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Family Business Review

DOI: 10.1111/j.1741-6248.1989.00221.x 1989; 2; 221 Family Business Review

W. Gibb Dyer Integrating Professional Management into a Family Owned Business

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A R T I C L E S

Integrating Professional Management into a Family Owned Business W. Gibb Dyer, Jr.

Under which conditions can professional knowledge and values be integrated successfully into the organization and management of a

family firm?

In recent years, historians of American business have documented the development of management science and wi th it the inexorable growth in the popula t ion of "professional managers" (Chandler , 1977; Hayes and Abernathy, 1980; Meek, Woodworth , and Dyer, 1988). While there is considerable debate regarding what constitutes their role, professional managers typically have received formal t ra in ing in a business school set t ing in areas such as finance, product ion, accounting, and personnel. Moreover, those trained in management generally fit the criteria for pro-fessionalism suggested by Schein (1968), inasmuch as ( l ) t he i r actions are driven by a set of general principles or proposi t ions independent of a par t icular case under considerat ion, (2) they are deemed to be "exper ts" in the field of management and to know what is " g o o d " for the client, (3) their relat ionships wi th clients are considered helpful and objective, (4)they gain status by accomplishment as opposed to status based o n ties

to the family, and (5) they be long to voluntary associations of fellow professionals. T h i s is no t to say that all those w h o receive management t r a in ing are necessarily professional managers. For example, some w h o receive managemen t t r a in ing bu t have a technical background may still view themselves as primari ly technical experts rather than managers. Thus , only those w h o adopt the orientation as out l ined by Schein should be considered professional managers.

T h e professionalization of management in the United States started in 1891 when Joseph Whar ton donated $100,000 to the University of Pennsylvania to create a school of commerce. Since that t ime some 650 business schools and 600 MBA programs have been created. Currently, business schools are p roduc ing about 70,000 MBAs per year and graduat¬ ing many more wi th undergraduate business degrees (Meek, Woodworth , and Dyer, 1988).

FAMILY BUSINESS REVIEW, VOL. II, NO. 3, FALL 1989 221



222 Dyer

Where do all these professional managers go? In increasing number , professional managers are f inding their way into posi t ions in family owned businesses. Th i s is largely due to the downsizing trend in Fortune 500 companies and the growth of entrepreneurial firms and family owned businesses. T h e histories of family firms such as Levi Strauss, Ford, DuPont , and scores of others document the rise of professional manage-ment in these organizations in recent years. While there has been con-siderable debate as to whether professional managers have improved or stymied the effectiveness of organizations (Hayes and Abernathy, 1980; Meek, Woodworth, and Dyer, 1988), most organizations benefit by utiliz-ing the skills of management science. For example, market research and financial p lanning , a long the more effective methods of product ion (such as statistical process control or just-in-t ime inventory systems—skills that are frequently taught in business schools), have helped numerous organi-zations main ta in a competit ive edge. Most critics of professional man-agement do not worry about the skills of professional management but rather their applicat ion, a long wi th the values espoused by those with professional t ra ining. Often cited are the professional managers ' lack of unders tanding of h u m a n issues in organizations and their short-term focus on financial performance.

In this article, I describe some of the issues, di lemmas, and conflicts that often arise as a family firm attempts to professionalize its manage-ment and discuss what migh t be done by leaders of family businesses to integrate more effectively the skills of professional management into their organizations. H i r i ng professional managers is one way to gain the skills of professional management . Another is to professionalize by t ra in ing family members of nonfamily employees currently working in the busi-ness. T h e data presented in the article are based on several case studies as well as my own experience in he lp ing leaders of family business work th rough some of the difficult issues that accompany professionalizing the management team.

Why Professionalize?

There are a number of reasons why a family owned business might want to br ing in professional managers or to professionalize their current man-agement team. One of the most common reasons is a lack of management talent wi th in the family. Family members sometimes lack skills such as market ing, finance, or accounting, and the family must acquire such skills if the business is to survive. As a family business grows—particu-larly in a complex environment—it is unlikely that the family will be able to staff all the key posi t ions and have all the necessary skills. There-fore, the family will, out of necessity, look outside the family for help or a t tempt to broaden the skills of family members.



