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On this opening episode of Season 2, Laurie Barkman speaks with Ann Dugan, former Executive Director and Founder of the Institute for Entrepreneurial Excellence. Her expertise in succession, Board governance, and family philanthropy stems from her relationships with thousands of family businesses. Ann shared insights how families can break the tradition of “shirtsleeves to shirtsleeves in three generations” by innovating and embracing change.
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Show Notes
- Ann Dugan LinkedIn
- Institute for Entrepreneurial Excellence, University of Pittsburgh
- Rabbi Steven Leder, Book More Money Than God
- Family Business Magazine
- Family Office Exchange
- “Efficiency or Innovation? Balance Both To Emerge as a Leader Post Recession,” article by Laurie Barkman
- Izhak Adizes – Corporate Lifecycle
Full Transcript
Laurie Barkman:
I really enjoyed my conversation with Ann Dugan. Ann is a business entrepreneur and a social entrepreneur – she created and ran the Institute of Entrepreneurial Excellence, one of the longest standing university-based entrepreneurial programs in the US focused on family enterprises, and during that time she worked with more than 1000 companies spanning nearly 30 years prior to her own succession there. Ann’s expertise in private company succession, Board governance, and family philanthropy stems not only from her experience with her family’s 5th generation company, but also from her work with the Family Office Exchange and National Philanthropic Trust. Our conversation covered a lot of ground. Ann shared super valuable insights for how to break the tradition of “shirtsleeves to shirtsleeves” in three generations. I hope you enjoy the episode as much as I did. Thanks for tuning in!
Laurie Barkman:
Ann, I’m really looking forward to speaking with you. You have such amazing experience with family businesses and succession. I feel like you’re perfect for this show. I understand you’re in a fourth generation family business.
Ann Dugan:
That is right, with the fifth generation not only on the horizon, but actively involved so it keeps on moving.
Laurie Barkman:
So tell me about the company.
Ann Dugan:
So the company was started really in 1890, thereabouts and we started actually in growing trees and cutting trees and planting trees for lumber and distributing that through the Southeast. So we’re in Brunswick, Georgia between Savannah and Jacksonville and as the generations moved forward, we got out of tree growing. And of course, another family at that time bought everything up, which was the Weyerhaeuser family, which still exists today. The Weyerhaeuser family, very active family, but not necessarily in operations these days. And then we moved forward to distributing lumber. And then in the third generation, we got involved in building supply. So building supply for the contractor, not necessarily for the residential home tinkerer environment. And so we’ve been in a good place there on the coast. We follow the swings of the commercial and housing markets, obviously as contractors have been through, the dynamics up and down especially over the last 15 years as we’ve had the mortgage crisis and everything come to a halt and then the restart. And now, there’s been some quietness. Not too much, but some quietness over the pandemic.
Laurie Barkman:
Understandable. Of course, ups and downs. And I noticed on your LinkedIn, it made it made me smile. You have listed this business on your profile and the start date is 1905. So you’ve been with the company a really long time.
Ann Dugan:
1890 is really when the business started, but my great grandfather was with another fellow. So in 1905, my great grandfather bought out the other side and it’s been single family owned ever since.
Laurie Barkman:
That’s great. Did you work in the company?
Ann Dugan:
No, I didn’t. It’s an interesting story that you asked that. So in 19, well, I’ll say I won’t say the year, cause my mother might hear this. So it’s through my mother’s side of the family and my grandfather, second generation, had two boys and two girls, my mother being one of those girls. And so my grandfather at the time said, and we have to understand my mother is 93, her sister is 91. His mantra was you need to go to college and find a husband and get married and have a household and do those things that traditional Southern women did at the time. The boys would have the operating company. The girls would have real estate, and that’s how in his mind– real estate was passive, their husbands could come on and take that on as they move forward.
