siblings and succession in the family business

www.hbr.org

A N D CO M M EN TA RYHBR CAS E ST UD Y

Siblings and Succession in the Family Businessby Warren D. Miller

•

How should Benson Electric’s board handle the succession process? And who is the most promising candidate for the position of CEO?

Four commentators offer expert advice.

Reprint 98108

http://www.hbr.org

http://harvardbusinessonline.hbsp.harvard.edu/relay.jhtml?name=itemdetail&referral=4320&id=98108

HBR CAS E ST UD Y

Siblings and Succession in the Family Businessby Warren D. Miller

harvard business review • january–february 1998 page 1

HBR’s cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts.

CO

PY

RIG

HT

© 1

997

HA

RV

AR

D B

US

INE

SS

SCH

OO

L P

UB

LISH

ING

CO

RP

OR

AT

ION

. ALL

RIG

HT

S R

ESE

RV

ED

.

Filling the shoes of a good leader is never easy. But when three of those vying for the position are offspring of his two marriages, the process gets downright complicated.

Looking old and tired, 71-year-old John R.“Jack” Williamson III climbed atop a table inthe large lobby at Benson Electric, a rapidlygrowing $80 million family business in theMidwest. More than 200 employees stoodwaiting to hear what they already knew: R.L.“Buck” Benson, the second-generation CEOwho had led the company since 1963, had diedthat morning of a massive heart attack. Will-iamson had been Benson’s closest friend.

“Ladies and gentlemen, most of you alreadyknow me. I’m Jack Williamson, and I serve onthe board of directors at Benson Electric. I havesome bad news to report to all of you.” Hepaused for a moment. “Millie Benson has askedme to inform you that her husband died thismorning.”

Some employees began to cry softly. Othersbowed their heads.

“Buck didn’t suffer,” Williamson contin-ued. “For that we can all be grateful. We willall remember him as a big bear of a man who

loved life, loved every one of you, and lovedthis company.

“Millie has asked that headquarters beclosed Thursday and Friday. Each of you is wel-come to attend graveside services Thursday at 3P.M. at Evergreen Cemetery. I’d like you toknow that your jobs are secure. Benson Electricwill continue to be the number-one provider ofoverhead line-construction work for electricutilities in this region. The company will keepdoing what it has done every day for 63 years.

“Buck used to say that we’re all in this to-gether. We’re a family business, and you arepart of the family.

“Millie and the board of directors have somedecisions to make. We will announce themsoon. This is a sad time for all of us, and I wantto thank you all for your loyalty.”

He looked around at the people gathered be-fore him. No one seemed to want to say any-thing. There was nothing to be said, really. Sohe climbed down, chatted briefly with a few ofthe employees, and then left the building.

Siblings and Succession in the Family Business•••HBR CASE STUDY


As he walked to his car, Williamson pon-dered what lay ahead: his friend’s funeral, andthen board meetings to choose Buck’s succes-sor. He thought back to Buck’s own appoint-ment as company president. When thefounder, Sam Benson, had died unexpectedly,there had been no question about who wouldtake his place. Buck was Sam’s only child—andhe had been groomed for the job since birth.

But, Williamson reflected with a faint smile,Buck hadn’t just slid into the position becauseof his name. In fact, Williamson rememberedBuck telling him about a letter his father hadwritten to him on his twenty-first birthday. Init, Sam had told Buck that although he wasproud of his son’s work in college, therewouldn’t be a job waiting for him at BensonElectric when he graduated. Sam had writtenthat he first wanted Buck to be successful in acompany where his last name didn’t guaranteejob security. And if he achieved that goal, Samwould talk to him about joining BensonElectric—but only if Buck expressed an interest.

Buck said that he was hurt by the letter atthe time, but that his father’s wisdom had be-come apparent to him over the years. Buckproved his worth as a manager with successfultenures first at a major electric utility and thenat an Oregon-based company similar to Ben-son Electric. When he joined Benson Electric,his track record kept employees from thinkingthat he was there only because he swam in theright gene pool. Eight years after his collegegraduation, Buck told Williamson, he thankedhis father for the letter.

Williamson shook himself out of his reverie.Choosing a successor this time wouldn’t be aseasy. And he couldn’t help but think thatBuck’s ex-wife, Joyce, would somehow compli-cate the process.

Sibling RivalryAs Buck Benson’s casket was lowered into theground, Joyce Benson and her children, Boband Leigh, stood near her son’s car. Boblooked back toward the casket, half expectingto see his father.

“I just can’t believe Dad is dead. I just can’tbelieve it.”

“Well, he is,” Joyce said. She frowned. “Youare going to run the company, aren’t you?”

“Wh-what?” he stammered. “Mother, Idon’t know. I don’t know if I can.”

“Of course you can. Besides, you’re the onlyson in this family. And it’s what your fatherwould have wanted for the company. What’s afamily business for, if not for the family?”

“I don’t know, Mother. Maybe the boardwon’t...”

Leigh interrupted. “Wait a minute. Whatabout me? Why is he so special? You think thatjust because he’s a guy, he’s entitled to it? Re-member, I’m two years older than he is. I’vebeen at the company longer, I make moremoney, and I made vice president before hedid. Don’t forget that.”