Integrating Professional Management 223

A second reason for professionalizing management is to change the norms and values of business operat ions. Lansberg (1983) and many others have pointed out how family values such as uncondi t ional love and concern often conflict wi th business values of profitability and effi-ciency. Some leaders of family firms believe that the family's lack of professionalism and the employees' lack of concern for profitability and efficiency can be changed by indoct r ina t ing the current management team in sound business practices or by br ing ing in professional manag-ers whose values are more consistent with organizat ional efficiency and achieving higher profits. By moving to professional management , the family may feel that unproduct ive employees can be let go and stricter controls can be enforced. Often leaders of family firms w h o have a pater-nalistic orientat ion toward their employees are reluctant to make such changes themselves, so they br ing in "hired g u n s " to make the painful changes the family will not make.

A third reason for acqui r ing or developing management expertise is to prepare for leadership succession. T h e founder or family leader may want to retire in the near future and may feel that family members in the business need addi t ional t ra in ing before assuming the mant le of leader-ship, or the founder may feel that n o one in the family is capable of r u n n i n g the business after he or she is gone. A search is then made to find managers that can be trusted with the future leadership of the firm.

The Problems of Professionalization

Many of the problems that accompany the t ransi t ion to professional management in a family firm can be traced to differences between the t ra in ing and values of the family and those of the professional managers . Schein (1983) points out how founders and professional managers analyze problems differently, occupy different posit ions of authority, and relate to others in very different ways. For example, founders of family businesses tend to be driven by their part icular vision of their product or service. They tend to be intuit ive in their decision making , their power is based on ownership , and they motivate their followers th rough their charis-mat ic behavior. Conversely, those trained as professional managers gen-erally derive their power no t from ownersh ip bu t from posi t ions of authority. They tend to make decisions based more on logic and rat ional analysis than on intui t ion. Furthermore, these managers tend to be rather impersonal in their interactions wi th others, in contrast to the more personal style of the founder.

While not all founders and professional managers differ dramatically a long these dimensions (I have seen instances where professional man-agers act more like founders than the characterization of professional managers out l ined by Schein), numerous case studies of professional



224 Dyer

managers enter ing a family business generally suppor t Schein's analysis (Dyer, 1986; Meek, Woodworth, and Dyer, 1988). Professional managers often have world views and assumptions that differ from the leaders of family-owned firms. Moreover, the organizational systems and methods of operat ion that are preferred by professional managers are often anti-thetical to those of family leaders, w h o are accustomed to a more informal (and, at times, seat-of-the-pants) management style.

T h e reasons for the differences between professional managers and those wi thout such t ra in ing w h o work in family businesses can often be traced to organizational and occupat ional socialization experiences (Van Maanen and Schein, 1979). Those "growing u p " in the family business learn skills and practices that tend to be idiosyncratic to that organization and generally have had little or n o experience in other types of organiza-tions. These employees learn the importance of the family's values and the role of the family and the firm in the communi ty and recognize how to accommodate the needs of the family and top management . The i r t ra in ing is often informal, individual , and technical (not managerial) and is idiosyncratic to the part icular work they perform.

In contrast, professional managers are typically socialized collectively in the classroom (White, 1977), where the t ra in ing is formal, and generic skills are taught as t hough they could be applied to most, if not all, organizations. T h e case method, which is an integral par t of most man-agement t ra in ing classes, is generally biased toward the analysis of large, bureaucrat ic organizations hav ing well-defined systems and processes. Much of management t ra in ing is value free, despite recent at tempts to integrate the study of ethics into the curr iculum of business schools. After graduat ion, many professionals go to work in large companies. They also tend to change jobs frequently and thus gain a broad range of organizat ional experiences (Schein, 1976).

T h e following case of Jones Enter tainment , Inc., (all names have been disguised) will be used to illustrate some of the differences in orien-tat ion between professional managers and family business founders (Dyer and Nyman , 1987). While there are certainly events and personalit ies un ique to Jones Entertainment, the case is prototypical of many other cases involving the professionalization of a family firm (Dyer, 1986).

Jones Entertainment, Inc.

Greg Jones and his wife, Marsha, started a home entertainment business in the early 1980s that included market ing books and audio- and video-tapes for children. Initially, the business was just a hobby, bu t it grew more rapidly than they could have imagined. Marsha provided m u c h of the creative inspirat ion for new products while Greg handled the finan-cial and management side of the business. As the company cont inued to




grow, Greg felt that the business was becoming too complex and con-suming too m u c h of his t ime. He felt a need to retire in a few years and wanted to find someone to replace h im. While Marsha and Greg had some of their children work in the business, neither of them felt that the chi ldren were interested or qualified to assume Greg's role. Furthermore, Marsha was support ive of Greg's desire to be less involved in the day-to-day operat ion of the business.

