Reston Family Case Study OLD

Case studies are descriptive scenarios that help people think through an idea or concept while applying concepts to the example provided. This Reston case study would be great for a sibling partnership or cousin consortium group. This specific case study allows the participants to consider a scenario about family business management succession while considering how important factors such as communication and/or conflict can play a role.

We encourage participants to take 45 minutes to read the Reston Case Study and consider the questions as a prompt. Sharing thoughts about this case study can open dialogue about the issue of succession and succession planning.

History – Joe and Ann

Joe and Ann Reston founded Reston Manufacturing, a high-end office furniture company, in 1992.  Joe, a nationally known architect, sold his previous architectural firm in 1990.  He and Ann, his current wife of 23 years founded Reston in the same year.  Due to Joe’s design and construction background and Ann’s experience in textile and interior designer, Reston is well-known in the industry for its quality products and award-winning, innovative designs.  To date their company is valued upwards of $350 Million.

In addition to the commercial operation, five years ago Joe decided to create a line of residential furniture for custom homes starting in the million dollar range.  This decision has resulted in the biggest growth and revenue increase in Reston’s history. While most of their manufacturing is in the U.S., they are currently looking at expanding into the Pacific Rim, but the final decision is currently on hold.  Joe is concerned about the economy.  While sales levels remain high for the year, economic indicators for the last six months suggest a possible future downturn – especially in the purchase of large ticket items like furniture.  Joe feels confident that the company can wait until the first quarter of the next fiscal year to make a final decision on the Pacific Rim venture; however, he also knows that if the company waits much longer they could hurt their competitive advantage.

Joe recently turned 65 and wants to leave the business by the end of 2014.  Ann cut back her time three years ago to pursue other interests and she and Joe decided that they want to travel.  With the company’s recent successes and national reputation they think this is a good time for them to retire and pass the company on to their children.  Joe has been very diligent in planning financially for this transition.

There is a family trust in place.  Joe currently owns 30 percent and Ann owns 10 percent of the company.  The remaining 60 percent of ownership is divided equally between his four children.  His ownership of Reston as well as his other investments will be divided equally between Ann and his children upon his death.  Finally, when he retires he made provisions for his successor to receive an additional 10 of his 30 percent interest to be distributed over a three year period.

Knowing that in addition to the financial plan he would soon need a good succession plan, he has been privately and informally discussing alternatives with the family’s wealth managers for the past two years, but has yet to make a final binding decision about succession.  After the last meeting the advisors suggested that Ann and Joe talk to the four children and involve them in the discussion and succession planning process, at least to some extent.  This was something Joe had not done in the past – any decisions about the company and family finances had always been his.

The Children

Joe has four children – three with his first wife Susan and one with his current wife Ann.  Joe and Susan were married for 16 years and have Vicki, 38; Joe, Jr., 35; and Nick, 27.  Joe and Ann, married for 24 years, have Jeff, 22.

Vicki

Vicki has earned a MFA in Fine Art and came to work for Reston in the design department right out of college. She worked her way up through positions in purchasing and marketing and is currently the Senior VP of Marketing and Sales. She played a key leadership role in the expansion plan five years ago and is involved in the Pacific Rim venture. She is highly regarded by those around her for her business acumen. She took 4 years off after her twins were born, but has been working full-time since her leave five years ago.

She has always been thought of in the family as the “responsible child,” because she took care of her mother after her parent’s devastating breakup. Being the eldest she also has the tendency to be an over-achiever and demands perfection from others. She likes to have things her way. Her goal has always been to take over as CEO when Joe retires. Because she has been with the company the longest and is the first-born sibling, she assumes that her father and step-mother have her in mind for the position. On several occasions she has mentioned her interest; however, her father never gives a definitive response. He only says that he will think about it. In addition, she has mentioned her ambitions to Ann several times during the past two years. Ann has always been a little intimidated by Vicki, so Ann agrees with whatever Vicki says and promises to speak to Vicki’s father (which she never does).

Vicki is married to Josh, who she met at Reston. He works in the legal department as General Counsel. He is vocal and extremely supportive of Vicki taking over when Joe, Sr. retires; Josh thinks she is the most qualified of the four children to run the company. In fact, without Vicki’s knowledge he recently went to Joe and made a case for his wife moving into the CEO position. Joe indicated that although she was doing a fine job in Marketing and Sales he was not sure that Vicki was “right” for the position. Among other reasons, Joe said he was concerned about his grandkids not having their mother around. Josh and Vicki have 8 year old twins–Jen and Mark who will be going off to boarding school next fall.

Joe, Jr.

Joe, Jr. has a B.S. in electrical engineering from Duke and an MBA from Wharton. He worked for an international engineering company and traveled internationally as a project manager before coming to Reston three years ago. He is now one of two VPs in Operations. Privately, Joe told Joe, Jr. that because he is the oldest male he is being groomed for the CEO position. Joe, Sr. has given no date for the succession.

