Women Reach the Top at more Family Firms

Women Reach the Top at more Family Firms

by Edward Taylor
Staff Reporter of The Wall Street Journal

This article is reprinted by permission from StartupJournal.com.

As chief executive of Swedish forklift truck manufacturer Atlet AB, Marianne Nilson is one of a growing number of women who hold key positions in their family firms.

“The dynastic model of succession, where the business is passed on to the eldest son, seems to be fading,” says Jozef Lievens, a partner at Belgian law firm Ebilius Lawyers, and founder of the Belgian Family Institute, a nonprofit organization that provides training and education for family businesses. “We see a growing tendency for daughters to take over the firm — or even entire teams of siblings.”

A 1997 survey of 3,000 family firms conducted by Mass Mutual in the U.S. showed that the number of female chief executives was set to rise, with 25% of respondents saying their next CEO would be a woman. A similar trend is evident in Europe, Mr. Lievens says.

At Atlet, there was no male successor among the children of founder Knut Jacobson: Marianne was one of five daughters. (None of Ms. Nilson’s sisters works for Atlet.) She studied pharmacy at university, and then started working for Atlet while studying for a degree in business administration.

“One day I realized that I might as well work for myself, since I own a sixth of the company,” says Ms. Nilson, 40 years old. “My father was surprised and happy about my choice to work for Atlet,” she adds.

After she had worked for a year as head of Atlet’s Swedish unit, the board eventually agreed to take her on as chief executive of the entire group in 1995, succeeding her father, Mr. Jacobson.

“The board of directors didn’t want me as managing director to start with,” she says. “They said I had no experience, so I worked even harder to prove them wrong.”

Mr. Jacobson, who founded the company in 1958, stayed on as chairman of the board. Since Ms. Nilson took over as chief executive in 1995, Atlet’s net sales grew to 1.234 billion Swedish kronor ($116 million) in 2000 from 750 million kronor in 1996. (Audited figures for 2001 haven’t yet been released.) Ms. Nilson says that income is invested back into the company, which may help explain why for the same period, net profit grew to 58.5 million kronor from 54.9 million kronor.

With Ms. Nilson’s decision to work there, Atlet overcame a crucial hurdle for all family firms — making it to the next generation. According to the Family Business Network, a nonprofit organization based in Lausanne, Switzerland, which advises more than 1,000 family firms on leadership and strategy, around 70% of family firms fail to make it to the second generation. Fewer still are able to retain family control of a business beyond the third generation.

“In Europe and across the world, it’s much more common to see the son taking on a leadership role, but in some cases, the choice of a daughter may even be preferable,” says Joachim Schwass, professor of family business at the Institute for Management Development in Lausanne, Switzerland.

The relationship between a father and daughter tends to be less competitive, less combative, and more professional than a relationship between father and son, says Prof. Schwass. “The best nonfamily managers tend to leave if there is uncertainty about the leadership or conflict between generations of leadership,” he adds.

Such uncertainty would be a disaster for Codorniu Group, a Spanish wine producer that boasts over 1,200 acres of vines. Codorniu is a member of the association Les Henokiens, an exclusive club of 18 mainly European companies managed by the founders’ descendants, who have been either the owners or the principal, majority shareholders for at least 200 years. Codorniu has belonged to the same family since 1551.

“My father, Jesus Raventos Fatijo, was president of the company for 20 years, and I have followed his example,” says President Maria del Mar Raventos Chalbaud, 49. “I learned to work by my father’s side. The most important thing is to follow the company’s philosophy — to create wine from the finest grapes.”

In 1997, Codorniu owned five wineries; it now owns 11 around the world, from Barcelona to Argentina and the U.S. The focus is on long-term growth rather than on short-term returns: Family firms want to keep the business healthy for the next generation — not just for the next quarter.

With 450 family members to choose from, Ms. del Mar Raventos Chalbaud has devised a protocol to select the best potential leaders to work at Cordoniu. “The basic rules are to have a university degree, speak fluent English and to have worked with success in another company for a minimum of five years,” she says.

When questions about succession have been resolved it’s easier for family-controlled firms to pursue a long-term strategy, says Daniel L. McConaughy, director at the center for family business education and research at California State University. Mr. McConaughy, who advises family-controlled firms on compensation and performance measurement, says his research shows that family firms tend to grow more quickly, are more profitable, and are run more efficiently than nonfamily firms of a similar size.

“When the aims of managers and owners coincide there is less temptation for the management to make decisions such as divesting assets simply to boost the share price in the short term,” Mr. McConaughy says.

Family firms also have an interest in the social standing of the firm, says IMD’s Prof. Schwass, as any action by the company reflects on the entire family.

Berit Kjeldsberg, 47, of Norwegian real-estate and medical-research firm R. Kjeldsberg AS, agrees. “Being a family company adds values to the ethical awareness, and gives a long-term perspective on investments and management,” she says.

That has its advantages, as Ms. Kjeldsberg, who became general manager on Jan. 1 after two years working in the family firm, found out. “Our company name gives a big advantage when it comes to networking, connections, deal making and investments,” says Ms. Kjeldsberg, now head of the company with annual revenue of $350 million.

The best family firms, says Mr. Lieven, have clearly outlined the different areas of responsibility for individual family members. This is particularly important if children work alongside the founder, he says. “Founding fathers tend to be overprotective — they have trouble letting go of something they built up.”

For Ms. Nilson, on maternity leave until August, the case is clear. Long-term strategic questions are taken care of by her 78-year-old father, while the day-to-day running of the company is up to her. “It’s more confusing for the staff, who are still working out who takes which decision,” Ms. Nilson says. “But these questions will become clearer as the company and I move forward.”

This article is reprinted by permission from StartupJournal.com, © 2002 Dow Jones & Co. Inc. All rights reserved.


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