To find the r ight person to replace h im, Greg called a local "head hunter ," Tom Wilson. Wilson did a nat ional search and found J o h n Lewis, w h o seemingly fit Greg's needs. Lewis had many years of experi-ence work ing for a large retailer, bu t now wanted to work for and lead a smaller organization. After interviewing Lewis, Jones felt that the fit between Lewis and Jones Enter ta inment was a good one. Lewis was hired and began working for Jones in 1987.

After just a few weeks of work ing together, problems began to surface in the re la t ionship between Jones and Lewis, and the organizat ion began to suffer as result. As the tension mounted between Jones and Lewis, they began to avoid each other. At times, weeks went by wi thout a mean-ingful conversation between them. Finally, they decided to br ing in an outside consultant to help them analyze their differences and to facilitate a resolut ion of the conflict. After interviewing Jones and Lewis, the con-sultant identified seven issues on which Jones and Lewis had different views and expectations. These differences are summarized in Exhibit 1.

Not only did Jones and Lewis differ about the issues listed in Exhibit 1, bu t they disagreed on the priority of the issues. Jones felt that improv-ing dis t r ibut ion channels was the most impor tan t problem facing the firm, while Lewis felt that expanding the sales force should be the com-pany's top priority.

T h e firm's employees also noticed several differences between the two men. T h e employees saw Lewis as a good motivator, communicator , and trainer. He also worked well wi th the company 's distributors. Jones was seen as a rather author i tar ian manager w h o needed to check on all the details of the business and had little t ime to deal wi th larger issues. He did not delegate well or provide his employees wi th m u c h feedback on their performance. Furthermore, he did not relate well in one-on-one si tuations wi th his distributors. Still, Jones was seen as the visionary w h o had bui l t the organizat ion from no th ing and was acknowledged as the clear leader.

T h e differences between the two men reflect two distinctly different views of the world and the role of management . Lewis sees his role as one of a hired employee, wi th an accompanying ut i l i tar ian logic: he br ings various skills and abilities to the workplace, puts in an eight-hour day, and in re turn is compensated for his work. According to Lewis, his role is to unders tand the "big pic ture" by analyzing the overall business



226 Dyer

Exhibit 1. Differences in Views and Expectations of Jones and Lewis

Issue

Salary

Results

Time

Detail

Level of commitment

Writing

Expenses

Jones

Jones feels he is paying Lewis an extremely high salary. As a result, he expects maximum time and effort with quick results.

Jones (and others) expected that the new high-salaried executive vice-president would come in and make immediate, even dramatic, improvements in sales and profits.

Jones believes that Lewis should be spending a great deal of time everyday, including weekends, learning the business and being on top of all issues of the business.

Jones recognizes that Lewis should work on broad areas but feels he should also perform detail work. Jones is concerned that Lewis doesn't follow through.

Jones has a vision—the type of home entertainment he sells can positively affect all who use it. He feels Lewis must have the same vision.

Jones is not satisfied with Lewis's writing skills and rewrites many of Lewis's reports.

Jones is very frugal with expenses. His motto is "Stay out of debt and pay as you go." He feels every expenditure should pay off.

Lewis

Lewis realizes he has a high salary, but it is a cut in pay for him. His performance in the past has been recognized and rewarded. He feels no need to change his work habits.

Lewis feels that it is unrealistic to expect any real changes immediately, and that one should be given two or three years to make significant changes.

Lewis works under the assumption that he can get on top of the business by putting in a full regular day.

Lewis doesn't think detail work is a wise use of his time. He prefers broad-range thinking and has others do the detail work for him.

Lewis is excited about the product and wants the company to succeed but doesn't have the same sense of mission as Jones.

Lewis feels pressured to write like Jones and thinks much of what Jones rewrites is not worth the time.

Lewis feels one must invest in development and not expect immediate return. He is accustomed to having his own budget to spend as he sees fit.




si tuat ion and to avoid get t ing bogged down in details. Jones, on the other hand, is driven by the mission of his business: to provide whole-some entertainment to young people. As the founder, his name is on the company 's products, and he thus feels a sense of responsibility for all aspects of the business. Moreover, he feels that each employee should be as dedicated as he is and should share his vision.