Ann Dugan:
And it wasn’t a bad deal. You look at St. Simons Island, Jekyll Island, Sea Island are the three islands that we primarily serviced over time. And so owning real estate there was not a bad deal. So that was in his mind, how to take care of the “girls” and make sure that the boys were okay. So that became the mantra up until late in the third generation and girls could not work in the operating company. It was only the boys. And I would say probably – I’ll get the year particularly wrong – but I’ll say early ’60s – my aunt joined the company. And the reason that she did is she said to her husband, my uncle, who was CEO at the time, listen, I don’t like this idea that some weeks we have good paychecks and other weeks we have nothing.
Ann Dugan:
And I have three boys I have to feed and a household to run and I need to go and find out what’s happening in the company. And so he said, Oh, you can’t do that. Dad would really be upset, no girls in the company, et cetera. She came from a grocery owning family. So she understood keeping your finger on the pulse of business, on numbers, on slim profit margins, all of those good things. So she came in and took a look around and the rest is history. She was horrified at what she saw. My uncle – her husband – and my grandfather had given credit to every contractor that asked for it. And back then in a small town that was how things went. But there was no credit. There was no collateral. It was a promise like, yeah, I’ll pay you one day kind of thing.
Ann Dugan:
And so from that day forward, or that period forward, her name is Marcelle. If you wanted credit, you had to go see Marcelle and Marcelle did not give credit easily. I look at her as being a key point in time of really changing the pathway of the company, making it much more profitable running with good business processes. And that’s why even today, when I work with families, really look at the talent throughout your family, not just those that are in the business, but those that marry into the family, those that graduate from college or other activities within the family. Look at how do we tap into all of the skills and the family, not just those at any particular point in time.
Laurie Barkman:
I love Aunt Marcelle. She sounds awesome. Wouldn’t we love to sit with her and talk to her about her experience from the early ‘60s. Wow. What a change she made to the company.
Ann Dugan:
She did.
Laurie Barkman:
I wanted to ask a follow up question that, about the men working in the operating business and women working in real estate. Was that cultural in the South at the time, or was that something specific to your family?
Ann Dugan:
No, I think it was absolutely cultural. Women did not get involved in business and especially when you were from a prominent Southern family. Not only was my grandfather the second generation leader of this significant family business locally, they provided great employment and lots of opportunities for vitality within the community. But also he was Mayor for a number of years on and off, my uncle was County Commissioner. I mean, we were really infused in the community. So having two daughters who would go off to college and marry well was a typical Southern process at that time in a small town. And that was his hope, unfortunately, I’ll say both of my mother and her sister married well, but they’ve also had incredible careers themselves. And so, he got part of his wish.
Laurie Barkman:
Well, I’m sure ultimately he was very proud of them. Did your mother end up working in the company too?
Ann Dugan:
No, not at all. In fact, my mother is a PhD. Psychologist, has built an incredible career in that field for herself, continues to provide some consulting engagement today at the age of 93, but she really took that idea. And this is sort of the mantra of my family: everybody does something. So from an early age on, there were no trust fund babies. There’s nobody hanging out, waiting for something to be done for you. I really give the third generation a lot of credit for this, my mother, her sister, her two brothers, everybody does something. And they really took that mantra to heart and worked hard at creating a life for themselves– some in the business, some outside of the business, always owners at some level. And that became important for her in particular. She’s built an esteemed career as a forensic and grief consultant and professional up until the time she retired.
Laurie Barkman:
Well, I love the story of strong women. So instead of Steel Magnolias, we have Lumber Magnolias, but they sound fantastic.
Ann Dugan:
Sure!
Laurie Barkman:
Yeah. So I was curious about you and your choices when you were coming up through the family and understanding the family business. Seeing your Aunt Marcelle running it, did you think, hey, this is something you wanted to do, or were you eager to do something different?
Ann Dugan:
Well, my career had taken me on different paths and I was outside of the Brunswick Georgia area. And I actually settled here in Pittsburgh and as I was going to the University of Pittsburgh and looking at various opportunities that provided me here, I met my husband. And so, at that particular point in time, he had his own company and it was not transferable to another state. So as we got married and started to raise our family, I was settled here. I would say my biggest role with our family business has been governance. And that is as a confidant and a consultant, a board advisor to my aunt and uncle as they were going through their development of the company moving into building supply which was a big foray at the time.