“Shut up, Leigh,” her mother snapped.“Each of you has 10% of the company. Thattells us something, doesn’t it?”

“Yes, Mother, it does. It tells us that my fa-ther, unlike you, didn’t play favorites.”

“Will you stop the bickering,” pleaded Bob.“Just stop. Let’s not dance on Dad’s grave. Be-sides, Millie and Julie together own 80% ofBenson Electric.”

“So what?” snarled Joyce. “I can’t believeyour father left a secretary 70% of our com-pany. That’s all she was, you know. A secretary.Buck’s secretary. She hasn’t worked a day sincethe two of them started playing around.”

“Mother, do we have to talk about this rightnow?” Bob sighed. “We just buried Dad, forcrying out loud.”

Good Advice Not TakenFrom the shade of an old elm, Sandra Edgell, aprofessor of entrepreneurship at the localstate university, watched the crowd at thegraveside slowly scatter. She was one of fivepeople Buck had recruited to become direc-tors of Benson Electric three years before,when he had begun to believe that public util-ities would be deregulated. He had wanted dif-ferent perspectives about what the sea changewould mean for the company’s future.

Edgell remembered that Buck had worriedabout a decrease in profits after deregulation.Electricity prices would fall, he had said. Lookat airline fares and long-distance telephonerates. The big utilities would squeeze their sup-pliers. What could a small player like BensonElectric do?

Edgell, along with the other four directors,had advised Buck that marketing expertisewould become a critical requirement in thecoming years. Benson Electric had never If onlyBuck Benson had listened to the board of direc-tors’ pleas that he plan for his succession. evendesignated anyone to sell, advertise, or promotethe business. “Sales just happen around here,”he had shrugged when Edgell asked him aboutit at the first board meeting she attended. Buthe had taken the board’s advice.

And over time, Edgell and Alan Roberts,another director, had convinced Buck thatcomputers would also play a major role in anindustry with a long tradition of brawn overbrains. “Other companies in this business will



be communicating with high-cost cell phonesand fax machines,” Roberts had told Buck.“But those are archaic technologies in the ageof intranets.” Benson had taken their advice byinvesting in a series of new computer systems,and the company’s performance had notfaltered.

Edgell pressed her lips together. If onlyBuck had listened to the board’s pleas that heplan for his succession. He had always said, “Ijust must do that.” But he hadn’t done it.

RelentlessJulie Benson-Keene blinked back tears as shehelped her mother into the black limousine.After easing herself into the seat opposite hermother’s, she leaned forward and took MillieBenson’s hands, massaging them gently.

Their car crept past Buck Benson’s first fam-ily. Joyce was pointing her finger at Bob, whileLeigh looked angry. Doesn’t Joyce ever let up?Julie wondered.

Her mother frowned.“Did you see that?” she asked.Julie nodded. “We might have 80%, but that

won’t keep Joyce from making a stink.”“It’s going to be tough,” Millie sighed. “I

can’t count the times I urged your father to sitdown with all of you children and tell youwhat he wanted. I even offered to sit downwith Joyce to discuss it all. But he didn’t wantto hurt anyone’s feelings by choosing one ofyou over the others. Or maybe by not choosingany of you. He thought the problem wouldtake care of itself. Maybe one or two of youwould somehow end up leaving the company.

“I told him that if anyone left, you would,because you were the only one who couldmake a decent living in a building that didn’thave ‘Benson’ etched on it. He just didn’t wantto face up to the idea that he might not liveforever. Besides, no matter what he did, someor all of his children would probably be hurtand angry with him, and he certainly didn’twant that.”

“Well, Mom, I wish he’d listened to you. I’llbet that Joyce wants Bob to be the next presi-dent of Benson Electric.”

Her mother nodded. Her favorite word todescribe Joyce Benson was “relentless.”

Old WoundsBob Benson stared into the fireplace. Histhoughts of his father were interrupted by hismother.

“When are you going to tell the board thatyou should be president?”

“C’mon, Mother. Dad’s not even cold in hisgrave and—” Bob protested.

“Listen to me, Bob. Listen. You just need totell them that you’re the one for the job.”

“I’m really not in a position to tell the boardanything. Besides, what about Leigh?”

“Construction companies are for men, notwomen. Assert yourself.”

“I’ll say something if I’m asked.”“What do you mean, ‘if I’m asked’?” his

mother shrieked. “That’s my 70% that MildredTaft has, do you hear me? It’s mine! She stolemy husband, she stole my future, she stole ev-erything! Do you hear me?”

“Yes, Mother. I hear you.”“She stole my life!” Joyce bellowed. “I’ve

waited 32 lousy years to get something back.Do you know what it’s like to lose everythingin a town where everyone knows everyoneelse? To raise two kids by yourself while theirfather is cavorting with another woman andstarting a second family? Do you know whatthat’s like? Do you have any idea how humili-ating that is?”

Joyce Benson’s face went crimson as sheflailed at her deceased husband’s memory.

“No, Mother, of course I don’t,” Bob said,resigned. He knew her script well.

