By Wayne Rivers

There are two components of successful family business leadership. The first is exercising the positive components of leadership successfully (i.e. creating a compelling common vision for your company, developing a strong mission, creating clear roles, responsibilities, and accountability, having internal transparency, etc.). The other component of successful leadership is to avoid making mistakes. There are two distinct sides to the leadership coin: One must simultaneously do right things right while avoiding critical mistakes in order to be a successful leader.

A January, 2012, Forbes article by Eric Jackson cites the book Why Smart Executives Fail by Sydney Finkelstein, a professor at the Tuck School of Business at Dartmouth College. Finkelstein did research on 50 formerly high performing companies like Enron, Tyco, and WorldCom in order to find out why they had gone so spectacularly from success to failure. He uncovered that the senior executives at these companies had seven habits in common which he labeled “The Seven Habits of Spectacularly Unsuccessful Executives.” If, to be a successful family business leader, one must avoid the landmines which devour unsuccessful executives, then this article could be taken as preventive medicine or perhaps even as an early warning sign. It is not intended to be a criticism of anyone’s leadership in particular, but rather as a self-check and a potential wake up call. Here’s a synopsis of Finkelstein’s seven destructive habits as they apply to family business executives:

Habit #1: They see themselves and their companies as dominating their environment

This is the CEO’s ego talking. The majority of family businesses are – being 100% blunt – inconsequential industry forces in the long run. Think about it. If your firm were eliminated from the face of the earth, couldn’t another company in your industry fill your customers’ needs at roughly the same quality and price? Sure, there are things that you and your company do which are absolutely unique and which your clients value and appreciate, but if someone needs a new set of tires, they need to erect a 20,000 square foot warehouse, or they need 100,000 bushels of corn, couldn’t someone else step in and take your place with fairly little disruption? It’s harsh and jarring, but it’s true!

CEOs that see themselves and their companies as dominating their environments are providing valuable goods or services, but if they think they are the only ones who can provide that good or service they’re simply delusional. There is nothing wrong with a healthy ego, and it’s probably true that the absence of a healthy ego would cause a family business leader to be less successful. However, if you’ve begun to read and believe your own press clippings, you may be losing touch with business reality.

Habit #2:  They identify so completely with the company that there are no clear boundaries between personal interests and company interests

Family business leaders wouldn’t be the successes they are without devotion and commitment to their companies, but when they cross the line from viewing their companies as enterprises that need time, attention, and nurturing and begin to look at their companies as extensions of themselves, they have hit a tripwire. Family business CEOs who cross this invisible marker are usually easy to identify. They’ve begun to mix corporate needs and expenditures with ones which are really personal or ego driven. For example, the family business leader who used company funds to buy a 100-foot yacht for “entertaining clients” has most likely lost sight of the bright line dividing necessary company marketing expenditures with expenditures more truly benefiting himself and his family.

Another sign they’ve crossed the line is when any constructive criticism about the company is taken personally by the leader and is consequently crushed by his withering defense. This behavior shuts down helpful observations and team play and cuts off the CEO from valuable perspectives and information.

Lord Acton said, “Absolute power corrupts, absolutely.” Since being the leader of a successful family business is about as close in our society as we come to having royalty (outside of Hollywood stars, musicians, politicians, and athletes), they can often begin to behave more like entitled royals than hardworking family business leaders. When this transformation takes place, the leaders risk losing the trust of those who follow them.

Habit #3:  They think they have all the answers

A common stereotype for family business leaders is that they are dynamic individuals making dozens of decisions per day, dealing with crises on the fly, and sizing up situations which lesser mortals couldn’t handle. This is probably true for some family leaders some of the time, but to assume that any one individual has all the answers to all the problems faced by a family business over the course of a few months or a few years is foolish.

What would work better: A team of committed, go-getter executives bound together by a common mission and their desires for long term business success, or a company led by, as one writer put it, “a genius with 100 followers?” If the old saying that two heads are better than one is true, family business leaders would be wise to admit they don’t have all the answers and recruit the kind of talent which can consistently and quickly help them find those answers.