Ann Dugan:
As I was looking at what was going to happen, or what did I want to do next I should say, I ran into a young couple who were in the process of creating locally, the first franchise of home delivery, fast delivery of pizza. And that became Four Star pizza. And I spent many years, as they were building up to, I think at the very end, when I left, we were probably at around 150 units around the world.
Ann Dugan:
And so in that whole arena, I’ll say by 1987, Wesley Posvar who was the Chancellor of the University of Pittsburgh and someone I had gotten to know while I was a student there, along with his wife, Mildred, had asked me, we have this small entrepreneurship program called the Small Business Development Center here at the university, and it’s really struggling. And can you come in and take a look at it because you’re this entrepreneur you’re running around doing this or that. So I said, sure, I’ll come take a look. I’ll do what I can to help, but I’ll never work at a big bureaucracy. And that began my 28 year run at the University of Pittsburgh.
Laurie Barkman:
Ann that sounds like famous last words. I’ll never work there. And then you’re there for almost 30 years. That’s incredible. I didn’t realize that. I love that story. So it really opened your eyes because they contacted you. It wasn’t something that you were thinking about.
Ann Dugan:
No, it wasn’t something I was thinking about at the time. And it just ended up to be a great opportunity because entrepreneurship was a total unknown, not only at the University of Pittsburgh, but at all universities and colleges. It’s much more known today.
Ann Dugan:
And so that really led me to look at all of the opportunities in entrepreneurship that could happen. And the number one was family business. And that’s when I said, we really need to create a program for family businesses. It was the early ‘90s by then. And a lot of our family businesses locally were servicing the steel industry and many of them were waiting for the steel industry to come back.
Ann Dugan:
But really by the late ‘80s, it wasn’t coming back. And even if it would one day, it wasn’t going to come back at the level that it had been. And so they were really struggling whether they were a supplier of product, or metal, or transportation, or temporary help, or whatever it was. Those family businesses had to reinvent and reignite. And I said we could do that here in terms of creating a Family Enterprise Center. And that’s what we did. And I had some of the most incredible leaders in Western Pennsylvania in their family businesses agree after I courted them and asked them saying, we need to do this here because family businesses are the rock bed of any community and still are today. They’re the ones that don’t pick up and move because there’s an incentive, a financial incentive, to relocate to another state or to do things differently.
Ann Dugan:
They’re rocks. Done well, they’re the Rocks of Gibraltar for any community. They continue to provide employment, have a long-term vision, a long-term commitment to the region. And that’s where, I felt that we could do better with the family business area. So I got the University of Pittsburgh to agree that I could create that. And really that became the genesis of the Institute for Entrepreneurial Excellence. Because we had now two things. If you think of the life cycle of entrepreneurial activity, we had the startup side, which was the Small Business Development Center, and then we had the Family Business side, which was really that mature, good things in place, but how do we reinvent ourselves to become entrepreneurial again. And that was the two. And then later on, they became blended into the Institute for Entrepreneurial Excellence with several other things that I created.
Laurie Barkman:
As you said, an underlying part of it were the family businesses that stay here and are a thriving part of the community for employment and for people to want to be here and make a difference. In your center ultimately, let’s call it IEE for short, how many family businesses did you work with over let’s say, I don’t know what period of time, if you want to say the 30 years, but just in ballpark, can you give a sense?
Ann Dugan:
Oh, it was well over 1000 for sure during that period of time. And then in 2010, I created a membership program because up till that point, we were one off. You would call us or you would hear an ad or whatever it is, we’d speak at a program and you call us for assistance. My board said, listen, instead of like living on the waiting for someone to help us out, let’s create a membership organization so we can continually and consistently help. And so we did that. At that point in time, we ended up with about 350 closely held businesses. Mostly family businesses, but some of them might be two families or a group of entrepreneurs that had moved past the startup phase and were looking at how to really build sustainability and capability in their team that were part of the organization. And we just continued, I think at one point we got up to close to 500 members annually that belonged.