After work ing wi th the consultant and recognizing that there were significant differences in their views, Jones and Lewis came to the con-clusion that there were basically three opt ions: (1) Lewis could leave the company by choice or by being fired, (2) the men could develop a new work relat ionship, or (3) they could cont inue on as they were and hope things would improve. Both Jones and Lewis felt that it was to their advantage to renegotiate the init ial contract written when Lewis was hired. (Jones's first choice would have been to fire Lewis, but Lewis had a provision in his contract that Jones would have to pay h im one-year's salary if he were terminated, and Jones wanted to avoid such a payment.) They decided that Lewis would no longer be considered Jones's successor and that he would work on a commission basis. Lewis was confident that he could increase profits, and Jones was certainly wil l ing to pay for any increase in profitability.

T h e case of Jones Enter ta inment highl ights many of the issues com-m o n to family businesses when family values conflict wi th the values of professional managers. T h e family has a set of expectations regarding the function and role of professional management that often do not cor-respond with those of professionally trained managers. Conflict often ensues, resul t ing in uncertainty and confusion of company employees. Decision m a k i n g is slowed down, priorities and goals become unclear, and new ideas and projects are delayed as a result. In many cases, the firm begins to lose its competit ive edge, and profitability declines. We will now turn to some alternatives available to mit igate such conflicts.

Alternatives for Integrating Professional Management into the Family Firm

There are three basic op t ions available to those leaders of family firms w h o wish to b r ing professional managemen t skills in to their organiza-t ions: (1) professionalize members of the o w n i n g family, (2) profession-alize nonfamily employees currently working in the business, or (3) b r ing in outside professional managemen t talent. T h e first two op t ions typi-cally represent evolut ionary and incremental changes in methods of do ing business—that is, changes will occur rather slowly over a n u m b e r of years. Moreover, the company cul ture will probably no t change dra-matically. T h e third op t ion generally reflects a more revolut ionary type of change effort, where significant changes in both methods of operat ion



228 Dyer

and company cul ture can occur rather quickly. Each of these op t ions will be discussed in more detail.

Professionalizing the Family

T h i s op t ion is most viable when the following four condit ions exist: First, there must be family members who are wil l ing and able to gain the necessary management skills and w h o want to work in the family busi-ness. Second, the family must feel that the cul tural values established by the family need to be perpetuated and that the family is best able to ensure the continui ty of those values. Th i rd , the family must wish to cont inue to both own and manage the business. Fourth, the strategic focus of the business should not be likely to change in the near future— that is, there must be a relatively good fit between the organization's strategy and its environment.

Under these condit ions, the family is likely to be successful in devel-o p i n g their own talent. Creat ing a t ra in ing and development p rogram for family members is essential to this success, and leaders of family firms have used a variety of different methods to do so. At Levi Strauss, for example, the Haas family has encouraged family members to get a Har-vard M.B.A. before work ing in the business. Another family firm in Hawai i requires that family members not only get a formal business educat ion but also work at another company for at least two years before re turn ing to the family business. To ensure that his children brought the r ight set of skills back to the business, one entrepreneur in Texas encour-aged each of his four sons to get degrees in different areas. Each son came back to the firm with different expertise.

Whi le business school educat ion and work experience can help enhance a family member 's management skills, addi t ional t ra in ing may be necessary once a family member enters the business. Executive man-agement programs and seminars can be used to broaden skills. Affilia-tions with professional associations can help family members network and keep abreast of the latest developments in the business world. A mentor ing system where highly respected nonfamily managers teach fam-ily members both management skills and company norms and values has also been successful in a number of family firms (Dyer, 1986). Finally, company sponsored t r a in ing and development p rograms can provide needed information and skills.

Choos ing the family op t ion to professionalize the business has draw-backs, however. Some children in the family may feel undue pressure to re turn to the family business, which can result in guil t feelings if the chi ld chooses a career outside the family business (Barnes and Hershon, 1976). Moreover, feelings of resentment on the par t of parents are com-m o n if the chi ld follows a different career pa th . Sometimes the expecta-




t ions of the family leaders and of the children are similar, bu t conflict may occur once the family member rejoins the business after comple t ing his or her education. In one family firm, the son of the founder was sent to M.I.T. to get a M.B.A., with the expectation that he would return to work in the business. After complet ing his degree and re turning home, the son discovered that the father was not wil l ing to listen to the new ideas that he had learned at business school. T h e son felt cheated and estranged from his father and family and soon left the family business, wi th bitter feelings.