“Well, let me tell you!” she yelled. “Your fa-ther said I needed an identity apart from his. Herefused to let me work with him. So I got a jobteaching. Then he hired Mildred Taft instead ofme, his wife, the mother of his children.

“If I can’t be the president of Benson Elec-tric,” she sobbed, “then I’ll at least be hismother.”

The Short ListOn Saturday morning, Benson Electric’s fivedirectors met in the company’s small confer-ence room with Buck Benson’s widow,Mildred Taft Benson. The directors includedBill Clay, retired regional vice president of op-erations for a large electric utility; SandraEdgell; John O’Reilly, whom Sam Benson hadhired, now retired after running Benson’s Ne-braska division; Alan Roberts, who’d built asuccessful consulting business after beingdownsized out of his job as executive vice pres-ident of a $2 billion equipment manufacturer;and Jack Williamson, the third generationowner of two thriving family businesses.

“Millie,” Williamson began, “I know I speakfor all of us when I tell you how concerned Iam. We all feel terrible about Buck’s passing.We’ll do anything we can for you.”

If only Buck Benson had listened to the board of directors’ pleas that he plan for his succession.



Warren D. Miller is the cofounder of Beckmill Research, a consulting firm based in Lexington, Virginia. His work focuses on business valuations, market research, and strategic management in privately held companies.

“Thank you, Jack. Thank you all for beinghere. You—you’re all so kind. Until now, Inever understood why Buck insisted on put-ting outsiders on Benson’s board. The boardhad never been active before you all, youknow. It was just Buck and me. We’d have afifteen-minute meeting every year, and thatwas it. Thank goodness Buck brought all ofyou on. We need someone to help us run thebusiness.”

“That’s why we’re here, Millie. We trust thatyou’ll be involved in the process.”

“I don’t think so,” Millie said. “I’ve thoughtabout it since we buried Buck, and I’m goingto call Joyce Benson and tell her that I’ve leftthe decision to the board. She probably won’tbelieve me, but I’m going to do it anyway. Iwant Buck’s kids to get along. And I thinkthey’ll have a better chance if I’m not involvedand if everyone knows that ahead of time. Mybusiness knowledge doesn’t compare withyours, and what’s more, I can’t believe thatfeuding siblings are helpful.”

She stood up.“We’ll respect your wishes, then,” William-

son said. “But one thing before you go. Do youmind if we consider people other than theBenson children?”

Millie looked surprised. “No. No, I guessnot. Whatever the five of you decide will befine with me. But let me mention two thingsyou may find helpful.

“First, Joyce was forever taking Buck tocourt to increase her alimony. He finally saidhe’d hire Bob and Leigh if she’d leave himalone. She agreed, but only if he made themvice presidents. He said he couldn’t do thatright away because it would cause too muchdisruption among the other employees, butthat he would do it over a period of severalyears. She agreed, and the legal hasslesstopped.”

“I never knew that,” Williamson said. “Myimpression was that he was proud of Bob andLeigh and the jobs they’ve done here.”

“Maybe, but he never said that to me. Hejust felt so guilty about divorcing their motherto marry me. The second thing is this: Buck

often said that he thought Julie was the onlyone of his children with the instincts and tem-perament to run the company someday.”

“Well, Millie, you can be sure that we’llthink hard about all of this,” Williamson said.

Millie left the room.Williamson turned to his colleagues. “Yes-

terday, I took the liberty of getting togetherwith Maxine Sipkins, the HR director, and weput together seven short bios: five current em-ployees and two outside people. In fact, thetwo outside people are Bill Clay and AlanRoberts.”

“Huh?” Clay and Roberts exclaimed inunison.

“Relax, gentlemen. External comparisonsfor internal candidates are vital. Besides, if weconclude that no one at Benson is ready or ca-pable, we’ll have to go outside anyway. Utilityderegulation leaves us no choice but to be cer-tain that whoever we choose isn’t wedded tothe status quo. Having family members on thepayroll definitely adds to our complications.”He frowned and then continued.

“We have to figure out how to select a suc-cessor to Buck without setting off any majorfamily feuds. You all know the people in-volved. We need to map out a process that willget us through this situation in one piece. Oth-erwise, the new president—even if he or she issomeone who is absolutely perfect for thejob—will fail. And we will be the ones who setthat person up to fail.”

With that, he handed a set of candidate pro-files to each director.

For more on family-owned businesses, see thearticle “Governing the Family-Owned Enterprise:An Interview with Finland’s Krister Ahlström,” byJoan Magretta, in the January–February 1998issue of HBR.

How should Benson Electric’s board handle the succession process? And who is the most promising candidate for the position of CEO?

Case CommentarySee • Four commentators offer expert advice.



CANDIDATE PROFILESJulie Benson-Keene, P.E.Vice President of Engineering Benson Electric

EDUCATION

• B.S. in electrical engineering

• M.B.A. (GPA: 3.8)

• active in several groups for female

professionals

EXPERIENCE

• 7 years in engineering at B.E.I.

STRENGTHS

• encourages different groups of

people to work together

• functions more as a coach than as a

manager

• knows B.E.I. and the business

backwards and forwards

• grew up around the business

• works in innovative ways

WEAKNESSES

• lacks self-confidence at times

• has difficulty setting priorities

• can be disorganized

• fails to follow through

• has no work experience outside

B.E.I.

