Zildjian versus Viacom
Publicly held businesses create most of the news. But family-created and held business are a bigger part of the economy than most people realize. They might be a brand-name you use every day, or something deep in the supply chain that you’ve never seen. But there are a great many family businesses. What makes the difference between those that last and those that end? It all depends on how the family itself is taught, managed, and involved in the business.
Let’s look at some examples. The most successful, if you measure by how many generations have been able to keep the business going, is by far Zildjian. Zildjian is the U.S.’s oldest non-farm family-held business. It was started in 1623 – over 150 years before American independence. It is still run by a family member with the name Zildjian. I don’t know much about them, but consider a couple facts that make them unique. First, they have protected intellectual property in the form of their alloy, which has been passed on from generation to generation. Second, they sought excellence in their segment. They didn’t chase unbridled growth, only to collapse later. They didn’t say they are in the music business, and start making guitars. They make cymbals. That’s it.
Recently the family the owns Fiat went through some succession, with a new Chairman named, John Elkann. He’s a worldly man despite being in his 30s, born and raised in New York, high school in Paris, and earned his industrial engineering degree in Turin. He also worked in secret in the factory to understand the business. He’s already demonstrated leadership within the family selling off prized assets like French winery Chateau Margaux in order to raise money to reinvest into Fiat.
Other examples of success are demonstrated by the Mars family, makers of M&Ms and Snickers candy bars. This organization has remained so private they don’t even have bank loans, preferring instead to fund everything internally (which the exception of the well-documented acquisition of Wrigley with help from Warren Buffett). Although a public-company, Ford is still family controlled. Through different classes of stock, the family was able to maintain virtual control of the company while cashing out of their economic stake to a large degree. While I don’t agree with that structure, the Ford family has recently demonstrated leadership when Bill Ford fired himself as CEO. This happened when there was nothing to gain – he would go down as the CEO who rode the company to the bottom but didn’t save it, allowing someone else to become the savior. This took courage and long-term thinking.
The S.C. Johnson company – makers of Ziploc, Glade, and Windex – are now in their 4th generation of family management. And they are often listed as one of the best companies to work for.
But not every one of these family-owned examples ends well. I have seen numerous examples up close of either families who have destroyed the business, or the business which had destroyed the family.
One of the more famous examples, although the business continues on, is Sumner Redstone and the Viacom / CBS
story. Unwilling to admit that at some point he’ll need a successor, Redstone as alienated family members, including publicly trashing his own daughter, as he fights to maintain control.
Another example is the Bancroft family’s infighting during the takeover arrangements of the Wall Street Journal with News Corp. The family didn’t know what it wanted, and clearly wanted to maintain control and the prestige of owning the brand while cashing out their financial stakes.
Countless others have ended badly that just aren’t big enough to make the news.
It doesn’t have to be that way. There are ways to manage the family, succession planning, and the company all at the same time that can at least prevent things from going too far. I’ll share some of those thoughts next week in Part II of this post.