All around the world, family-owned firms dominate business. In the U.S., some of the largest companies — Wal-Mart, Ford, Coca-Cola, Motorola and Hewlett-Packard, among others — were founded by and are owned or dominated by families. This is also true in Europe, especially in countries bordering the Mediterranean; dynasties such as the Rothschilds have been around for centuries. In Latin America and Asia, too, family-owned business empires abound and wield considerable power.

Like monarchies, one of the thorniest problems family firms face is succession. A commonly cited statistic notes that less than 15% of family firms survive under family control after the third generation. While the reasons may vary in each individual case, overall they are hardly difficult to fathom. The combination of external challenges — changing markets, increasing competition — with internal issues of organizational and family dynamics can be lethal. It subjects family firms to levels of pressure that professional managers rarely encounter. As the scion of a business family wrote in BusinessWeek, “Business and family don’t mix” — at least not easily.

Over the years, academics have explored factors that can smooth the succession process for family firms. Leslie Mayer, CEO of the Mayer Leadership Group, is a Senior Fellow with the Wharton Global Family Alliance headed by Wharton professor Raffi Amit. She points to research by Wendy Handler, who has studied succession in family firms. Handler’s research showed, for example, that the more the members of the next generation have achieved fulfillment in terms of career, psycho-social issues and life stage, the more likely they are to have a positive succession experience.

In addition, when next-generation members have greater influence over the business — both in terms of control over other individuals and their own situation — the smoother the succession is likely to be. Mutual respect and understanding with the founder or owner are other critical issues. Mayer adds that Handler’s research indicates that family firm successors are likely to have a positive experience “the greater their commitment to family business as a family value.”

For succession to work smoothly in a family firm, the founder must of course clearly and unequivocally “bless” the successor. Still, according to Mayer, “even if the successor is anointed in a public way, there is a missing piece because it cannot immediately change the way that others perceive him or her. Successors may be handed a title, but the way others see them is not transferable. It’s an ongoing process in which successors must come of age in their own right.”

Given these challenges, it is hardly surprising that armies of consultants have emerged to provide advice — psychological, accounting, legal — on these issues. Many of them, though, approach the issue of succession from the perspective of the founder’s challenges in managing the transition and ultimately ceding control to the successor. In an effort to see how the picture looks from the other side of the table, Knowledge at Wharton spoke to the successor/heir apparent of a private family firm.

The Bowman Group owns a clutch of construction and land development companies in Southern New Jersey. Launched by founder William Bowman, 62, in 1972 with a $3,000 loan, the business has generally experienced steady growth because of the market’s proximity to Philadelphia and Atlantic City. Annual revenues now exceed $50 million. Robert, 38, the elder of William’s two sons, started a homebuilding business 10 years ago outside the Bowman Group’s market area. The second son, Peter, 36, worked outside the firm for nearly 15 years, but returned to the Bowman Group in 2001 and is now the successor.  In a conversation with Knowledge at Wharton, Peter Bowman spoke about family firm succession as seen through a successor’s eyes.

Knowledge at Wharton: What led you to rejoin your father’s firm?

Bowman: Two years ago Kevin Manley, a key member of the executive management team at the Bowman Group, suddenly passed away because of cancer. This man, I believe, was to be the ultimate successor. After that tragic and unforeseen loss, my father needed help to solidify the future of the business as he wished. My older brother’s rapid individual success made it difficult for him to be an active component in the succession plan. As a result, my father asked that I join the organization.

Knowledge at Wharton: What have been the most challenging aspects you have faced so far?

Bowman: There are many challenges, but a few are worth noting. The first is — and will continue to be — navigating the delicate fabric between business and family. It is a challenge to gain business respect from someone who has always viewed you as the child or the dependent. Second, the reaction of employees and business associates to your involvement is at times tough to gauge. Some people view you as the person you are, while others see you as a lucky lottery winner who will never live up to the task at hand.