Leigh S. BensonVice President of Purchasing Benson ElectricEDUCATION

• B.A. in economics (magna cum laude)

• M.B.A. (GPA: 4.0)• has taken many seminars and

courses on marketing and on the industry

EXPERIENCE• 16 years at B.E.I. in purchasing,

human resources, and accounting• 3 years in marketing at a major

consumer-products companySTRENGTHS

• develops subordinates very well• is not afraid to hire top performers

• manages by consensus• works very hard• was appointed B.E.I.’s media

spokeswoman

WEAKNESSES

• can be pushy, according to oper-

ations personnel

• is rumored not to manage per-

sonal finances well

• is considered a poor paper-handler

Robert L. Benson Jr.Vice President of Property and Equip-

ment (P&E) Benson Electric

EDUCATION

• B.B.A. in marketing

• began part-time M.B.A. program

but withdrew after one-and-a-half

semesters

EXPERIENCE

• 14 years at B.E.I.

• five jobs in three years before

coming to B.E.I.

STRENGTHS

• has detailed knowledge of P&E

• has diverse B.E.I. experience (op-

erations, HR, purchasing)

• understands internal politics and

plays them well

WEAKNESSES

• is an 8-to-5 person (at best)• is not well-respected inside B.E.I.

• has run departments (purchasing,

P&E) in which there has been heavy turnover

• is known for being “technophobic”

Edward J. MadisonSenior Vice President of Operations

Benson Electric

EDUCATION

• B.S. in mechanical engineering

• is working on executive M.B.A.

• has attended many industry seminars

EXPERIENCE

• 22 years at B.E.I.

• worked his way up from lineman

apprentice

• has been in current slot for 3 years

STRENGTHS

• is honest and works hard

• is an excellent engineer

• gets along well with everyone• has worked at B.E.I. since he was

an undergraduate• is active in contractors’ trade

association

WEAKNESSES• has never worked anywhere else• makes no attempt to hide his con-

tempt for OSHA regulations• believes that utility deregulation

will have no effect on B.E.I.

Roberto G. Padilla, C.P.A.Senior Vice President, CFO Benson ElectricEDUCATION

• B.S. in physics• M.B.A. (GPA: 3.9)

EXPERIENCE• 6 years at B.E.I.• 5 years at MegaUtility Company • 3 years with a national public ac-

counting firm• Navy veteran, honorably discharged

STRENGTHS• improved liquidity by restructur-

ing and renegotiating loans• cleaned up B.E.I. balance sheet

• is a bean counter with interper-sonal skills

• puts in 65-hour weeks routinely• has broad, big-company back-

groundWEAKNESSES

• doesn’t delegate• has opposed efforts to set up a

marketing department at B.E.I.• believes that the best and only

way to compete is with low prices

William H. Clay, P.E.Regional Vice President of Operations (retired) Interstate Utility Company

EDUCATION• B.S. in electrical engineering• licensed professional engineer• has taken classes ranging from

cultural anthropology to C++ programming



EXPERIENCE

• is on the board at B.E.I.• 42 years with Interstate Utility

Company in 17 different jobs (oper-ations, maintenance, engineering) in 12 locations

STRENGTHS• has encyclopedic knowledge of elec-

tric utilities• has many contacts in the utilities

business• has never met a stranger• is relentlessly curious• “knows his stuff,” according to

B.E.I. operations people• Weaknesses• has limited construction-industry

knowledge

• likes being retired

Alan W. RobertsManagement Consultant

MarketMetrix Corporation

EDUCATION

• B.S. in industrial engineering

• M.B.A. (highest honors)

• Certified in production and inven-

tory management through the

American Production and Inven-

tory Control Society

EXPERIENCE

• is on the board at B.E.I.

• self-employed for 10 years

• was executive vice president at

Continental Widgets Company

• worked at 3 large manufacturers

in various management jobs (op-

erations, industrial marketing,

logistics)

• is a Vietnam vet

STRENGTHS

• has built a 35-person consulting or-

ganization

• knows B.E.I. better than any direc-

tor, except for John O’Reilly

• is up front about what he doesn’t

know

• speaks his mind, yet tactfully

WEAKNESSES

• has limited knowledge of con-

struction industry

• loves what he’s doing right now

harvard business review • january–february 1998

Siblings and Succession in the Family Business • HBR CASE STUDY

Case Commentary

by Joseph A. Wolking

How should Benson Electric’s board handle the succession process? And who is the most promising candidate for the position of CEO?Jack Williamson and Benson’s board membershave their work cut out for them. But I thinktheir path is pretty clear. I believe that the di-rectors will have to recommend that BensonElectric appoint a CEO from outside the family.Millie Taft Benson is in the toughest spot: asthe controlling shareholder, she will eventuallydecide whether the company will be a family-owned business managed by family membersor a familyowned business managed by outsideprofessionals. That may be a painful decisionfor her to make. But if the board explains to herwhy the three siblings and the other internalcandidates are not qualified to assume leader-ship at this time, Millie will most likely makethe right choice. Ultimately, I think she’ll putthe company’s interests—and thus, the family’ssecurity—ahead of her own personal wishes.

