Book Review: Smart Growth: Critical Choices for Business Continuity and Prosperity (Jossey-Bass 1989).
Sure, start-ups are tough. But the real question is how do you revitalize a mature business
Maturity" -- not start-up -- "is the trickiest of business stages," writes Ernesto J. Poza. He is referring specifically to maturity in the family-owned company.
You have to admire Poza's chutzpah. In Smart Growth: Critical Choices for Business Continuity and Prosperity (Jossey-Bass, 1989), he has tackled one of the toughest topics a business writer can choose. In many respects, getting an old company moving again is far more difficult, and certainly more complex, than walking away and starting something else from scratch. And when you've got intergenerational family relationships to deal with on top of that, how do you even begin to sort things out?
The only time most authors look at mature family businesses is when the business and the family are in the process of coming apart. The newspapering Binghams of Louisville spring to mind. This book genre -- with the accompanying pieces on "60 Minutes" and the like -- produces less analysis than just plain dirty linen. The stories are titillating but short on practical advice. Sadly, however, they are not atypical. The Binghams' family feud wasn't any messier than the crack-up lots of families experience over business issues; they just got more press.
The truth is that most family-owned companies don't last more than a single generation. Some get sold. Many more fail or just stop doing business, and for all sorts of interesting reasons. They may well fail, in fact, when things are looking their best. "Beneath the veneer of wealth, success, power, and plenty lies the risk of hidden and protracted decline and death," Poza, a Cleveland consultant, writes. Often the business's product (or service) and its founder have both matured at about the same time. That situation raises two separate but interrelated and awfully tricky issues: what to do about the one and what to do about the other. Dealing with those two issues is what Poza's book is all about.
First, what to do about the mature business. Poza sees five choices. The riskiest is not to choose -- to fail to confront the issue, to keep on keeping on. That behavior al-most guarantees the business's decline and failure. Choices two and three are to sell the business or, under the right circumstances, take it public. Those actions raise com-pletely different sets of issues, but they both remove responsibility for the company's survival from the family's exclusive control.
Taking the money and clearing out might, in fact, be the best thing a family can do for the business and for itself. But if you don't want to, you've still got two other choices. One is deciding to maintain, which is different from not deciding at all and just maintaining by default -- but hardly less dangerous. Maintenance is a good choice only if the business has just finished a growth spurt and needs some time to consolidate or if it's in a market where competition is benign. Otherwise, says Poza, maintenance promotes most of the same problems inherent in decline: lowered employee morale, increasing resistance to change, more family divisiveness, and growing customer dissatisfaction.
That leaves the last and, in Posa's view, best choice: growth. He spends the bulk of his book's 211 pages exploring the subject of growing a mature family business. He does a very good job.
For instance, he draws useful distinctions between three categories of growth: specialization, diversification, and maintenance. The last of these, he insists, is not the contradiction it first appears to be. "For one thing, a firm's vision of growth may be more qualitative than quantitative; increased numbers and sales growth may not be the ultimate goal." All together, Poza defines and discusses 15 varieties of growth within the three categories and takes the subject far beyond the familiar growth/no-growth de-bate, which is usually more ideological than useful. Practically every thriving business is growing in some way; growth doesn't always have to show up on the top line.
Poza writes with refreshing clarity. I don't know whether he was ever in the army, but Smart Growth follows the old and effective formula for getting the word out to the troops. First, you tell 'em what you're going to tell 'em. Then you tell 'em. And then you tell 'em what you told 'em. It works just as well here, as Poza explains and illustrates with examples the steps he thinks every mature company (family owned or not) should go through in deciding its future. It is impossible to get lost in this book. It is also difficult to get confused. That's because Poza insists on using normal, everyday English. In the whole book there is just one of those annoying acronyms consultants are fond of. Poza's is PRISM (for power, roles and responsibilities, information, strategy, and management), and he apologizes for it: "While it may seem a little gimmicky, the code word does help people remember the [evaluation] tool and use it in their own regeneration efforts." He also coins only one new word: interpreneurship. "A business is 'interpreneuring,' " he writes, "when it organizes for and supports a revitalization of the business just prior to or during the next generation's tenure. This may be done for growth, leadership, fun, profit, and/or the perpetuation of important personal or family values." It's not so bad a coinage, certainly no less useful than Gifford Pinchot's intrapreneurship.
While Poza is brilliant in discussing what to do about the mature business, he is less helpful on the subject of dealing with the mature founder. Not that his observations aren't perceptive. "There is no greater barrier to growth than lack of consensus among owning family members. . . . And there is no greater obstacle to this consensus than a founder-entrepreneur or second-generation CEO who does not have a life beyond the business," he writes. True enough, and worst of all are the CEOs who don't acknowledge this sad reality about their lives until they're too old to do anything about it. Usually by then they've driven off anyone in the family clever or ambitious enough to be a successor. The questions begged here are what's to be done to avoid the situation or to deal with it if it can't be avoided?
Poza has some practical wisdom to offer on the subject, and he displays considerable sensitivity as well. For instance, he says it's important for succeeding management to realize that they must allow the organization time to mourn the passing of the old order and the old ways. Ambitious young hotshots, anxious to try their own plans, will also do well to remember it wasn't all blind luck that kept the business going for the previous 25 years. They should respect what has worked as well as what may work.
And maybe Poza takes us as far on this aspect of the topic -- dealing with the founder -- as any consultant's book can. Whereas strategic planning and the rest is largely a rational process, or at least can be made so, founders usually find it wrenching to contemplate the prospect of giving over to another's care, even their children's, the company they have birthed and nurtured all their lives. Journalists can write stories about it, and consultants can offer advice, but no one can make it any easier or less painful to the person who has to see it through.
"Growth seems to be one of those paradoxical qualities that are best in process, not as an end in themselves. Like love, wealth, and happiness, growth often vanishes when sought directly and feverishly. With both eyes on growth, management has no vision for objectives that are important to survival and growth: quality of product, customer satisfaction, competitiveness, profitability -- qualities that may have propelled the entrepreneurial or family business's growth in the first place. . . . [I]t is important to envision growth not as a goal in itself, and not as a prerequisite to bigness, but as the best source of energy for business, family, and individual survival, fun, and development."
-- from Smart Growth: Critical Choices for Business Continuity and Prosperity by Ernesto J. Poza