Before choosing the family opt ion, family leaders must unders tand the career aspirations of family members. Th i s approach requires open communica t ion a m o n g family members about career choices, wi th the opt ion of career counseling, preferably by trained professionals, for poten-tial family managers . T h e family must also recognize what future skills and abilities will be needed to make family members aware of business needs as they explore career opt ions . For example, a family business that once had needs for engineering talent may need personnel and marke t ing skills in the future. T h u s a family member w h o might not enjoy engi-neer ing but likes working with people could be counseled to get some t ra in ing in personnel or market ing, with the unders tanding that there would likely be a future role for h i m or her in the family business.

Professionalizing Nonfamily Employees

A second op t ion is to give nonfamily employees the t ra in ing and skills that will be needed by the organizat ion in the future. Th i s op t ion makes sense if (1) there are few, if any, family members w h o are interested in work ing in the family firm; (2) nonfamily employees appear to have the necessary mot ivat ion and ability to improve their performance as man-agers; (3) the trust level between family and nonfamily employees is rela-tively high; and (4) the family wants to perpetuate family values as well as cont inue the strategic focus of the business. In many family firms, nonfamily employees are treated as second-class citizens and given little credit for the success of the business. These employees are often an overlooked and underuti l ized resource, often unders tanding the business better than the family realizes. They also have an appreciat ion for the values—and idiosyncracies—of the owning family and thus can act in ways that will meet the family's expectations. These employees can play a significant role in developing the business if given the opportunity.

One family firm that has at tempted to improve the management skills of nonfamily employees is a large retail business in the Midwest. T h e two brothers w h o founded the business are in their mid sixties and would like to retire in the near future. While there are two family members work ing in the business, bo th are qui te young, and the next generat ion



230 Dyer

of leadership will have to emerge from the pool of nonfamily managers. Al though the current nonfamily employees generally have excellent tech-nical skills, they have had little t ra in ing in general management—part ic-ularly the areas of strategic p l ann ing and corporate finance. Moreover, they have spent little t ime developing their own subordinates—a critical management skill. These deficiencies are due, by and large, to the fact that the brothers have not given nonfamily managers experience in stra-tegic p l ann ing and finance, nor have they themselves spent t ime coach-ing them.

Recognizing the need to prepare the next generat ion of leaders, the brothers enlisted the aid of a consultant to help their h u m a n resource managers design an effective t ra in ing and development program, which included:

1. Interviews by the consultant with the top twenty-five nonfamily managers to better unders tand their career goals and aspirations.

2. An assessment of the management skills (p lanning, decision mak-ing, communica t ion , team bui ld ing, and so on) of the top sixty managers in the company. (These assessments included feedback from each manager 's superiors, peers, and subordinates. Th i s feed-back, wh ich was confidential and given only to the manager, was used to help the manager set goals for improvement . These goals were then shared with the manager ' s boss w h o reviewed the man-ager's progress in performance appraisal sessions.)

3. T ra in ing sessions to help managers improve their skills in various areas.

4. A succession p l ann ing process to ensure that each manager was p repar ing someone to replace h i m or her.

5. T h e opportunity for nonfamily managers to attend management sem-inars and conferences sponsored by various professional associations.

So far the results of this program have been quite favorable. Th i s climate, wh ich encourages learning, has also created more open communica t ion between the founders and nonfamily managers.

T h e example of this organizat ion suggests a number of things leaders of family firms should consider if they wish to professionalize nonfamily employees. First, they must develop an appraisal system to identify those nonfamily employees wi th the appropr ia te career aspirations and poten-tial and then offer them career guidance and new career opt ions . Second, the family should provide incentives to encourage nonfamily employees to seek addi t ional education. Tui t ion reimbursement or paying for work-shops and seminars are the most c o m m o n ways to encourage the acqui-si t ion of addi t ional skills outside the workplace. In-house t r a in ing programs can also improve the performance of nonfamily employees. Th i rd , the family must be wil l ing to treat nonfamily employees more or less as equals w h o can enjoy the benefits that may have been reserved for




only the family. To merely encourage education and personal develop-ment wi thout a willingness to share in the rewards creates cynicism and undermines morale.