Laurie Barkman:
In your years working with family businesses, when the next generation got their new role, when the next generation came up to gen three or gen four, what does that look like normally? Do they live in status quo for a while before they’re comfortable leading change, or are they leading it before they even get the baton? How does that typically happen?
Ann Dugan:
That’s a really great question. And I want to say that every family is unique. They do this in a different way. I can say that today, and really over the last seven years, there’s been much more discussion and activities and learning about family business than there has been in the past. In 1989-90, when we really launched the Family Enterprise Center, it was misunderstood and nascent because people would go, oh, it’s all those rich kids that are entitled and they’ve inherited this business and this wealth and they’re not doing anything. And maybe there was some of that.
Ann Dugan:
I would say in general that as the world has evolved today, the idea that, second generation in particular, they’re respectful of the founding generation, the first generation. They don’t like to rock the boat, they like to make sure that dad or mom or whoever is that senior generation founder and leader, are okay with what they’re doing. And so they tend to be risk adverse, and be caretakers or placeholders. That’s changed, I’d say definitely in the last seven to 10 years where not only they get in and they don’t rock the boat, day one, they might be doing it through their college projects or sometimes high school projects saying, hey, I think this is something we could consider or do differently.
Ann Dugan:
In general, a family needs good communication and good collaboration. So no one feels threatened. I used to hear all the time, listen, we’re fine. Everything’s great. Our profits are great. Revenue is great. Why be the spouting whale? Because what happens is the spouting whale gets harpooned. We’re fine. And, that when with some families that goes on for a long time, until there’s a big hiccup, like a pandemic, like a labor shortage, those are the kinds of things. And then all of a sudden they’re the family goes, ooh, maybe we should have been forward planning a little bit stronger or more proactively. I think that’s where you see today, families looking for that- especially family leaders, where is that innovation coming from? Because it’s not just in their products and services over the last five, seven years, it’s in their use of technology. It’s in their labor pool and their labor activities, as you look at employment today needs more than just a paycheck a lot of things, they need to innovate it into how do we market. Every traditional area of business today needs innovation and smart, strong family businesses get that and are actively involved with it.
Laurie Barkman:
Yeah. And it probably involves their teams around them that they’re driving the culture from the top and giving the permission, if you will, for the rest of the organization to look for opportunities for not only continuous improvement, but innovation, which takes something to another level, whether it’s adjacent change or a completely new market or a completely new service. And that I find in conversations sometimes with companies, it’s harder for them to really make lasting change unless they have the keys, so to speak. I’ve talked with some next generation CEOs and when they say, yeah, I kind of have half a key or I want to make change, but there’s always a “but”. Whether it’s my dad is chairman and we’re not really ready. What do you think are some of the things holding companies back? You mentioned risk aversion. I totally understand that. And the financials needing to be there. But do they see it as R&D and that invest for the future? Or is it more of like, where you’re just talking about where, oh no, we need to do something different. There’s something we didn’t see it coming. So now we’re reacting.
Ann Dugan:
Yeah, I think your three stories, every family is unique so all I’ve seen all of them. Part of what I recommend is the earlier, the better– is to have that kind of communication and that collaboration so that all the family understands the culture. And the culture of the family business is really rooted in their values. As the next generation, if you haven’t really set your values right now, it’s time to just block the time. This weekend, next weekend and say, we really need to have– there’s lots of good data points out there — but a good process to understand what are our five top common core values and then how do we make those alive in our business so that no matter what kind of change we’re looking at thinking about innovation itself.
Ann Dugan:
We’re allaying the fears, because change happens when people feel comfortable that it’s going to be a thoughtful process. It’s not going to take two or three years. It’s going to be a thoughtful process, but we need to move this forward. And in stop being fearful of change. And especially as the older you get, the more fearful you are of change, let’s just stay where we are and not worry about it. But getting back to your core values on a regular basis, especially as you’re going through times where it’s important to think about what’s next in the market, what’s the market telling you, how do we move forward as a group? And I think it’s not only the family team, but it’s the team within the company itself because many times, and I’ll use the example of the IT area.
