How to Save the Family Business

How to Save the Family Business UMass

Related Matters Newsletter
Spring 1995

by Peter F. Drucker

Management books and courses deal almost entirely with the publicly owned and professionally managed company. Yet the majority of businesses everywhere–including the U.S.–are owned and run by family members. They even include some of the world’s largest companies.

If the family-managed business is to survive, let alone prosper, it must stringently observe the following rules:

  • Family members working in the business must be at least as able and hard-working as any unrelated employee. In a family-managed company, relatives are always “top management,” whatever their official job or title. On Saturday evenings they sit at the boss’s dinner table and call him “Dad” or “Uncle.” Mediocre or lazy family members are therefore–rightly–resented by non-family co-workers, and respect for top management and the business as a whole rapidly erodes. Capable non-family people will simply not stay, and the ones who do soon become courtiers and toadies. It is much cheaper to pay a lazy nephew not to come to work than to keep him on the payroll. DuPont, controlled and managed by family members from its founding in 1802 until professional management took over in the mid-1970s, grew into the world’s largest chemical company. It prospered as a family business because it faced up to this problem. All male duPonts were entitled to an entry-level job in the company, but five or six years later their performance was carefully reviewed by four or five family seniors. If this review concluded that the young family member was not likely to be top management material 10 years later, he was eased out. More…

When Patient Capital Grows Impatient

When Patient Capital Grows Impatient

Recaps” are Becoming more Popular as a Way to Satisfy the Diverging Needs and

Priorities of Shareholders
by François M. de Visscher

The Windham Co., a third-generation manufacturing company, had not surveyed its shareholders to evaluate their liquidity and capital needs in more than 20 years. The company had very effective shareholder information and communication programs. But when the 35 shareholders were interviewed in a recent survey, the leaders were surprised by the results. The composition of the shareholder base had changed. The estate and financial objectives of the shareholders had become quite diverse. The “patient capital” of this company had been well maintained through two generational transitions but was getting impatient. More…