Habit #4:  They ruthlessly eliminate anyone who isn't completely behind them

CEOs who work hard to develop compelling visions for their companies may often think it’s their job to get everyone to buy into that vision. Consequently, there is a perception that anyone who doesn’t rally to the cause of that vision is somehow undermining the leader. And people who undermine the leader simply have to go.

It’s not necessarily true that people who dissent and offer contrasting viewpoints are undermining the leader or his vision in any way. They may simply have alternative ideas and methodologies for getting things done. Sometimes those senior managers are actually even right! Family business CEOs who eliminate dissent and the people who they believe “undermine them” usually only succeed in driving the contrasting viewpoints underground. They still exist, just out of the sight or hearing of the CEO. Executives who fall prey to Habit #4 find themselves in companies with little to no bench strength, a population of “yes men,” few alternative options when things get hairy, and an inability to attract talent later on. They can even marginalize family members who don’t cleave to their visions. One family business CEO even went so far as to drive off a son-in-law through constant criticism, fault finding, demotions, and a behind the back whisper campaign. The CEO commented to us laughingly that when he bought out his son-in-law’s shares that he had “stolen them for half of what they were actually worth.” It didn’t seem to occur to him that he was harming his oldest daughter and his grandchildren by undertaking this ruthless action. He was so determined to eliminate any dissent among his management team, so determined to be the winner in this perceived conflict, that he was blinded by the competition and his unquenchable desire to “win.”

Habit #5:  They are obsessed with the company image

This negative habit relates directly to Habit #2 and smacks of narcissistic behavior. The company image is everything, and any negatives about the company are, therefore, negatives about the CEO personally! When CEOs are consumed with blatant attention seeking – think Donald Trump – they often find their attention drawn not to company strategy or operations, but drawn to their next media fix. Worse, when the company does experience success, they are reluctant to share the credit with other members of the team thereby creating a demoralizing work environment.

Habit #6:  They underestimate obstacles

Family business CEOs are some of the most confident people on earth. For 20, 30, or 40 years they’ve met and overcome just about all the obstacles in their way. Now, when obstacles confront them, they, because of their track record of success, underestimate the potential impact or simply fail to appreciate the magnitude of hurdles which must be overcome in order to achieve the next success. They have created an environment of unrealistic expectations which makes it hard for them to pull back from any chosen course of action. There was a story during the “Dot-Bomb” of 1999 and 2000 of an ego driven CEO who had decided that he needed to rebrand his fleet with a new, different, splashy paint color and logo even while his company was going broke. The fleet got the makeover the CEO demanded, but the company did in fact go belly up which made this CEO the modern version of Emperor Nero fiddling while Rome burned.

Habit #7:  They stubbornly rely on what worked for them in the past

Jackson writes, “Many CEOs on their way to becoming spectacularly unsuccessful accelerate their company’s decline by reverting to what they regard as tried and true methods. In their desire to make the most of what they regard as their core strengths, they cling to a static business model.” With all the changes afoot in today’s marketplace, attempting to run your family business the way you did 1982, 1992, or even 2002, is probably a recipe for future trouble. Wayne Gretzky said the reason for his greatness was that he didn’t skate to where the puck was, he went to where the puck was going to be. Don’t today’s family business leaders need to go where the puck is going to be? Knowing that one can’t manage millennials the way one did generation X or Y, shouldn’t today’s wise leaders develop new skills and strengths – or at least hire new skilled and strong people – to help them go in a slightly different direction? None of this means that a family business leader’s vision or mission are somehow flawed; it simply means that just as a professional golfer continues to work on and hone his swing every single day, a successful CEO needs to develop and hone new skills and strengths to cope with changes in the marketplace, changes in competition, changes in customer preferences, and changes in employee wants and needs. The Golden Rule doesn’t work anymore! The new rule is do unto others as they want to be done unto. Being able execute this “Platinum Rule” means CEOs need to continue to develop their people and emotional intelligence skills in order to get the most out of themselves, their employees, and their companies.

Jackson concludes his article: “The bottom line: If you exhibit several of these traits, now is the time to stamp them out from your repertoire. If your boss or several senior executives at your company exhibit several of these traits, now is the time to start looking for a new job.”

Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.
^{January 2012}