The Power of Historical Narrative in Family Enterprise (I)

Updated: Aug 19


Note: The following is the first part of a two-part essay adapted from the closing keynote address at the EDHEC Business School 2017 Family Business Conference: “Family Firms in the Long Run: The Interplay Between Emotions and History,” May 11-12, 2017, in Lille and Paris.

INTRODUCTION

When I was invited to speak at this year’s Family Business Conference at EDHEC Business School, I didn't hesitate to say yes, because the interplay of emotions and history has been a recurring theme in my own career.

I began my professional life as an academic with a keen interest in biography, which encouraged me to see history through the lens of individual experience. I also spent many years working for a global brokerage firm, where I saw first-hand how decisions are made—and I can tell you it isn’t always rational or pretty. So I suppose I had always taken it for granted that emotions play a role in business, any business.

But I didn’t appreciate the unique influence of emotions in family business, or their relationship to family history, until I began consulting to family firms and other organizations that want to capture and learn from their past experience—their history. It was these engagements over the last decade that taught me

  • why emotional bonds (not just blood ties) shape family identity, strategy, and culture;

  • how those bonds evolve over time and in the context of change and challenge; and

  • why historical narrative is therefore such a powerful tool to help families understand and master those emotions.

So in bringing this wonderful conference to a close, I thought I'd to share what I’ve learned from my client work about why this is so—the impact of historical narrative—and then offer some practical advice for family firms who might be contemplating such a project.

EMOTIONS: CHALLENGE AND STRENGTH

First, what do we mean by emotions in family enterprise?

For most people, it is the negative emotions—jealousy, greed, anger, fear, revenge, and so on—that make unwanted headlines or lead to botched strategies or failed successions. And to be sure, history is full of such examples.

Take Ford Motor Company, where a bitter father-son rivalry led to missed opportunities in the transition from first- to second-generation family ownership. When Edsel Ford took over as president in 1918, aged 25, his father and company founder, Henry, refused to relinquish control. In fact, he bought out other Ford shareholders in order to preserve a controlling share in the firm, and then pressured his son to relent on key decisions. He resisted Edsel’s move to replace the Model T—iconic but outdated—with a more modern design. The two clashed over labor issues too, with Edsel taking a conciliatory stance amid the suffering of the Great Depression and Henry backing a union-busting approach that led to years of labor trouble.

This emotional messiness is what leads many family business leaders to want to keep emotions out of decision-making altogether. Yet history is also replete with stories of more positive emotions at work in family firms.

Here I would cite one of today’s leading partnership banks, which was founded more than 200 years ago as an Anglo-American trading enterprise. In the 1830s, the founder’s death and the subsequent withdrawal of the two middle sons left the eldest and youngest sons in Liverpool and New York, respectively, to run the firm. Far from giving way to sibling rivalry, these two brothers exhibited a genuine affection for each other and for their father’s legacy that translated into mutual trust, a fraternal spirit of compromise, and a deep sense of stewardship. This let them move decisively to seize opportunities, navigate successive financial panics that destroyed many of their competitors, and reconcile ideological divisions among their US and UK partners over the American Civil War.

Emotions, in other words, are both the greatest challenge of family business and also its greatest strength: They complicate management in ways that most public companies or nonfamily private companies needn’t worry about, yet they also foster a sense of mission and purpose, loyalty, and a long-term view—all classic advantages we associate with a family enterprise.

The question, then, is not how family firms can suppress emotions, which is no healthier in business than it is in personal or family life. Rather, it's how they can understand and master those emotions in order to drive effective strategy, succession, culture, and governance.

To that end, let me offer a vignette that I think captures the transformative, at times even therapeutic, impact of historical narrative in family enterprise.

WHY: THE IMPACT OF FAMILY HISTORICAL NARRATIVE

Once upon a time there was a third-generation family firm that had long since evolved from its industrial roots in the early 20th century to become a high-tech manufacturing company. In the mid-2000s, after a period of aggressive growth, the family CEO nonetheless took the difficult decision to sell the firm that his father and grandfather had built. He and his younger brother then opened a family office to manage a portfolio of investments across related sectors, and pursued new interests, including philanthropy.