Third, I am sensitive to the bridge between ownership and the culture of the organization. As the potential successor, you generally hear and see things that are not exposed directly to the owner. For example, when employees are having a meeting, they may speak more openly when the founder is absent. When the owner is present, they may be on their best behavior but when the future successor is around they may lower their guard and speak openly.

Such situations can create quite a few dilemmas. When criticism is voiced, for instance, should I jump on that bandwagon or respond as the future owner? Also, what should I share with my father and what should I keep to myself, so that neither my father nor the employees stop trusting me? You have to adjust to such issues and not get caught up taking everything to heart. It is challenging at times to remember that leadership requires that you operate under your own beliefs and values and not be swayed by the feelings and beliefs of others.

Knowledge at Wharton: How have you dealt with these challenges?

Bowman: It can be frustrating. When conflicts occur, you tend to rationalize them, intellectualize them or internalize them. You can’t go running to the founder and become a frustrated, negative force. When you are trying to build a professional relationship, you can’t go to him as a father — it can hurt the professional capital you are trying to build. When the business environment and regulatory challenges are as difficult as they are today, a lot of hidden tensions can surface. One thing that has helped me recently is contact and communication with other successors of family firms. In what can be a very lonely situation, it helps to know that I am not alone in dealing with such issues.

Knowledge at Wharton: What do you like about being a successor to the family business?  

Bowman: That question is very important. Before fully committing to the part of successor in a family business, you need to be sure that the opportunity will satisfy your needs. You have to ask yourself whether your personal goals and dreams are being met. This is a difficult process because while you are evaluating the opportunity, the owner is also evaluating your level of commitment to the succession plan. You have to be sure that joining the family firm is what you truly want to do and that it is rewarding enough for you — including the material rewards. If you don’t do that, it makes it harder to deal with the challenges you will face. You can’t have a career to help your father; it must be what you want as well. You can’t live for anyone else; you have to live for yourself.

I have been through this soul-searching exercise, and all things considered, I believe that what I like most about returning to the family business is the opportunity to be working with the person I most admire. I have worked for and with enough people to know that working with my father is where I truly belong.

Knowledge at Wharton: How does your family firm plan for your eventual ownership?

Bowman: In our circumstances, it may not be what we specifically plan but more how we feel. Our company was built on a foundation of entrepreneurship and it continues to remain entrepreneurial. Entrepreneurs are, traditionally, great feelers of people, processes and especially opportunity. Inherently, I share many of those same characteristics.

Many times it is our genetic bond and our unspoken dynamic that gives us our sense of comfort rather than succession contracts or paper plans. While everyone in the company is clear that the succession will occur at some point — in fact, this was announced in a newsletter — it is an elusive plan, almost like a transition without boundaries. It isn’t based on timelines or goals or measurable events. In other family firms, they might have explicit timelines and trigger events, but we are at the other end of the spectrum. We recognize the need for flexibility and also that issues of trust cannot be forced under deadlines.

My father and I are trying to work within that dynamic. It is ironic that my father and I face the same ultimate goal but from opposite ends of the spectrum. He is trying to pass on what he already knows while I am preparing for what I think will eventually come.

Knowledge at Wharton:  How did you prepare for the succession process?

Bowman: I am convinced that my experience outside the family firm serves as a great asset to the succession process. I worked for the family business in my teenage years as a laborer in the field. Today, I watch, listen and participate in many of our highest-level engagements. It is important to me that I stand on my own styles and management beliefs.

If you know what you need to become the successor to the business, you need to trust that knowledge and assemble the necessary people and resources while moving on a parallel path alongside the current ownership. Such a strategy prepares you for any type of succession transition, whether it is planned or unplanned. 

Knowledge at Wharton: How do you handle the separation between business and family when conflict arises?

Bowman: That is one of the greatest challenges of succession. You always have to choose which conflicts are important and worth fighting over and which ones you need to tolerate and let go. Either way, it is your reaction in conflicting situations that you are measured by, not by the resulting decisions. My approach to owner-successor conflicts is to be respectfully strong, as unemotional as possible and always be positive. Remember, the owner is still your boss. Keeping your game face on through conflicts is very important.

