By Judy Carmack Bross
Davis Anderson, a notable Chicagoan recognized not only for his business savvy but also his cordiality, makes the case in his new book, Sustaining a Family Jewel, that “family companies are special and that it is important to keep them in the family.”
A third-generation company owner and leader, Anderson outlines steps to make succession planning early.
“Like my family company, most family businesses do not last beyond the third generation, leading to sayings like: ‘Three generations from overalls to overalls’.”
He recently answered our questions on his important new book. Watch for his programs around town.
“One of the main reasons for a lack of generational succession is that there is not a commitment to it and thoughtful planning for it—starting very early in the tenure of the “new” generational leader. As I discovered, generational succession does not just happen,” Anderson has said.
CCM: Tell us about yourself, where you grew up, about your work and deciding to be an author.
DA: I grew up in what was then unincorporated Cook County, now part of Burr Ridge. My mother was from New England, so we spent summers in Rhode Island, and I went to school for eight years in western Massachusetts, first at Berkshire School and then at Williams College. Even though we lived in the suburbs, we spent a lot of time in the city, and I grew up with a dream of being mayor of Chicago. As history demonstrates, that obviously did not happen! But I moved into the city upon returning from school, and have lived here ever since. I am passionate about Chicago being a great city, and we need to have the political will to resuscitate and, once more, make it a safe city that is growing, financially solvent, and one we are proud to call home.
A year after receiving my degree, I went to work for the family business, Chicago Extruded Metals Company, a brass extrusion mill with its main operation located in Cicero. That experience forms the core of my recently published book, Sustaining a Family Jewel, Planning For and Driving Generational Succession in Family-Owned American Manufacturing Companies. For several years, I have had a file titled “Books to Write” but never did anything with it until after the pandemic hit in 2020. Stuck as we all were at home, I began to research how I could support family-owned American manufacturing companies” family-owned, American, and manufacturing being three pillars of my passion. That led eventually to my deciding the best way to establish a platform was to write a book and that in turn led to developing a relationship with a firm called self-publishing.com.
In picking a subject, I focused on generational succession. Many books have been written about selling a family company and maximizing return; many fewer have been written about keeping the “family jewel” in the family as a source of pride, wealth, and America’s economic strength. A main driver for me was that I had been unsuccessful in managing the transition from my (the third) generation to the fourth generation—principally because I did not think about it early enough and then properly plan for it. My failure led to terrible consequences for our company, our family, and me. I want to help families avoid what we went through.
CCM: What is the core premise of your book and why is it important to encourage families to put it in practice?
DA: Family companies are important! Generational succession is worth committing to and planning for! The core premise is that family companies create strong values and are critical to our families, supply chains, communities, and country, and, if one is not committed to and thoughtfully planning for it, generational succession won’t happen. The family leader should begin planning for family succession as early as possible upon taking the family reins.
I talk in the book about a company called Woodward now based in Colorado–originally Woodward Governor, based in Rockford–that was founded in 1870. It is currently a publicly traded company but was essentially a family company through four generations. It had strong values that came directly from the founder and still form the core values of the company today. Another family company says that they “live by the Golden Rule. Treat everyone like we want to be treated, with thoughtfulness and a genuine interest in getting to know them, and always with integrity, respect, and kindness.” They also say that they have “the freedom that comes from being privately owned” which allows them “to invest in long-term growth, instead of short-term profit.”
CCM: Practically everyone enjoys watching Succession. What are the similarities to your thesis? Why is this show such a blockbuster?
DA: The show appeals to the television audience because it deals with power, prestige, and wealth. There is constant family dysfunction, intrigue, even actual hand-to-hand combat at times as each possible successor is conniving to destroy all the competition. It plays to the worst images people may have of the business world. And it does have legitimate succession issues, like who is best suited to succeed their father and the constant pull and tug of whether to cash out or keep the company in the family. But, in my mind, it is a disaster as a prescription for handling family company succession. There are very few similarities with my thesis—except to show the mirror image of what not to do in planning for generational succession.
As I say in the book, I tried twice to watch the entire series and could only get through a few episodes. I tried to find even one redeeming character—and there is none! But what was most discouraging was that the succession process was completely mismanaged and deeply flawed. The patriarch is 80 years old—not only a ridiculous age to have succession but a terrible time to initiate any succession-related activities. The children are all spoiled with a deep sense of entitlement. The only one with some management experience has few people skills and torpedoes a deal that would have given him the reins—but of course would have made the rest of Season 1 and all of Seasons 2, 3, and 4 unnecessary!
CCM: Why are family companies important?
DA: Most companies start as an iteration of a family company, even if the founder has not yet married or started a family. The chances are there will be a family, and most companies will be faced with a decision of whether to keep the company in the family or transition it out of the family. I postulate that it is important to “sustain the family jewel” and plan for generational succession. Family companies tend to take a longer-term view, which affects relationships with all the stakeholders in the company—employees, customers, suppliers, the community, and America as a whole. Employees tend to be valued more and, therefore, are more loyal and dedicated. A family company can have a more lasting and productive relationship with customers and suppliers. In the book, I relate stories about actions that were beneficial to companies and their stakeholders. Woodward’s employees on several occasions deferred compensation to allow the company to grow or survive a rough period—because of how the company treated them. At our company, a customer needed to purchase an important piece of equipment to allow their company to grow; my father made a loan to them that facilitated the purchase. When I came along, that customer would never have considered buying our products from any other supplier.
CCM: Knowing Chicago as you do, what is the climate for them in Chicago and do you feel that the concept of “Midwest values” plays into this?