A potential problem of t ra in ing nonfamily managers is that they may be unwi l l ing to try ou t their new skills, or they may accept t ra in ing merely to please the o w n i n g family, having little commitment to the educat ion process. T h i s is particularly true in family firms that tend to be paternalist ic and have an autocrat ic management style. T h e family can end u p wi th highly trained employees w h o cont inue to follow com-pany policies, procedures, and values blindly, failing to use their new knowledge and skills to improve company performance because they fear pun i shment or failure.

Bringing in Outside Professionals

T h e first two opt ions are appropr ia te if the family wishes to cont inue its present strategy and wants to main ta in t radi t ional family values. T h e third opt ion, br inging in professional managers from outside, is generally deemed necessary when (1) there is little or no expertise, ability, or interest on the par t of the family and nonfamily employees to manage the busi-ness, and (2) there may also be a need to change business strategy or family values. Those family businesses that have failed to mainta in a competi t ive advantage in the marketplace or that have been unable to effectively organize and coordinate the activities of the organization are often in need of an "overhaul ." Wi thout outside help and new ideas, such changes could not take place; thus, there is a need for new manage-ment expertise. As noted in the case of Jones Entertainment, the entry of professional managers is likely to create some tension wi th in the organi-zation, as new skills and values are introduced.

To mit igate some of these problems, the family can take a number of positive steps. First, it can take the t ime to socialize the professional manager in the ways of the family and the business. Some professional managers see their role in the family firm as one of "k i l l ing sacred cows"—that is, chang ing the business norms (Dyer, 1986). While some sacred cows may need to be killed, there are typically some values of commitment , loyalty, quality, and so forth that ought to be retained. T h u s the family must communica te clearly those values it feels need to be uphe ld—and should focus on ar t icula t ing ends rather than means. In other words, the family should out l ine the u l t imate goals it would like to achieve, while a l lowing the professional manager some discretion to implement new ideas and new methods to achieve these goals. In the case cited above, Jones spent little t ime trying to teach his goals, values, and orientat ion toward the business to Lewis. Instead, Jones relied on the head hunter to find the " r igh t" person and then assumed that Lewis would follow his lead.



232 Dyer

Another impor tan t approach is to tie the interests of the professional manager to the firm, which will influence his or her behavior to be more consistent with family interests. One strategy is to offer ownership stock to key professional managers so they will " th ink like owners" and not focus on parochia l management interests. Moreover, inc lud ing key pro-fessional managers on the board of directors can be a good way to gain their i npu t as well as teach them how the family feels about the business.

Professional managers should also be encouraged to become a part of the c o m m u n i t i e s they work in. Problems can arise when there is a lack of fit between commun i ty values and the values of professional managers (Astrachan, 1988), and a number of studies have shown that professional managers often decide to live outside the communi t ies they work in because their interests are quite different than those of the indig-enous work force (Warner and Low, 1947; Meek, Woodworth, and Dyer, 1988). When professionals live outside the community, communica t ion barriers are often created between professional managers and local em-ployees, and an "us versus them" mentality is created. Moreover, some family and nonfamily members may feel their career goals and sense of self-worth threatened if outsiders begin to occupy key management posi-tions. T h i s can intensify feelings of suspicion and distrust. In the firms I have studied, such conflicts are common, and the result is lower morale, increased u n i o n activity, and, eventually, lower overall organizat ional effectiveness.

One such example is the Brown Corporat ion, a medium-sized ($70 mil l ion sales) materials hand l ing firm located in a small town in the northeastern United States (Meek, Woodworth, and Dyer, 1988). In 1974 the company faced a severe crisis, and the company president, J o h n Brown, Jr., decided to b r ing in a professional manager to turn the com-pany around. T h e professional manager, Reed Larson, took a number of steps to change the company. He implemented a more efficient inventory control system, set u p financial controls, and fired a number of employees considered "deadwood." Because of his tough, no-nonsense approach, he earned the n ickname Jaws. As a result of Larson's actions, sales and profits increased dramatically. However, after a few years, Brown began to recognize that Larson ' s values and or ienta t ion were u n d e r m i n i n g morale and that the workers were beg inn ing to suppor t a un ion move-ment . Furthermore, sales declined sharply in the early 1980s, and Larson layed off over one-half of the work force to cut costs. Conflict between Larson and Brown began to intensify as Brown began to see the com-pany 's basic na ture changing . As Brown at tempted to find a way to change Larson or to fire h im, Larson secretly lobbied for suppor t from key managers and the board so he could purchase the company and oust the Brown family. (The stock was publicly traded, wi th the Browns own-ing about one-third). Brown found out that Larson was trying to "steal




