, the desire for a 100-year dynasty versus ceding family control over certain matters. Here, that required Marilyn to reinvent the family enterprise by creating a female-friendly environment and handing over control of certain matters to a non-family CEO.

The Carlson story illustrates strong attempts at control from the grave. It also suggests that such control is rarely, and really shouldn’t be, irrevocable, though the amount of effort the incoming generation will have to expend to modify it will vary considerably.

Check back next week to read the second part of this three part series by Lloyd Shefsky, Clinical Professor of Family Enterprises

2 thoughts on “A grave matter for family businesses

  1. Pingback: The “ghost on the wall” theory of family control | EY Family Business Blog

  2. Pingback: Family businesses letting go | EY Family Business Blog

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