DA: Chicago and the Midwest have been fertile ground for family companies—and for sustaining them. The history of Chicago is filled with important ground-breaking family companies. Landing from the west at O’Hare Airport, we pass over hundreds of small and mid-sized manufacturing companies, most of which are family-owned. Midwest values definitely play a role. The word “manufacturing” means working with one’s hands. Our roots are from the land and thus from the farm. Manufacturing has been considered a bad word, and you often hear that manufacturing is dead, yet everything we use in our lives, from our furniture, our utensils, our mobile devices, transportation, etc., etc. is manufactured. Midwest values cause us to revel in doing hard things and making a real difference in regular people’s lives. And in recent years, we have experienced the pain of sending much of our manufacturing strength offshore. Manufacturing is not considered as bad a word today, and one can hope that a manufacturing renaissance in America will be for real.
CCM: You talk about “sustaining a family jewel”, tell us more about this and why it is important. What can happen without thoughtful planning?
DA: To a large degree, I believe this failure both to keep the family company in the family and, in many cases, to lose the family wealth by the third or fourth generation is a direct result of a lack of commitment to generational succession and of thoughtful and continual planning for it. The statistics show that only about ten percent–some studies say as little as three percent–of family companies make it to the fourth generation. Successful planning can increase the odds of the company making it to each successive generation. The resulting bolstering of family values can help ensure that the next generation celebrates family success with humility that keeps life and responsibilities in perspective, thus preserving family wealth.
Sustaining the family jewel has several other benefits, for example showing respect for what our ancestors have created, thus maintaining family legacy and pride, the ability to control one’s own destiny and not be a corporate cog, a focus on customers and their needs, contributions to the community, and benefits to employees.
The sad part of not planning for generational succession is what can happen to the family. The next generation is not prepared, maybe not even interested; there can be massive conflict as people fight it out; the older generation can hold on too long; and the issue of “money” raises its ugly head, creating jealousy, conflict, and maybe lifelong estrangements.
CCM: Senior versus Junior, what is the role of the Senior and how can the Senior set up Junior for Success?
DA: In the book, I refer to “Senior” as the current leadership generation and “Junior” as the upcoming generation. Without Senior’s total commitment to generational succession, it will more than likely not happen.
Senior needs to start early in Junior’s life setting the stage for succession and instilling a belief in the nobility of carrying on the family legacy. Senior must help chart an educational path that leads to leadership, must encourage or require time spent in another organization before joining the family firm (something I did not do), and smooth the way for the transition by making sure the management team is aware of the ultimate objective and is on board with it. Senior also has to set the stage with family members and take on the role of dealing with the emotions that often attend the transition. Another key role is facilitating the consolidation of ownership so that a continuing proliferation of owners without a direct role in the company is prevented.
CCM: You speak of the “old way” versus the “new way” of succession planning, tell us more.
DA: It is not an old or new way of succession planning. At the time during which generational succession happens, there is a transition from Senior’s “old way” of leading and managing to Junior’s “new way” of leading and managing. As much as we may be descended from similar roots, we are different and will do things differently. Our capabilities, skills, education, experiences, interests, and goals will be different. Our methods of operating will be different. In our case, my father was much more operational—always interested in the latest technologies—while I was more strategic. These differences can lead to confusion or even resentment in the management team if not recognized and communicated. It also may require changes in the management team to offset the strengths and weaknesses of Junior relative to the strengths and weaknesses of Senior.
It is important to think through these differences before the transition and for Senior then to “let go” following the transition. If there is not early and continual planning for succession, then the first point may not be covered. The second point (“letting go”) is an emotional hurdle that Senior has to be prepared for and to do (Mr. Roy wasn’t even close on either point!)
CCM: You talk about the importance of leadership in keeping the family excited and interested. What are ways to do so?
DA: I’ll start by saying that succession will never happen if the next generation is not connected positively to Senior’s work and passion. As with all we have discussed, this requires planning and thoughtfulness. The next generation needs to feel the pride of involvement in—and possible ownership and leadership of—a family company.
One place it all starts early on is at the dinner table. We need to restore the dinner table as a place for families to connect, share stories, and create interest. In the book, I quote Ronald Reagan as saying in his farewell address, “And let me offer lesson number one about America: All great change in America begins at the dinner table.”
Senior needs to promote a connection to the legacy and accomplishments of earlier generations with attendant celebration and feelings of pride. I suggest that a role that the former Senior can play, after the transition to the new Senior, is to make sure a company and family history is created or updated.
CCM: What are the pitfalls inherent in family companies and how do you get around them.
DA: The biggest pitfall is that we are all human! The worst aspects of being human are dramatized in Succession. But we can screw up any situation! My lack of successfully transferring our company to the fourth-generation had its roots in my assuming that it would “just happen.” My experience thus informs my belief that early, continuous, and thoughtful planning for generational succession is essential to making it happen—and to avoiding the pitfalls of natural human tendencies to succumb to our lesser values like jealousy, conflict, hubris, overconfidence, and even greed and indolence.
CCM: Are you planning a successive book, and if so, what is it about?
DA: Yes, but first I want to use the content in Sustaining a Family Jewel to help family companies successfully navigate the generational succession process and advise them on how to do it based on my experiences—both successes and failures.
While I refer in my book to examples of many companies, I based the content mostly on my experiences and observations. In a subsequent book, I would like to chronicle the great family companies of different sizes that have maintained a thoughtful approach to generational succession over several generations. These companies and the families that lead them have prospered and are stunning examples for all of us.
You can learn more about Davis Anderson and his mission to support and advise family owners in keeping their jewel in the family here. Reach Davis here.
