Empowering Family Enterprise By Learning from the Past
When Frances Stroh published an introspective, painfully honest memoir last year about the demise of the Stroh family’s beer empire and its accompanying family dysfunction, she was taken aback by the outpouring of empathy from members of other families who had experienced similar struggles. From bungled strategies to squandered fortunes to substance abuse, the Strohs’ story echoed that of other family enterprises, though Frances Stroh was unusual for being so public about it all.
That Stroh’s book struck a chord with so many readers underscores the widespread challenges of managing and maintaining a multi-generational family business. With analysts projecting that $30 trillion of baby boomer wealth will be transferred to millennial heirs over the next 30 years, family business leaders and their advisers are grappling with the need to establish an appropriate business strategy, identify potential successors, and ensure that next generation managers become invested in or acculturated to the organization’s mission.
As Frances Stroh’s experience suggests, reflecting honestly on their past experience—as a family and as a business—can be an illuminating, even liberating, means to accomplish these goals. Of course, by the time it was published, the Stroh Brewery Company had folded and most of the Stroh family fortune was long gone—a reminder of the risks of leaving that self-examination until it is too late.
Hard-won lessons—and the risks of avoiding them
The story of the Stroh family that Frances Stroh captured in her memoir is a textbook case of how not to manage succession, strategy, and governance in a family enterprise. The Strohs confined the next generation of managerial candidates to sons, when daughters or nonfamily professional managers might have made the better leaders, and then did not instill in those sons an understanding of the entrepreneurial values of 19th century founder Bernhard Stroh that might have led them to anticipate changes in the marketplace, such as the shift to light beer. As it was, the family’s fourth generation chased the market, making expensive me-too acquisitions of other beer companies along with investments far outside their area of expertise. Sales and profits plunged.
Hanging over all of this, and the focus of Stroh’s memoir, were wrenching personal struggles of the kind that often plague those who derive wealth from a family business. Frances’s father, Eric, chafed against company and family responsibilities in which he was not emotionally invested yet became dependent on dividends from his family shareholding, all the while spending money recklessly and battling depression and alcoholism.
History as a tool
How can examining their past help family enterprises avoid these outcomes?
For one thing, such introspection can enable family members to recognize and accept their part in the larger story by validating their individual contributions. This can apply to aging patriarchs or matriarchs who must acknowledge the need to relinquish control, successors who are being groomed to take the helm, or sons and daughters who are not tapped for leadership roles but come to understand other ways they have contributed and may continue to do so.
For another, gaining a sense of their family or business history going back several generations can help sons and daughters feel a part of something larger than themselves, nudging those like Eric Stroh—who might otherwise feel purposeless and uninvolved—into becoming active stewards of the family legacy. Conversely, an authoritative narrative of the family enterprise can help acculturate newcomers or outsiders, especially when an earlier generation retires and determines that the best successors are, in fact, not family members. Such a determination might very well take place after retiring managers have used that same narrative to assess what kind of successor might best continue its core mission.
Finally, reflecting on their past can help family members define the family enterprise more broadly—not just by what it does or makes but also by the values and social commitments it embraces. This can be reassuring when the right choice is, in fact, to sell the business, and members can pursue the family legacy through other means, such as philanthropy or another business venture. Thus did Frances Stroh become re-invested in family ideals like the Strohs’ longstanding allegiance to the city of Detroit, prompting her ongoing philanthropic involvement in that city’s revival.
Seeing the bigger picture—and the role of the outsider
Of course, having a family member like Frances Stroh is uncommon. Most families do not include someone with her literary flair, and would in any case want to avoid such a public airing of their dirty laundry.
This is where family historians come in. Engaging a trusted professional from outside the family to craft a family narrative, whether for internal or external audiences, can amplify the individual self-knowledge of a memoir like Frances Stroh’s: by capturing multiple voices in the story, which makes it both more interesting and more credible; by placing that story in a larger historical context, which explains how the family enterprise is distinctive; and by reconciling conflicting interpretations of past events, which can help repair damaged relationships among family members. The very process of constructing its narrative also lets family members collaborate on the creation of the history—with the historian and with each other—and thus to reserve control over how it is used.
Whether it is used to shape succession or strategy, engage the next generation of leaders, or write the next chapter in the family story, a historical narrative empowers family enterprise by helping families see the bigger picture.
Arielle Gorin, a Saybrook consultant, is currently at work on a narrative of a leading national nonprofit.