Leveraging the Mission in Family Business

by Danny Miller and Isabelle Le Breton-Miller

To many outsiders, family businesses seem to behave in incomprehensible ways. The New York Times knowingly put its very existence into jeopardy publishing Pentagon documents the government and its own lawyers deemed treasonous. It was their public duty, the owners said—a part of their mission. Hallmark and Levi Strauss sometimes seemed more like clans than companies: Values and loyalty were deemed as important as competency; employees were kept on the payroll for life; and the family looked after their people from cradle to grave. Where would the money come from? IKEA and Wal-Mart didn't just buy from their suppliers, they went in and redesigned their plants and bought them new equipment. Then we have firms like Fidelity Investments, Cargill, and W.L. Gore and Associates that embraced business models so bold and unorthodox as to both ridicule and sympathy.

Yet it was just these distinctive approaches that we kept finding in successful family companies.

Continuity: Pursuing the dream. Our long-lived FCBs commit enduringly and passionately to a substantive mission—to do something important exceptionally well. They invest deeply and for the long run in the competencies needed to attain that mission. And because the company is the vehicle for achieving their dream, families strive to ensure corporate health and continuity, exercising careful stewardship over resources and encouraging long executive apprenticeships and tenures. Short-term tactics and quarterly earnings are furthest from their minds.

Community: Uniting the tribe. To realize their missions, thriving FCBs often insist on building a cohesive, clanlike team. They embrace strong values that rally people around what is important, socialize staff to assure that these values will prevail, and often pamper employees to elicit loyalty, initiative, and collaboration. Bureaucratic rules and financial incentives are secondary.

Connection: Being good neighbors. Many great FCBs cherish enduring, open-ended, mutually beneficial relationships with business partners, customers, and the larger society. These relationships vastly exceed the time span, scope, and potential of episodic market or contractual transactions.

Command: Acting and adapting with freedom. FCB leaders desire the discretion to act independently—quickly and in original ways—often to renew or adapt the firm. They typically work with an empowered top team whose members are similarly free to communicate openly and make decisions. Unlike at many non-FCBs, these leaders do not face hobbling constraints from shareholders.

These driving priorities, and the practices they engender, collectively blend into a kind of symphony that supports powerful strategies common among FCBs. Just as notes can be combined to form a variety of melodies, so can the four Cs and their elements be orchestrated to gird different strategies such as innovation or quality leadership. Now this is a critical point. Volumes have been written about recipes for corporate success that signal the benefits of a whole list of individual practices, including some of the ones we will discuss here. Unfortunately, there are many firms out there that employ these practices and perform miserably. The reason is twofold: First, depending on the strategy and the capabilities the company demands, some priorities and practices are far more important than others; and second, a wide variety of complementary and counterbalancing elements acting in concert are required to make any organization work. Firms that ignore these two lessons, including some of our once-great FCBs, soon become victims of gaps and excesses.

We raise these points here because they signal a major difference between our approach and the typical "best practices" literature. Our stance, quite simply, is that although the individual practices of long-lived FCBs have something to teach us, they are utterly incomplete without specifying the configuration in which they must play a role—specifically, the strategy they are intended to realize and the many complementary elements needed for its pursuit.

Although more "natural" for FCBs, the Cs certainly are not universal there, nor are they beyond the reach or experience of non-FCBs wishing to embrace them.2 Our winning FCBs do, however, pursue them with rare passion and integrity.

Continuity: Pursuing the dream
Great FCBs are unusually devoted to their dream—their mission. They are willing to sacrifice profoundly to attain it, and to safeguard the organization that is its instrument. Take the New York Times. Despite its recent snafu with reporter-cum-plagiarist, Jason Blair, the Times rests on a longstanding tradition of journalistic excellence, one based on thoroughness, truth, and good judgment. The paper's century-old mission is, at first glance, a simple one: "To give the news impartially, without fear or favor, regardless of any party, sect, or interest involved."3 But that's a tall order. To fill it, the Times, at great expense and risk, keeps taking on powerful interests, from the U.S. attorney general in the Pentagon Papers case to, on countless occasions, New York's civic administration and police department. The credo at the paper is that the public has the right to be informed. Leads are to be followed whatever the consequences. Period. The owning Sulzberger family's original mission of truth comes above personal politics, connections, friendships, and profits—and every editor knows that.