Knowledge at Wharton: What advice would you give founders who want to plan the succession of one or more family members to the family firm?

Bowman: I suggest that owners sharply evaluate their reasons for wanting succession. Motivations must clearly be defined and ideally should match up with the successor’s needs and wants. In our case, I believe our succession need comes from a deep sense of responsibility we feel to the families we support through employment. Many people have sacrificed long hours and worked in tough conditions to see our company through harsh economic cycles. I believe we owe them an unconditional return that assures them a competitive opportunity at our company in the future. That is the foundation of our business, and I fully subscribe to that purpose. 


Knowledge at Wharton: How do employees at the Bowman Group view the succession issue. When conflicts are not resolved, how does this impact the employees?

Bowman: I think for the most part, employees are pleased to see a succession plan evolving. We have a large number of loyal and long-term employees at our companies, and I believe they all share a vested interest in seeing the business move forward successfully. The good part of my relationship with my father is that I try to avoid public conflicts. I am a private strategist, and I make every attempt to shield everyone else from deep or tense issues between us. When conflicts do occur, I believe the solutions can be most easily found in a private setting. To ensure a successful succession, we are both forced to compromise. In order to succeed (in both meanings of the word) it is my responsibility to see that compromise between us comes more frequently and that increasingly decisions are made in ways that are best suited to the companies’ future growth.


Knowledge at Wharton: One of the biggest challenges for founders of family firms is letting go. The founders’ sense of ego and self-worth are so tied up with the business that they find it hard to relinquish control even when the successor is a beloved son or daughter. How do you deal with this conflict? What are the costs to the business of founders not letting go?

Bowman: I believe with certainty that this is the subject of many books, and an entire profession has been built around servicing this need. I can say that letting a business go for some owners is nearly the equivalent of severing a major appendage. A business is the direct extension of the owner. Letting go of the business can be a highly sensitive subject for some owners to address and is probably the greatest cause of succession failure. As the potential successor to a tightly held company, I can only imagine that once you have unlocked the key to the owner’s control release issues, your efforts can be more efficiently focused on the business of running the business. 

Knowledge at Wharton: When is it the right time for a founder to step aside and make way for the next generation?

Bowman: The right time and the actual time are most likely never the same. The challenge is to match the needs of the owner with the capabilities of the succession team. I use the expression “succession team” because in our case, it will take a team of highly competent people to meet my father’s technical expectations before any real release occurs. My goal and purpose is to initiate and evolve a transition process that utilizes my father at the highest level while removing his need to operate at lower levels. Once you have the ingredients for transition in place, you need to push each and every day, in every possible direction, to move even one step closer to the goals of transition. Succession is not a process; it must be viewed as a mission.

Knowledge at Wharton: Do you have any suggestions for other potential successors of family firms?

Bowman: I have two key suggestions: first, establish good communications with the owner. If you want to eventually run the business someday, you have to take the initiative to consistently discuss and build working trust in ways that supplement the family bonds. Most owners look for people who are proactive, and that applies even more to the potential family successor.

Second, secure the trust and involvement of what I call the “glue guy.” This is the person in the organization whom the owner trusts, and whom you trust as well. He (or she) should also be a person who trusts you completely. Building a strong bond with the “glue guy” is an invaluable asset. In my situation, the “glue guy” is a tremendously positive influence within the organization and for me personally as he helps push the succession envelope. He guides and supports my cause while consistently maintaining respect for my father. That is extremely important, and a critical ingredient to ensure the success of the succession.

Knowledge at Wharton: What makes for longevity in a family business?
Bowman: I believe longevity for a family business is founded on a true sense of family legacy and responsibility to those who follow in the future. I know some of the top family-owned businesses in America are even more successful as family units than their highly regarded businesses. The core of business longevity I believe is founded in three areas: A strong family vision, unconditional family support and a true willingness to trust.