Ann Dugan:
Those are people that have been with the company, treasured employees, for 35 or 50 or 60 years, because they’ve grown up with the family business. But sometimes they can be barriers to change as well. I’ve been with so many families where, I think that your accounting system or your financial system, your supply system needs a little bit of modernization. They’re like, oh no, Mary or John and the accounting department would never let that happen. Well, we’ve got to find a way to bring Mary and John along because they’re comfortable with their system. I’ve seen in the last five years ledger systems by pencil that are still being deployed by Mary or John. Okay, we need to move the whole team forward. I’ll give just one sample case study of why that’s important in the last few years.
Ann Dugan:
I have a family national family, highly recognized if I told you that name and their brand and so forth. And they’re in hospitality. I’ll say fast food business. And, have been really hammered over the last five months. The family came together and said, wait a minute, we’re second and third generation, but our first generation was very entrepreneurial. We’ve been somewhat entrepreneurial in second and third, but we need to be more. And so they really went back to their entrepreneurial spirit, read some of the history, not only in the second generation who knew it really well because it was their father, but the third generation and saying, how did grandpa, and great grandpa in this case, take advantage of the opportunities that were out there and be opportunistic.
Ann Dugan:
They went back to their values that he was very innovative. He was opportunistic. He took advantage of looking around the market. He didn’t what I call belly button gaze. He picked his head up and looked around and saw what was happening and where his company could take advantage of things. They looked at their financial strengths which is a value because they never live at the end of their paycheck or the end of their debt, or they’re constantly looking at how do we have the resources to move forward. Professional integrity was always a big part of their company. And so they really agonized over some of the things that came out like the PPP and other kinds of government help, like how does that work for our business today and tomorrow?
Ann Dugan:
And then they brought the management employees together because they were worried. Because most of them, if not 90%, were on layoff because of the industries they’re in and everything being closed. And so the CEO who is a family member right now, was really sending out twice a month, incredibly important letters about what the family owners were thinking about. They were talking about some of the innovations that were on their minds. They were forming virtual teams to really work on some of these to create solutions or options for some of the things that they were thinking about when the world reopens. And so it was really important to go back to their values and look and have that as the basis for how they were going to look at innovation and change when the world reopens. And I think they’re going to be in an absolutely great place.
Laurie Barkman:
I think that’s right. I there’s a lot of people and companies focusing on the core, which is the right thing to do, right. Buttoning up the financials, making sure they have money in the bank, securing all the things from the government that they can. And that’s sort of step one and that’s a place to be for sure. And then not giving up on investing in the innovation side of the business. There’s a wonderful article and research around that from McKinsey that came out recently. And then also of course, the classic HBR study. I wrote a blog post about this quite recently, and I’ll include a link to it in the show notes. It’s the companies who protect the core, do the operational effectiveness work, do the
belt tightening if you will, whatever they need to do to make sure that they’re financially sound, but at the same time, they’re balancing their R&D their innovation work and the key initiatives to make sure that dynamic shifts in the market, that they are continuing to invest. And that’s not an easy thing to do. But that starting from the top and driven all the way through the company and that culture back to the values, as you pointed out, all those things tying together. So it’s the companies that invest in both and continue to have that balance and not walk away- if they can financially of course – not walk away from those initiatives. So I love that you shared that example.
Ann Dugan:
Good, good. I think those are all important. Sometimes with families, again, as you had summarized, there’s a reluctance to change or to do things there’s a cultural issue. And I encourage families not only to go out there and look at some having dad, mom, or the senior generation, whatever, to really feel comfortable by looking at, okay, it’s not a son or daughter, cousin, nephew, whatever saying, do this, or do that, let’s look at what others are doing. And that’s where just bringing in a TED talk, or recommending a TED talk to look at together, whether it’s on culture change, leadership, innovation. It helps have another expert, so to speak, in the room. And then the Family Business Magazine is an international magazine out of Philadelphia that’s really incredible.