Leigh Benson is obviously very bright. De-scribed as “pushy” by Benson’s employees,however, she may lack the important interper-sonal skills that are critical in positions of lead-ership. Her experience is also limited to staffpositions, and the company needs a leaderwith proven marketing ability. With the properdevelopment, Leigh has the potential to be-come a good senior manager. Right now, how-ever, she is far from ready to take over as CEO.

Julie Benson-Keene possesses good interper-sonal skills and a reasonably solid background.(Julie, more than her half-siblings, seems to re-flect her father’s personality.) She knows thebusiness, and she knows how to work with herpeers. But if she has difficulty setting priorities,organizing herself, and following through onher actions, she is not ready for a leadershiprole. Her lack of self-confidence might be theroot of these weaknesses, but a CEO’s job isnot the place to work on building self-esteem.Julie may in fact be the only one of Buck Ben-son’s children with the “instincts and tempera-ment to run the company someday.” Thecritical word, however, is “someday.”

Bob Benson probably should not even beemployed at Benson Electric. Any unqualifiedexecutive, and especially one who is a familymember, can have a demoralizing effect on

other employees. His being there sends thewrong signal to the rest of the company and tooutside stakeholders, including customers.Bob’s poor track record at previous jobs, hislack of motivation, and the turnover in his de-partments tell all. He needs to go.

As for Edward Madison and Roberto Pa-dilla, I think they’re best left in their currentpositions. Madison is a status quo fellow wholacks an appreciation of the opportunities pre-sented by deregulation. He’s a good engineer.Let’s keep him where he is most effective. Sim-ilarly, Padilla seems to be a qualified financialofficer who does not appear to understand theimportance of marketing—even as the com-pany faces a critical time of deregulation andgrowth. The new president will need a hard-working financial expert to manage the com-pany’s balance sheet in the next few monthsand years.

Which leaves Bill Clay or Alan Roberts—either of whom would be a good candidate forthe CEO’s job during this period of change anddevelopment. I don’t think the board wouldhave much luck in signing a truly competentleader from the outside after he or she hadstudied the company and gained a sense of thecurrent family dynamics. The board wouldlose valuable time searching for someone—better to appoint Clay or Roberts. (My pickwould be Roberts, if he could be wooed awayfrom his consulting business.)

Another reason for tapping the board for asuccessor? Both directors in question have anintimate understanding of the company, bothrecognize the complex family situation, andboth are knowledgeable about the Strengthsand Weaknesses of the family members. Theyknow the territory. And both would be able tocoach Leigh and Julie, perhaps preparing themfor leadership roles either at Benson Electric orat another company. What’s more, Julie andLeigh probably won’t feel threatened by theappointment of an outsider they already knowfairly well. (But Leigh’s outburst in front of hermother indicates that she does have it in her tobecome a very disruptive employee and share-

The board won’t have much luck in signing a truly competent leader from the outside once he or she gains a sense of the current family dynamics.



holder if she is not handled with extreme careduring the transition.)

A word of advice for the new president: A63-year old family business most likely has aunique culture and tradition. Those areStrengths. Try to understand them. In the end,Benson Electric can be a family-owned busi-ness that’s managed by competent profession-als who understand and appreciate the familyculture and traditions and who can leveragethose assets.

And a reminder to the board: Benson Elec-tric is poised to increase its shareholder equitysignificantly. With utility deregulation, strongengineering, and solid finances, Benson hasmost of the ingredients for double-digitgrowth. But the window of opportunity pre-sented by deregulation might be narrow. If thesuccession situation isn’t handled immediately,the company could lose valuable ground, andthe new CEO will be forced to play catch-up.This is no time for tentative management. Theboard should be decisive in its recommenda-

tions to Millie. And it should also make surethat she is firmly committed to the agreed-upon path.

One can understand and sympathize withBuck for side-stepping the succession issue. It’spainful stuff. But he deserves credit for bring-ing in a group of insightful outside directors.Not only are these people up to the challengeof guiding the company through the immedi-ate crisis, but they also have the know-how andtemperament to help Benson Electric—thenew leader, the family members, and everyoneelse at the company—grasp the significanceand opportunities of deregulation. They justhave to get moving as quickly as possible.

Joseph A. Wolking is the CEO of PennWell

Publishing Company, a family-owned business

based in Tulsa, Oklahoma. He is not a member of

the family. PennWell, a business-information

company, publishes 37 international business

magazines, including Oil and Gas Journal, Solid State Technology, and Laser Focus World.



Case Commentary

by Kent Noble

How should Benson Electric’s board handle the succession process? And who is the most promising candidate for the position of CEO?The board of directors of Benson Electric facestwo challenges: one fairly easy and one ex-tremely difficult. The easy one is selecting thenew CEO. Julie’s mother, Millie, owns 70% ofthe company; Julie owns 10%. The two seem tohave a close relationship, and together theydominate the other shareholders by a greatmargin. For all her talk about letting theboard do its bidding, Millie has made it clearthat she wants Julie to have the job. Julie willbe the new CEO. Case closed.

