No matter how cushy it might appear to outsiders, being chosen to run your family’s business has its negative points. Just ask William Lauder, the chief executive of Estée Lauder, the US cosmetics firm. “Leading a public company is a sentence but leading a publicly held, family-controlled business is a life sentence,” Mr Lauder is quoted as saying in a Wall Street Journal article analysing his decision to bring in an outsider as his eventual successor.

Mr Lauder is the grandson of Estée Lauder, who founded the company with her husband in 1946, and is the son of Leonard Lauder, who preceded him as ceo and who remains chairman. Working in the family business meant he had to work ”twice as hard for half the credit”, William complains, adding that it didn’t help that some board members knew him from when he was a child.

Running a family business does indeed create peculiar strains. The Earl of March and Kinrara -the British hereditary peer who is trying to diversify a leisure business located at Goodwood, the family seat - admits that it can be disconcerting having ancestors peering down at him from their portraits. “Every time I walk up to bed, I see them all up on the wall, and think ‘Oh Christ, what do they think’s going on?’”

Tension between the various members of a business dynasty can lead to all-out conflict, as detailed in Family Wars, a new book reviewed in the FT today. But how can family-owned companies avoid being poisoned by the sometimes toxic mixture of blood and bottom line?

Earlier this year, Professor Josèp Tapies and Alfonso Chiner of IESE, the Spanish business school, came up with a list of ten governance tips for family businesses. Among other things, they stressed the need for each generation to be given the freedom to partly reshape the business. Old grievances between relatives needed to be addressed and healed, while family employees were to be referred to by both given name and surname. Meanwhile, the role of spouses of family members also had to be thought through, they added.

Perhaps Mr Lauder could add an 11th commandment: allow no-one to be appointed to the board who has seen you frolicking naked in a paddling pool.

February 28th, 2008 in Family businesses, Leadership | Permalink