The story doesn't end there. For several years later, as their children were entering adolescence, the brothers were still struggling with questions about the history of the business and of the family:

  • What exactly were the values they had inherited from the old family business?

  • How could or should those values shape their business pursuits and investment decisions in this next chapter of the family story? and

  • What role did their family history play in the legacy they would leave to their children (whether or not they continued in business) as well to the employees, associates, and investors in their new businesses endeavors?

Far from ignoring their family history now that the old family business was gone, the brothers saw all the more reason to probe that history for answers—about who they were, where they'd been, and where they might go from here. As one of the brothers put it: “We’re no longer a business; but we’re still a family.”

Uncovering strands of the family DNA

With this complex brief, the brothers decided to look outside the family for help. They eventually engaged a team of consulting historians to produce a historical narrative of the family, one that would remain private and confidential.

The historians knew that any narrative they might produce had to understand the family identity and values independent of business, which no longer defined the family. So they went beyond the story of the brothers and their father to craft a narrative of the family itself going back to the mid-19th century.

This multi-generational narrative, it turns out, identified a set of values—including calculated risk-taking, respect for expertise, innovation rooted in tradition, a global orientation that transcended their deep national roots, and a strong work ethic grounded in non-financial motives—that had driven the family’s success over time. These were values not just of the father and grandfather but also of their forebears before them; and they were present not just in the paternal line but also in the maternal line dating back to the 16th century, whose resilience and the capacity to adapt had made a lasting impression on the mother’s character.

By tracing these strands of the family’s cultural DNA, the narrative helped to unify the family around a common identity, one that was all the more powerful because it was rooted in their own multi-generational experience. It showed how family values had been forged in response to change and challenge, which gave them meaning beyond mere platitudes. And it recast those values in ways that could inform the brothers’ work outside of the old family business.

The healing power of narrative

To find this unifying narrative, though, the historians had to sift through a complex set of emotions in the recent history of the family that yielded impacts of an entirely different order.

The older brother had been groomed from an early age to assume leadership of the family firm. Like many scions of family business, he accepted rather than embraced this role, perhaps resenting that his destiny had been sealed for him. When he took over the company after his father’s death, he found himself managing in the shadow of this highly entrepreneurial, charismatic figure even as he built the company into a powerhouse, and struggled to bring along a cohort of nonfamily managers who remained loyal to his father’s way of doing business. Years later, he seemed to betray a sense of guilt for selling the business in the first place.

The younger brother, meanwhile, nurtured his own resentments toward his father: not so much for being passed over in favor of his older brother as for being overlooked, in the family as in the business. He had long struggled to make his mark and find his place in the story.

Then there was family trauma of other kinds, swept under the rug. Sources of anger and shame, they had driven a wedge not only between father and mother but also between the brothers themselves, who had very different reactions.

The historians could be forgiven for wanting to steer clear of these emotional landmines. Instead, they met them head on, using the same multi-generational narrative to help the brothers put them in perspective. Digging into the history, the historians

  • singled out the role of the older brother’s namesake ancestor, another entrepreneur with a similar character, ambition, and drive, which enabled him to see his part in a larger tradition of entrepreneurship that transcended his father;

  • analyzed the older brother's decision to sell the business in the context of the strategic choices available to him at the time, and established it as a necessary step in preserving, not destroying, the family wealth; and

  • clarified the younger brother’s role in the story as a nurturing yet highly competitive figure whose efforts to preserve family traditions had been important both to the business and to the family.

Now this engagement was unusual for the depth and range of emotions at work and for the brothers’ willingness to see them honestly in the light of their family history. What made it successful, though, was a process for crafting the historical narrative and a structure for presenting it—form and content—that I think can serve as a template for any family or family enterprise that wants to learn from its history.

To continue reading, see Part II

John Seaman, the founder and CEO of Saybrook Partners, is currently at work on the history of a leading partnership bank.


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