The difficult challenge is managing thesuccession process—and from the directors’actions to date, I’d say they’re botching it up. Ifthey continue to move toward a decisionwithout involving all the family members whoare shareholders, they are setting the stage forconflict later on—no matter whom they select.How can they right their course? First, theymust recommend that the shareholders—Millie, Julie, Bob, and Leigh (sorry, Joyce)—meet and help to select the new CEO. Second,they must make it clear to these familymembers that once the decision is made, it willbe extremely important for all of them topresent a united front to the company’semployees and customers. Benson Electric hasmore than 200 employees paying mortgagesand college tuitions and who knows what,and if those employees or the company’scustomers sense discord, the business could bein jeopardy. The board should state firmly thatif any shareholder is not interested in joiningin the decision-making process and presentinga united front—that is, buying in—then he orshe should sell out and leave.

I’ll acknowledge that buying in isn’t alwayseasy. It’s fair enough to expect that each familymember has an agenda and that if the likelyscenario plays out and Julie becomes CEO,Leigh and Bob are going to rant and rave inprivate. But in public, they must put the fam-ily’s overall interests first.

The board also needs to address the com-pany’s apparent lack of a formal business plan.Benson Electric needs one, so that all of thecompany’s interests are spelled out and are

within easy reach. Put simply, such a planwould help Millie, Bob, Leigh, and Julie stepout of their roles as family members and lookat the business objectively—something theyneed to do in order to run the company effec-tively. In the course of the meetings to decideon a successor, the board members should pro-pose that they, along with the shareholders,draft a business plan. (Incidentally, where havethese directors been? For all their qualifica-tions, they haven’t been doing a good job forBenson Electric. A strong board would havepressured Buck into planning for his succes-sion. They also would have ensured that theshareholders were meeting regularly and thatthe company had a business plan. Such prepa-rations would have made this whole processmuch, much easier.) The business plan forBenson Electric—an internal document, fornow—should put forth a mission statement,outline a reasonable course of action for thecompany, describe concerns about the futureof the business (for example, the implicationsof deregulation), and provide guidelines fordealing with disagreements or crises. It shouldalso include a process for the valuation andbreakup of the company, in the event that theshareholders do reach an impasse.

The plan need not be written in an elevatedmanner or style. For example, the missionstatement could be as simple as, “Our Grandfa-ther founded this business to ensure a securefuture for our family. He loved it, we love it;and we want to run it successfully so that it cancontinue to support us and our children.” Andthe process for handling disagreements couldbe as simple as a commitment to take any suchconflicts before the board—a neutral party—and abide by its judgment. The point is thatsuch written policies would guide the daily op-erations of the company. The plan would keepthe CEO, the other family members, and thedirectors out of many a tight spot.

I have two pieces of advice for Julie as shemoves into the position of CEO. First, sheshouldn’t worry about Bob and Leigh. Assum-ing that she is gracious about her appoint-

Millie has made it clear that she wants Julie to be the new CEO. Julie will be the new CEO. Case closed.



ment, her half-siblings should be able toadjust—even if Joyce moans and complains inthe background. And if they don’t want tobuy in, well, they both have good résumés;they can find employment elsewhere. Julieshouldn’t feel guilty if they leave, nor shouldshe feel particularly grateful if they stay.

Second, she has to begin acting like a leader.Her candidate profile says that she “lacks self-confidence at times.” She needs to get past thatproblem. Some people are going to say that shegot the CEO position because of her name. Sowhat. Sam Benson’s beliefs to the contrary,there’s no reason why people can’t provethemselves in their family’s company. In fact, ina well-run family business, there is tremendous

pressure on family-member employees to provethemselves. They may be given shares, but thatgift only gets them so far. If the overall goal ofthe family is the company’s success, only thosewho can contribute toward that goal will workin the company over the long term. You have toearn your place. Julie has put in her time. Sheknows the business backwards and forwards.She can’t afford to worry about what otherpeople think. She should concentrate on the jobin front of her—it’s a big one.

Kent Noble is the CFO of Noble Industries, a chain

of retail stores based in Hingham,

Massachusetts, that specializes in cameras, cards,

and gifts.



Case Commentary

by Kelin Gersick

How should Benson Electric’s board handle the succession process? And who is the most promising candidate for the position of CEO?For the Benson family and for the board ofdirectors at Benson Electric, the most importantfirst step in handling the succession situationis realizing that their task is not to pick thenew Buck Benson. The transition they face isnot about substitutions. In addition, the keyplayers must realize that Buck really heldthree leadership positions, not one: Buck ledthe owners, the family, and the business. Thethree groups—common to all family businesses—overlap but are not identical. Each needs anew leader or a new leadership system.

Selecting a leader who can succeed in thelong run—or designing a leadership system inwhich the family can share the responsibilitiesof running the company—cannot be accom-plished overnight. And obviously, somebodyhas to fly the plane while the family and thedirectors make their decisions. That’s why Irecommend that an acting CEO be appointedfor a specified number of weeks or months.