Ann Dugan:
It’s chalk full of family stories that have a long-term view. We’re going to remain a family, held family owned company for at least until the end of the earth, which is what one family told me. And so they have to have a way not only to innovate for today, but also preparing the generation for tomorrow because the research is that families typically grow faster than the wealth. And so not everybody can take a paycheck out of the company. So how are we going to manage ownership into the future so that we don’t have some that work in the company, but then there’s others outside the company waiting for their distribution check. So there’s a lot of good best practices out there, how to balance all of that, think about it, think about what works for your family. And that’s a really important part of preparation as well.
Laurie Barkman:
I want to switch gears a little bit and talk about your decision to retire. And you went through your own succession process because you ran IEE for 30 years. What was it like for you to go through the process?
Ann Dugan:
I would say a great question and that’s probably like another three hour webinar to talk about that. It was a hard process. I had been going through it with family leaders. I believed in, and taught, and the research showed that timely succession is really important. It helps that next generation move into leadership and help to really flourish and grow and their ideas and the next generation. So here I am teaching it to family businesses and I had one of my, so I had, at that point we were 24 employees at the Institute, or IEE at Pitt. I had five direct reports, and one of them came to me and said, Ann at your age and your energy, you’re never going to retire.
Ann Dugan:
So there’s no room for any of us to move up and do things that we want to do. And I said, well, I always thought that I gave everybody a lot of room and a lot of flexibility and all that kind of thing. They said, yeah, you do, but it’s not the same, because I tend to be, a pretty, I don’t want to say aggressive, but, forward-thinking always moving person. So I got that message and I thought about it for a while. And then a lot of things were happening at the university. I felt I had a really good team of people. My board supported that.
Ann Dugan:
The second part of it is my youngest daughter had twins and my oldest daughter had a single, all within three months of each other. And I thought, you know what, I need a little more flexibility in my schedule to spend some time with my new grandchildren. And so that was it. The timing was right. It was perfect. My successor – it was a great search that my board did with the Provost at the university. There was a big change of moving the IEE out of the business school and into the Provost office and, and ultimately the Chancellor’s office where it resides now. So it’s university wide resource and everything came together. So timing in life is everything, as well as your ability.
Ann Dugan:
I have to say to every leader, it is an emotional time. Doing it at the end of the day, why you did it still feels, helps you feel good and go back and think about it in those moments, especially in those last weeks, as you’re packing and doing your things to say, wow, I should do this, or I should do that. But, it’s good if you’ve done the right thing, preparing your organization, prepare your successor. Everything’s good. And my successor is still someone who I interact with frequently today. I’m proud of the fact that it continues. I’ll just give one thought, is that many of the entrepreneurship / family enterprise programs at universities never last outside of the founder. And in today, that’s changed a little bit, not too much, but a little bit. And I continue to speak with and discuss with universities how to make that happen and continue onward, because it is important that it doesn’t have to end with a founder. Succession done right, and done timely. It can continue.
Laurie Barkman:
That’s a fantastic legacy. You created something so impactful on the region, and then you’ve taken that on the road. You’ve taken it to other universities and consult, and that’s incredible. I’m sure you’re very proud of those accomplishments. I was wondering if you could share just a little bit about some of the work that you’ve done and how, and still do once you left. IEE because you’ve continued to work with families in what you’ve called the complex pathways of their lives, and you help them in a lot of ways, and areas for their strategy around philanthropic initiatives like family foundations. Can you talk a little bit about that?
Ann Dugan:
As I left and moved into my retirement phase and spent some good time with my grandchildren that first year, I have to say that as I was looking out is: what’s next for families. And that became really, in my mind, making the family enterprise alive. And that is that as the business itself is successful and thriving, the family will not put every dollar that they earn in profits back into the business or in distributions to increase their lifestyles. Many families were thinking about how do we give back to our community?