The Sulzbergers not only took courageous stands, they invested hundreds of millions of dollars and gave up about a billion dollars in personal capital gains to make the Times the most reputable and thorough paper in America. To fulfill their "public trust," they found and retained for career lifetimes independent and brilliant editors like Arthur Gelb and Abe Rosenthal, whose honesty made the Times an integral part of the conscience of the nation. They recruited the best journalists, set up the largest number of international news bureaus of any news organization in the world, and kept expanding coverage to neglected domains such as health and science, even as their rivals opted for "news lite." And because the Times is the family jewel, the Sulzberger children spent decades learning how to continue this tradition of excellence.

Elements of continuity
The example of the Times evokes a number of continuity elements common to many thriving FCBs. First, firms are so passionate about their mission that they are doggedly persistent and highly vigilant in its pursuit. That's what continuity is all about—chasing a cherished dream. This inspiring mission motivates a relentless development of the capabilities needed to realize it. It also draws forth intensive, patient investment in these capabilities, as well as total-immersion leader apprenticeship programs to impart the spirit to the next generation. Because owners so treasure the company that realizes the dream, they impose exacting policies of stewardship: Risks are controlled and products and practice are constantly improved to maintain a healthy enterprise into the future.4 In the following subsections, we express each of these elements as an imperative, as that is very much how our managers perceived them.

Embrace a Mission That Matters. Substantive missions are not concocted by some strategic planner, nor are they financially driven. They flow from values residing in the bellies of family proprietors. And like all bulwarks, they are immovable. Although missions are manifested in objectives such as making a superb product, pioneering technologies, or establishing an effective brand, they are more fundamental than that. Their ultimate purpose is to make a difference in how people live, in social or scientific progress, even in the joyfulness of life. The Michelins had as a mission to transform travel into a safer, happier experience. The Timkens [of the Timken Company] wanted to make bearings to reduce the friction that impedes global industrial progress. The Times wanted to create nothing less than an enlightened electorate. For these firms, it is not a matter simply of having a clear or ambitious mission, but one of real and enduring substance.

Relentlessly Pursue Core Capabilities. Because they are of pivotal significance to the owners, these missions motivate constant capability development. All firms pursue skills, but few do so with the dedication of our winners. Here the lion's share of funding goes to core capabilities—even in dire economic conditions, even when the company is strapped. Nothing can stop the train. During the Great Depression, while its rivals and customers cut back and adopted a fetal pose, Timken kept enhancing its superior competencies in bearings design, metallurgy, and manufacturing. Having hoarded cash and eschewed debt, it saw the crisis as a great chance to extend its leads. So instead of laying people off, Timken put many of them to work at research, developing alloys that years later became the mainstay of jet engine manufacture, and inventing the dominant technology for seamless tubing. At the same time, the research and development (R&D) staff busied themselves writing internationally heralded bibles on high-temperature metallurgy and corrosion, which, incredibly, remain classics after fifty years. Fast-forward four decades and we find Timken outspending rivals in R&D by a factor of 5 or 6, and building, during the economic crisis of the 1980s, a steel plant three times more efficient than the Japanese mills.5 Given such dedication, it is no wonder the firm has been a market leader for over 100 years.