In most cases, the senior executive who isnext in command would take charge. In thecase of Benson Electric, the interim CEO couldbe one of the company’s vice presidents orpossibly one of the directors. Clearly, he or sheshould not be one of the family. The actingCEO’s primary responsibilities will be to rightthe ship—to reassure customers, employees,and the financial community—and to act as abridge to the next long-term leader. Given theinterfamily conflicts and Buck’s failure to planfor his succession, it would be a mistake forany family member to jump into the CEO’srole right away.

Once the board, with Millie’s approval, hasappointed an interim manager, the real workbegins. Let’s consider the needs of each of thethree groups in turn: the owners, the family,and the business.

Who are the owners of Benson Electric, andhow do they intend to exercise theirownership rights? If Millie owns 70% of thevoting shares, and if each of the offspringowns 10%, then it’s up to Millie to start somehard dialogue about the future. She shouldbegin shareholder meetings immediately among

the four of them—and only the four of them:Millie, Julie, Bob, and Leigh. Joyce is not anowner and must not be treated like one. Atthose meetings, Millie needs to be clear aboutwhether she intends to make decisionsunilaterally, with or without soliciting inputfrom the other three, or whether she wants toshare control. If Millie intends to appoint Julieas CEO or chair, she needs to say so up front.She should also be willing to discuss her ownestate-planning intentions so that a likelypicture of future ownership distribution canbe established.

Once Millie has made her intentions clear,Bob and Leigh have some critical decisions tomake. Do they want to continue as owners ofthe company, or do they want to cash out assoon as the danger of a so-called fire sale haspassed? If Bob and Leigh do not wish to re-main in the company, either as executives or asinvestors, Millie needs to work out a buyoutarrangement that offers each of them an hon-orable and equitable exit option and at thesame time protects the company. Benson Elec-tric has been described as “rapidly growing.” Ifa strong leadership plan is implemented andperformance remains good, the owners andthe board may consider a number of optionsto generate the cash needed for such a buyout:recapitalization, seeking a private investor, oreven going public, at least with nonvotingshares. This is a perfect example of how man-agement succession planning is inextricablylinked to the strategy of a company and thelong-term plans of its owners.

If all the shareholders agree to continue asowners, they need to talk about what kind of asibling partnership they want and whether theright conditions exist to make that partnershipfeasible—that is, whether the combination ofthe family culture, the personalities and indi-vidual styles involved, and each owner’s eco-nomic agenda will allow such a partnership.Ownership has had only one voice in thepast—Buck’s voice. Now it needs to learn four-part harmony—very quickly and under themost difficult of circumstances.

Ownership has had only one voice in the past: Buck’s voice. Now it needs to learn four-part harmony—quickly and under difficult circumstances.



Now let’s turn to the work of the broaderfamily. Buck kept the lid on family conflictwhile he was alive. Now the lid has blown off,and there is a great danger that pent-up emo-tions will scuttle any rational planning done bythe four family owners. It seems unlikely thatJoyce and Millie will be able to work togetheras the heads of the combined family—even ifthey were to realize that such an alliancewould be in the best interests of all theirchildren.

The three siblings should set up a series ofmeetings without their mothers present. Theyhave a good chance of forming a working alli-ance on their own. That’s not to say that theywon’t have to acknowledge the views of otherfamily members, including Joyce and the sib-ling’s spouses (if any). Those other memberswill certainly influence their conversations andthe long-term viability of any solution. ButBob, Leigh, and Julie need to come to some un-derstanding among themselves. If the familyhas a future, that future is primarily in theirhands. Bob and Leigh’s most difficult task dur-ing this period will be to convince theirmother that they need her to support them inwhatever choices they make about their ownfutures.

Only after the family members havereached some form of resolution concerningtheir agendas can meaningful progress bemade toward selecting a new business leaderfor the long term. Assuming that Millie reallyhas not made up her mind about Buck’s suc-cessor, the board must take the lead. Their firstand most important consideration should befiguring out what kind of leadership the com-pany needs for the next decade. Selecting anew CEO should be an exercise in strategichuman—resources planning, not an exercise infamily dynamics. If deregulation is a concernand the industry is changing as rapidly as it ap-pears to be, it is critical to think about the newdemands the company will place on its CEO.

An outsider may be the best choice. Nobodywins—least of all the family—if an adequate,but not outstanding, family member is se-lected. (If one of the family members has thepotential to be an effective leader but is notyet ready, then the board and the interim CEOcould perhaps design and implement a specificdevelopment program for that individual.)

Given the family’s history of 32 years ofanger and resentment, it is unlikely that theBensons can pull off a successful, smoothsuccession without some kind of assistance—either internal or external. Perhaps Williamsoncan step into the role of quarterback andfacilitate the process. Either way, the decisionsthat need to be made about a successor must begrounded in a comprehensive, long-term planfor the shareholders, the family, and thebusiness. If situations like the one faced byBenson Electric are handled wisely andproperly, they can be an opportunity for growthand revitalization. If not, they can derail themost successful company and unravel theclosest family. I hope that the members of theBenson family and the company’s directorshave the courage to do the kind of honest,comprehensive planning that is so desperatelyneeded at the company. If not, prospects arebleak for any one of the seven candidates whogets the nod.