Ann Dugan:
How do we do things even more as a family so we have that activity doing together. Many of them started off with a family foundation and saying let’s look at, maybe they created a family foundation on paper. But what they wanted to do is have this be a really feel good, beneficial activity of our family going forward, not only for the current generations, but the future, and they want to give back and impact those things that either have impacted their business. Like the one family locally in workplace safety and worker safety is where their family foundation is focused. Others will be on things that have either impacted the family or are of interest of family.
Ann Dugan:
Lord knows today especially there’s so many needs that a family can get overwhelmed. Many families want to move from what we call checkbook philanthropy, as you get all these requests in the mail and you write checks, to really like studying the issues, studying the idea where I can make an impact and those kinds of things.
Ann Dugan:
So helping families craft their vision of what they’d like to accomplish. What are the topics or the interests that they have in terms of impacting, and then how do they come together and make decisions not only today, but putting some structure in place so that in the future the next generation is being brought in earlier and earlier. I had a couple tell me a few years ago saying, I’m listening to what you’re saying. We’ve given our kids everything, the best houses, the best education, the best vacations, everything, the best experiences. One thing we haven’t given them enough of is empathy, empathy for their fellow man, empathy for what’s happening in the world today and how we can impact. And we’re going to really focus on that through our family foundation of learning others that were born, or maybe, find themselves in situations that are less thriving than our kids were raised in.
Ann Dugan:
So it’s a win for everybody. And then moving from that, where I spent my time, not only the family foundations, but families have come to grip together and they’re doing more direct investing together on things like that. They’re investing in other opportunities that may be this family or that family puts on the table and say, I’d really like to have some other family investors involved with this. So a lot more direct investing going on now than in the past. And then I think there’s a couple of other things, in terms of the family office environment where I have spent the last four years dedicated to the Family Office Exchange out of Chicago, working with high net worth families all over the world in the sense that, okay, we’ve made this money, is this 100-year money is it 150-year money.
Ann Dugan:
How do we prepare our family to utilize the success of our ancestors and at the same time, preparing for future generations as well. There’s a great book out there by Rabbi Steven Leder that I used to bring to Pittsburgh at least once a year at my program called More Money than God, and it’s really about the fact that we are citizens and all in this together. How can we make this work for ourselves as individuals, for our family, and then in the community in which we find ourselves.
Laurie Barkman:
That’s beautiful and it ties together so many things because you’re using the entrepreneurial process to work with these families, to craft their vision for what’s next as they look at these other chapters in their lives, around the philanthropic pillar or the investing pillar, and it comes back to the values. I’m going to take a look at that book and I’ll include that in the show notes as well. So thank you for sharing that. One question that I wanted to ask you is about statistics. I know there’s so many that probably are swirling in your head. What is a statistic that when you think about it, you wish was different? Or asked differently just for sake of conversation, that you think is going to be different in the next 10, 20 years that people are really focused on when it’s pertaining to family businesses?
Ann Dugan:
Yeah, that’s a really good question and a good thought.
It’s a statistic that’s different in every country, but overall you hear, “Shirtsleeves to shirtsleeves in three generations.”
And I think part of that is that there was not the time. It’s funny to read about it even online because in every language and every culture, that’s a common saying, and the reason why it’s the first generation was the entrepreneurial generation. But what made them strong as a business leader also made them weak. And the sense that a successful entrepreneur often is not the most democratic, is not the most collaborative, let me get everybody’s opinion and think where we’re headed with this. So they can be pretty aggressive and domineering because they’re focused on mission and what do I need to do to be successful in my business today, tomorrow and next year?
Ann Dugan:
So they have a very focused business mindset, and that doesn’t necessarily make them the most collaborative, kind, high communicative father or mother as they’re raising their next generation. So the next generation was coming into the business and they figured out, okay, the way for me to get along with everybody is sort of stay below radar, don’t put my head up because it gets it’s like the whack-a-mole thing, I get in trouble. So they became place keepers much more than dynamic business leaders. And so by the third generation, the money was starting to run out, maybe the innovation as we’ve talked about, or the technology, or the personnel, were all aging. So they weren’t paying as much attention to, okay, how do we keep rejuvenating and rethinking where we are?