Invest and Sacrifice Patiently. Profound core competencies may take ages to develop and longer to pay off. So it wasn't unusual for our FCBs to invest all their profits in capability or product development, or to endure losses until the projects bore fruit. In 1978, Times editor Abe Rosenthal had the "crazy idea" of introducing a science section to keep readers informed of an increasingly vital part of society. This initiative would demand costly plant facilities at a time when the paper was hurting. The business end of the Times, moreover, had made it clear that it would be virtually impossible to sell advertising for the section, which then had no link to commerce of any kind. Although Punch Sulzberger acknowledged that fact, he said, in effect, "not to worry": the family had the money and the faith. So the Times went ahead with its new addition, which so clearly fit its information mission. With increasing use of the personal computer, the section became more and more popular. By the mid-1980s, the investment had paid off handsomely in increased circulation and advertising.6

Exercise Stewardship. Clearly, the dream is fulfilled via the organization. So organizational health and continuity are primary imperatives. To promote long-term survival, firms are assiduous resource stewards and risk managers. They minimize debt and build up mountains of cash to last out the dry spells. When they do take risks, they mitigate them by partnering, subsidies, sticking to areas of expertise, and buying countercyclically. Firms also keep their physical assets shipshape. Michelin maintained state-of-the-art facilities by using the steepest depreciation schedule in the business.

Foster Lengthy Executive Apprentices and Tenures. Two other striking aspects of stewardship over the firm and its mission are uniquely lengthy top executive apprenticeships and tenures. Typically, one generation runs the company until the next is ready to take over. This luxury of time allows the old generation to embed its principles in the organization and to train the newcomers. Punch Sulzberger served for twenty-nine years as the Times publisher, twenty of them ensuring that son Pinch learned the business. The Nordstrom, Michelin, Lauder, and Cargill kids spent decades at the feet of their parents—in the office and the living room—all the while absorbing a passion for the mission and the company, under emotionally riveting conditions. The result: Family members, like Pinch Sulzberger, feel not that the business belongs to them, but that they belong to the business, and that they must prove themselves worthy of the association.7

All these elements of continuity supported key advantages among our star FCBs: a striving to do something important exceptionally well; the persistence to create superior competencies; and the capacity to sustain these competencies across the generations. In an economy that has suffered from myopic opportunism, the notion of continuity and its elements warrant revisiting.8

The family roots of continuity
The mission elicits remarkable sacrifice in part because it is so closely linked with the family: its dream, principles, well-being, and reputation—sometimes even its religion. There are few things as compelling as the legacies of our forebears and the future of our children. Given their upbringing, family executives see themselves both as caretakers and crusaders. The onus on them is palpable. In speaking about the New York Times and all it stands for, Publisher Arthur Sulzberger Jr.'s wife said of him, "He knows how fragile it is; he knows how remarkable it is. It's daunting." Said a Times editor: "Deep in Arthur's soul, he firmly believes that if he blows this, he will burn in hell."9

Continuity in FCBs has distinct past and future components. The past takes the form of a proven legacy handed over from the previous generation—an heirloom to be respected and treasured—as is the Times' mission of being a public trust. Matriarch Iphigene Sulzberger, who died in 1990 at the age of ninety-eight, spanned all the generations of the paper back to Adolph Ochs, who first purchased the Times. She saw her purpose as transmitting to the "kids" Adolph's core values of "duty, unity, and the central importance of nurturing the New York Times." Iphigene had conveyed to the family "the conviction that they and the newspaper were one seamless identity." Grandson Arthur Jr. joked that the family had "grown up with tape recorders under their pillows chanting, `You are one with the paper, you are one with the Times.'"10

The future component of continuity is a family's commitment to nurture the business to support subsequent generations. Such commitment pushes family members to conserve resources and build for the years to come. To that end, these families made sacrifices and substantial investments, often living with penurious dividends and plowing back virtually all profits. Because the family is in control, opportunistic shareholders cannot undermine these commitments.

Excerpted by permission of Harvard Business School Press from Managing for the Long Run: Lessons in Competitive Advantage from Great Family Businesses. Copyright 2005 Danny Miller and Isabelle Le Breton-Miller; All rights reserved.

[ Buy this book ]

Danny Miller is a Professor of Strategy at HEC Montreal and Chair in Family Enterprise and Strategy at the University of Alberta.

Isabelle Le Breton-Miller is a human resources consultant and Senior Research Associate at the University of Alberta.