Kelin Gersick is a cofounder and senior partner of Lansberg, Gersick & Associates, a consulting firm based in New Haven, Connecticut, that works with family-owned companies and family foundations. He is also a professor of organizational psychology at the California School of Professional Psychology in Los Angeles and director of the executive program on family business at the University of California, also in Los Angeles. He is a coauthor, with John A. Davis, Marion McCollom Hampton, and Ivan Lansberg, of Generation to Generation: Life Cycles of the Family Business (Harvard Business School Press, 1997).

The three siblings should set up several meetings without their mothers present. They have a good chance of forming an alliance.



Case Commentary

by Victor Ney

How should Benson Electric’s board handle the succession process? And who is the most promising candidate for the position of CEO?Williamson and the other board members havelittle choice but to endorse Julie as the nextCEO of Benson Electric. Even though Milliesaid that she would stay out of the decision-making process, she made it clear that Buckthought that Julie was the only one of his chil-dren who was qualified to run the company inhis absence. That was the comment most criti-cal to the entire case. Millie controls the shares;Millie controls the company. If she wants Julieto be CEO, Julie is going to be CEO.

But that shouldn’t worry Williamson.There’s no candidate in the current pool whofar outshines the others. And although Julie’scredentials aren’t perfect, they’re manage-able. The directors could keep a tight rein onher and offer hands-on training until she is ascompetent as Buck was at running the com-pany. (They would probably do the same foran outsider in any case. After all, their ulti-mate goal is to maximize shareholder value,no matter who holds the title of CEO.)

What should be worrying Williamson ishow he is going to handle Leigh and Bob. Will-iamson seems to view Leigh, Bob, and Joyce asa problematic group. But they are individualsand should be treated as such—especiallysince their reactions to Julie’s appointmentcan have a tremendous effect on the com-pany’s future.

Let’s start with Leigh. Williamson hasn’tpaid much attention to her yet, even thoughher profile indicates that she is an excellentmanager with much to offer the company.Leigh is capable and enthusiastic. It seemsthat what she wants most is recognition andrespect. (In fact, she only seems to want thetitle of CEO to prove that she is better thanBob; if she had more responsibility else-where, she might not be as hungry for thecorner office.) The board could offer to ex-pand her role and allow her to carve out aniche for herself. If she accepted, I’m surethe company would only benefit.

Bob, by contrast, doesn’t seem to have alot to offer the company, but he isn’t hurting

its performance either. He doesn’t seem atall ambitious, and he might be content justto remain in his current slot for the longterm. I suspect that even a halfhearted at-tempt at making him feel needed would beenough to keep him in line and performingat least as adequately as he does now.

Of course, there is an outside chance thatLeigh and Bob—encouraged by Joyce—willbe upset if Julie is named CEO. In that case,they might resign, or they might try to maketrouble. If they resign, the directors shouldhelp them find secure jobs elsewhere. A fam-ily business is supposed to support thefamily. There’s no reason why that mandatecan’t extend beyond the walls of BensonElectric. All that aside, I think Bob andLeigh’s possible resignation is the least likelyscenario. They know that it is in their ownbest interests to continue making the com-pany successful, and an ugly, public conflictdoesn’t conform to those interests.

Williamson’s job probably will not be as dif-ficult as he fears. But right now, Williamson’sattitude is his greatest enemy. He states towardthe end of the case that “having family mem-bers on the payroll definitely adds to ourcomplications.” Well, there’s no denying that.It is difficult to deal with people whose profes-sional interests are entangled with theirpersonal interests, and whose status as familymembers may affect their better judgment.But conflict is conflict. Williamson has to real-ize that family issues aren’t that different fromvendor disputes, union negotiations, or dis-agreements with customers or employees.Emotions run high in all those cases, and it iscritical to understand that what appears fair toone party may not appear fair to another. IfWilliamson maintains his own professionalcomposure and tries to sympathize with all theinvolved parties—keeping shareholder valueas his guiding goal—he’ll get through this or-deal just as he would any other business crisis,and Sam Benson’s legacy will continue to growand prosper.

Williamson has to realize that family issues aren’t so different from vendor disputes, union negotiations, or disagreements with customers or employees.



Victor Ney is a vice president at Penguin Key Food

Supermarkets, a family-run business based in

Valley Stream, New York. He specializes in

human-resource and information-technology

issues. He is the son-in-law of the owner and

founder and also works with his brother-in-law

and sister-in-law, both of whom are vice

presidents. Penguin owns and operates seven Key

Food Supermarkets in and around New York City.

Reprint 98108Case only 98108XCommentary only 98108ZTo order, call 800-988-0886or 617-783-7500 or go to www.hbr.org

http://harvardbusinessonline.hbsp.harvard.edu/relay.jhtml?name=itemdetail&referral=4320&id=98108

http://harvardbusinessonline.hbsp.harvard.edu/relay.jhtml?name=itemdetail&referral=4320&id=98108X

http://harvardbusinessonline.hbsp.harvard.edu/relay.jhtml?name=itemdetail&referral=4320&id=98108Z

http://www.hbr.org

siblings and succession in the family business

Documents