A novel solution to family business succession
February 26, 2007
Saturday’s New York Times (subscription required) carries a story about the 102 year-old Louis Padnos Iron and Metal Company a family owned business who have come up with their own unique solution to the sucession challenge.
The problem for the Padnoses is an age gap. Third-generation members who run the scrap metal company, which employs about 400 people and has annual sales of about $300 million, are in their 50s. They want to work less. But the fourth-generation Padnoses who might someday want to run the place are still only in their teens.
The company hired a philosophy professor to help them
groom six hired managers to become, well, more Padnos-like.
The article goes on to outline the differences between the founding family (politically liberal, middle class and Jewish) and the managers (conservative, working class and from Protestant backgrounds) and the policy adopted by the Padnoses to encourage the new managers to be “part of the family”
The managers were assigned readings of Thoreau, Sophocles and a recent essay on Freud. They spent a long weekend in Chicago seeing plays, touring exhibitions of art and architecture and eating at fancy restaurants. And in recent weeks they have debated how to give away $40,000 of the Padnoses’ money, an exercise in becoming philanthropists.
The article also goes on to say that although the managers are encouraged to think more like the family they are also denied some of the financial information that would give them more of the family’s power and this is where it becomes really interesting from my perspective.
Family businesses are complex places – you can’t avoid the personal because, well family is personal. On one level this looks like a sensible and somewhat philanthropic gesture on the part of the Padnoses on another it could be a way of them never letting go of the family’s way of doing business. How can you act like an owner if you are not an owner? How can you take the responsibility if you’re not given the authority? Family businesses are fascinating places because the sometimes underlying personal relationships that inform all businesses are much more visible – particularly those that affect competition and leadership. It will be interesting to see what happens in this company when the elder generation have truly moved on and that teenage generation are ready to take over..