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How one famous family oversees its business

Jul 06, 2009 Business Daily, Strategy

“G.M.’s managers must answer to a new majority owner, the federal government, which in turn hopes to sell off its stake to other investors. Chrysler executives are learning to work with the Italian automaker Fiat, which acquired most of its assets.
Ford’s top managers said they have no such worries about their controlling shareholders.
“These people are so steadfast,” Mr. (Alan) Mulally (Ford CEO) said. “They believe in this company so much.”
The Ford family members own a special class of stock that gives them 40 percent voting control.
“I feel this is one of Ford’s greatest assets, and one that G.M. has never had,” said David L. Lewis, a business historian at the University of Michigan. “The family has been an oasis of stability through the years.””

International Herald Tribune (23 April, 2009)

The problem of the family business that outgrows the founding family is a perennial one. All over the globe, families start businesses peopled exclusively with family members. Often, the emotional commitment and drive that characterises these firms creates early success. Family firms can be a great engine for growth in any economy.

The problem comes later, often once the visionary founder has passed on, leaving a motley crew of cousins struggling to find unity of purpose and agree on the sharing of the spoils. By this time, however, the company is often a large, complex concern with other shareholders involved.

The famous Ford family has had its issues over the years, but as the excerpt from a recent IHT article shows, it has dealt with the issue of continued family oversight rather well. Family members remain very involved in the business: the family controls 40 per cent of the voting power through special shares. But please note: 60 per cent of the power lies in other hands, and the family is OK about that.

13 Ford cousins and their offspring are involved in the business – 35 members in all. Only a few of them, however, play any executive role. There is no sense of entitlement to head the company that shares the family name. The current CEO, Alan Mulally, was headhunted from outside the auto industry by the Ford family. People are put in executive positions if they can do the job, not because of their genes.

Family members have a separate offline meeting, held every quarter. They have been doing this for the past 20 years. Here, opinions fly freely, and the discussion is often heated. At the end, the family votes on key issues according to an agreed voting structure. The decisions made are then taken back to the company. In short, the company is kept insulated from family emotions and divisions.

It has not been all rosy for the family. Current conditions are catastrophic for the US auto industry, and the family’s shares are worth just US$ 140 million – down from $ 2.2 billion a decade ago. But that is the point: businesses are different when the founding family remains at the helm. “If this were just a financial investment, the family probably would have been out of it years ago,” Bill Ford said. “This is very much an emotional commitment.” When the family name is at stake, a whole different set of perspectives is present.

It is no coincidence that family-founded firms are some of the most famous and long-lived in the world. But there is a crucial distinction: these firms have enlightened families at the helm who understand business evolution. They know what to let go of, and what to hold on to. They provide oversight and direction, but leave the running of the firm to outside professionals on the whole. That is a lesson many of our rapidly growing Kenyan families need to learn, and fast.

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