The “ghost on the wall” theory of family control

Last week my last blog introduced the idea of “control from the grave” in family businesses and examined how it can exert such a powerful force. I want to explore this theme further and look at control that’s implicit and has more to do with influence – I call this my “ghost on the wall” theory.

This time, I want to use the example of the Crown family business. Material Service Corporation was started by 23-year-old Henry Crown after World War I with a loan of US$10,000.

Henry left the company to serve in World War II, eventually retiring as a colonel and returning to the business. Material Service was hugely profitable after the war. Success saw Henry buy the Empire State Building in the early 1950s.

Later generations of many family businesses typically show respect for the founder, but the Crowns’ deference is extraordinary. My interviews with family members highlight their deep reverence for Henry and his memory.

Henry’s son Lester succeeded his father after his death in 1990. Lester and his cousin-by-marriage Corky Goodman ran the business for decades, and were eventually succeeded by Lester’s son Jim, who runs the business, now called Henry Crown and Company, today.

There is little ostensible control from the grave in the Crowns’ case. But it is clear that Henry’s influence stretches to the present day – he is certainly a ghost on the wall.

The Crown reception room has a glass case filled with founder-related memorabilia and photos. And on the wall outside Lester’s office is a near life-size picture of Henry. The founder’s image symbolizes the need to respect his legacy with regard to values, culture, practice and policy.

Control in this case is not carried by formal contracts or bylaws. Henry lives on through the veneration of later generations’ – not by edict, but by the influence of reputation and honor.

Beyond Henry’s picture, his influence has also been kept alive by his stories. Jim told me how he and his brother would be brought to their grandfather’s office on Saturday mornings where they were enthralled by his tales.

These were stories such as how he got control of the Empire State Building or how he lost the opportunity to buy the land where the United Nations building now sits in New York.

But Henry’s stories weren’t just about business success and failure. They also related to values, such as building trust-based relationships. One story concerned a banker who didn’t even open Henry’s sealed collateral documents because he trusted his word.

Another story related to the importance of intrinsic rather than extrinsic rewards. Today, all family employees draw the same salary, regardless of title or tenure. All of this helps to guide the behavior and decisions of the business’s current leaders.

In this way, the Crown family story highlights that control from the grave needn’t be control at all. The ties that bind, rather than being “tied up” contractually, may be more effective when succeeding generations feel strong respect for their ancestors.

In fact, this more subtle influence often serves the family and business much better than more overt control. It allows future leaders to make their own decisions while still being guided by the family’s legacy of values and stories.

Come back next week to read the final part of the series from Lloyd Shefsky.

One thought on “The “ghost on the wall” theory of family control

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

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