Ann Dugan:
And there’s a fella out of Southern California, Ichak Adizes, who I brought some, not him, but some of his people to Pittsburgh when I was at the Institute. They’ve studied hundreds of thousands of companies. And what they show is that when you plot the bell curve of businesses is very much there. So you have the beginning the go-go the startup years, all of those things that make you either strong or kill you off because you’ve expanded too fast and you’ve run out of cash, or you have moved into new products and services where you have no capacity or capabilities and that’s caused you to fail.
Ann Dugan:
A lot of things on the way up can derail you, but let’s just say you’re on that left side of the bell curve, moving up, you plateau at the top. It doesn’t mean you can stay there. It means you have to think, okay, what’s next. So that I start my new bell curve, whether it’s new markets, new regions, new products, new services, new employment, managerial personnel, whatever. So that I don’t slide off the right of the bell curve, which is where there’s Death Valley, if we don’t make some changes.
Ann Dugan:
And so, you look at all of those things and that’s where the third generation sometimes inherits or takes over the business when it’s really on that right-hand curve sliding downward. And all of a sudden they have a hole to dig out of that they may or may not be prepared to do. If the second generation had done some of the heavy lifting of preparation and thinking more than short term, but much more longer term five, seven, ten years out in terms of their business itself. Those are things that I think that’s the statistic that is being impacted today because everyone understands there is no placeholders, there’s no place keepers here. We need to continually challenge ourselves. And having said that, the second thing I see more and more of all the time, which is so great.
Ann Dugan:
And that is that a closely held family held business is creating either an Advisory Board of Directors or a Board of Directors. And they’re putting a couple of independents, meaning non-family, non-professional advisors — not your accountant, CPA, attorney, insurance person — but really truly looking at your strategic plan, looking at your industry, where are we headed, and how would someone who has some subject matter expertise or some knowledge. How would they add to our board in a good way? I see more and more of that all the time because families were scared. If I put somebody on a board or an advisory board, what if they fire me? What if they tell me I’m an idiot? Those kinds of things. Well, good governance process done well, you’re not going to be putting people on the board who are going to say those things. In no way can they fire you because you’re owners. But I think it’s understanding the power they can to really impact that shirtsleeves to shirtsleeves in three generations mantra.
Laurie Barkman:
I think you’re right. I think there’s a core theme of reigniting the entrepreneurial spirit in mature companies and not being fearful of change. Having an independent board of advisors can be really effective as a way for companies to bring in diverse viewpoints and push the company forward on many fronts.
Laurie Barkman:
Last question for you. I love to ask all of my guests if you have a favorite saying or mantra about entrepreneurship.
Ann Dugan:
I would say that my favorite mantra, and I think it’s come through here is:
“Be enterprising in all that you do.”
Ann Dugan:
There’s innovation and opportunities everywhere and just learn of them, take advantage of them. And so be enterprising and all you do wherever life finds you at that moment, think differently and think about how you’re going to be able to, or embrace something and talk about it and start to make it real.
Laurie Barkman:
Well, thank you so much, Ann, for being here today and you’ve definitely sparked a lot of ideas to use that phrase, and you’re an incredible person. And I just love how you shared your experience. So thank you so much for the conversation today.
Ann Dugan
Thank you. Thank you for having me. I enjoyed it.
Laurie Barkman:
Innovation. Transition. Growth.
Easy to say but hard to do.
If you’re an entrepreneur facing these challenges, I get it.
I work with businesses – from small to big – for strategic planning with your team to achieve your vision.
Visit smalldotbig.com to schedule a call with me. I’d love to connect with you.
Be sure to catch the next Succession Stories episode with more insights for next generation entrepreneurs.
Thanks for listening!