the company" from the family, and he eventually emerged the victor in the power struggle. Larson was fired, and a new professional manager was hired to replace h im. T h i s new manager, Ph i l Olsen, was also fired after only one year on the job. Al though Olsen had an impressive track record at a large corporat ion, he too did not unders tand the family's values and was unable to develop any rappor t wi th the work force. As one top executive explains, "Olsen brought in all new people and sur-rounded himself with those he knew at his former company. He used many consultants and had no confidence in the oldt imers ." Olsen viewed the local employees as "a small- town b u n c h of jerks." While no t as tyrannical as Larson, Olsen was seen as "more secretive, sneaky, and less trustworthy."

Dur ing Olsen's tenure, sales rose but profitability declined as costs skyrocketed. Olsen had little feel for the company 's product or how to organize effectively to improve productivity. Morale was extremely low, and u n i o n organizing continued. Finally, after hear ing about Olsen's "misdeeds" from some company oldtimers, J o h n Brown, Jr., decided to fire Olsen in 1985.

Olsen's replacement, Brad Adams, has been m u c h more successful than either Larson or Olsen. Adams, a long-t ime friend of Brown, was a successful distr ibutor of the company 's products. He knew the company and its problems as well as the family. After taking the posi t ion, Adams spent his first week on the job meet ing wi th groups of employees. He made a conscious effort to be visible and accessible to employees, even to the poin t of visit ing workers on the graveyard shift. He reinstated some of the employees w h o were fired by the previous presidents, which helped boost morale. Union organizing has virtually stopped, and the company 's profits have improved in recent years. Adams' expertise in sales and mar-ket ing has helped strengthen the company, and his collaborative ap-proach to solving the company 's problems has received broad support .

T h e Brown case illustrates some ways to alleviate the problems asso-ciated wi th br ing ing in professional management . Family leaders and professional managers must establish good communica t ion wi th em-ployees th rough g roup meetings, newsletters, informal lunches, and so on. Role clarification meetings and team-building sessions are also likely to be needed as professional management is introduced into the firm (Dyer, 1986). These act ions can help reduce the ambigui ty and uncer-tainty that natural ly arise as people wi th different experiences and world views a t tempt to work together.

Conclusion

T h e issue of professionalizing a family business is one that most, if not all, leaders of growing family firms must grapple wi th at some point .



234 Dyer

H o w this issue is handled can often determine whether or not the family firm will cont inue to function harmoniously and to grow and succeed. Three opt ions for professionalizing the family business have been out-lined. They are no t mutual ly exclusive and can be used in tandem. T h e key point , however, is that the family must choose a strategy that makes sense, given its current si tuation. Expectations for t ra in ing and develop-ment need to be made clear by the own ing family so that family and nonfamily members alike will have a clear unders tanding of the rules governing p romot ion to higher levels of responsibility.

T h e issue of the professionalization of management extends beyond the borders of the family firm. However, family businesses that are typi-cally value driven and led by visionary entrepreneurs have u n i q u e chal-lenges as they a t tempt to professionalize. While there are no easy answers to these issues, hopefully the experiences of family firms presented in this article will help leaders of family firms make wiser choices as they acquire skills of professional management .

References

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Dyer, W. C , Jr. Cultural Change in Family Firms: Anticipating and Managing Business and Family Transitions. San Francisco: Jossey-Bass, 1986.

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Schein, E. H. "The Role of the Founder in Creating Organizational Cultures." Organizational Dynamics, 1983, 12 (1), 13-28.

Van Maanen, J., and Schein, E. H. "Toward a Theory of Organizational Sociali-zation." Research in Organizational Behavior. Vol. 1. Greenwich, Conn.: JAI Press, 1979.

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W. Gibb Dyer, Jr., is associate professor of organizational behavior at Brigham Young University.

White, R. N. "The Organizational Context of Professional Socialization: A Case Study of Two Business Schools." Paper presented at the annual meeting of the American Sociological Association, Chicago, 1977.



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