Joe, Jr. is a quiet and easy-going man. While he is a brilliant engineer he is known for making snap decisions. He likes to get things off of his desk as quickly as he can and sometimes his analysis misses the “big picture.” Joe has trouble being assertive both personally and professionally. He avoids conflict at all cost, and he never says no to his father. While his co-workers think he is a “nice guy,” they do not see him as a decisive leader. Joe, Jr. has not talked to his siblings about his father’s plans to move him into the CEO position, because he knows it would cause conflict – especially with Vicki and Nick. In fact, Joe, Jr. is ambivalent about whether or not he wants this responsibility. Joe, Jr. is not married but has been with his “life partner” for 10 years.

Nick

Nick has a B.A in Political Science. He has always been considered the “crusader” in the family. He likes to use his money and name in support of the disadvantaged. Much to his parent’s protests, he spent two years in Africa working with a Christian ministry. During that time he helped build the infrastructure for several communities that had been devastated by civil war.

He has been working as a production line manager in one of Reston’s large regional manufacturing facilities since his return. He likes what he does, but is not especially interested in staying in the family business. In fact, he made it clear to his Father that money was not the most important thing in his life. He also made clear to his Father that he believes Vicki is the perfect choice for CEO and he has told her so. Besides being very idealistic, Nick is a very religious person and has problems accepting Joe, Jr’s lifestyle choices. He and Joe, Jr. only interact when absolutely necessary.

Nick recently married a woman he worked with in the ministry and they are seriously discussing moving back to Africa to continue their ministry work at the end of the year.

Jeff

Jeff is the youngest child and the only son of Joe’s second marriage. He is currently on full scholarship and in his last year of business school at Stanford. He plans to go on for his Master’s and is even considering an academic career. He has already told his parents that he does not want to be part of the family business. Ann is concerned that Jeff may be making a mistake by not claiming his place in the family business, and encourages him to reconsider his decision; Joe is ambivalent.

Jeff, like his half- brother Joe, Jr., is very bright. He and a fellow classmate have successfully created two Internet start-ups over the past three years. Their latest venture generated a half million dollars in revenue in 2006. The company is considering an IPO for the end of 2008. With this experience under his belt, he is very confident that he can be successful without help from his family.

Jeff doesn’t really know his three siblings very well because he did not spend continuous time with them as he was growing up. Because of issues between Joe, Sr. and his first wife, Susan, the time the siblings had together was strained – he doesn’t know the specifics of the issues. Jeff regrets that he does not have a closer relationship with Vicki, Joe, Jr., and Nick, and is sometimes resentful that this happened. He feels isolated from his siblings, but doesn’t know how to bridge the gap. He also often thinks it is his fault that they do not want to be part of his life. The other three siblings are not aware that Jeff feels this way.

The Meeting

As CEO and Chairman of the Board, Joe recently met with Reston’s five outside directors to discuss his decision to retire. Ann, Reston’s President was also at the meeting but did not actively participate in the discussion. The directors asked Joe to outline his succession plan. Joe said that while he was fairly certain that Joe, Jr. would be his successor, he had not yet spoken with the children and thought it best to meet with them before making a formal announcement.

Three weeks later Joe and Ann invited the children for a long weekend at their vacation home. Joe Sr., thought it best that the meeting take place away from a work setting. He did not specify to the children the reason for the gathering in advance.

The second evening the family was together, Joe, Sr. announced at dinner that he had something to discuss with the family. He began by saying that he and Ann had decided it was time to take a step back from the company. He indicated that he would like to stay on as Chairman for a few years, but he was resigning as CEO and at the same time Ann would resign as President. He went on to say that while he loved all of his children he realized that not all of them were interested in the family business and he respected Nick’s and Jeff’s decisions to follow their own path. He said that he had been thinking for a while about the best way to make the transition, and staying on for another few years as Chairman would help the new CEO get accustomed to the role. He then announced that his choice was Joe, Jr.

The first to react was Vicki. She looked at her father, and without a word got up from the table and walked out of the room. Josh was stunned and said to Joe, Sr., “how can you do this to Vicki when you know she is the best person for the job?” Joe, Sr. replied, “I made the best decision for my family. Vicki may be angry now, but she will always have a big part to play in the company.” With that, Josh walked out of the room after Vicki.

Nick turned to his father and said, “Father, you are making a big mistake giving Joe, Jr. the job. I’m with Josh on this – Vicki is the most deserving and qualified. She also has two children that will benefit some day from Reston, and I think it only fair that she have a say in their legacy. Joe won’t be passing the business on to any children. If I have a vote here, the job should go to Vicki.”

Jeff looked at Nick and said, “Nick, what do you care? You are going off to the jungle to save the natives. Personally, I think this whole family is screwed up. I’m not even sure why I am here. It’s clear that my opinion has never counted before, but Dad and Mom should be able to do whatever they want with their business.”

At that point, Ann stood up and said, “That is enough everyone. Your father has made his decision and I think you should stand behind him. If you don’t it might be best if you leave.” There was long silence around the table and each of the children looked at looked at Joe, Jr. who had his head down and his hands folded on his lap.

After a few minutes everyone filed out of the dining room without a word, leaving Joe, Sr. alone.

Later

Later that evening Joe, Sr. sat by himself in his study and tried to analyze what had happened at dinner. He began to wonder if he had jumped the gun in appointing Joe, Jr. as his successor. After all, Vicki had demonstrated an interest in the company – and had certainly proven she was capable of implementing strategy. But Joe, Jr. was the eldest son, and Joe, Sr. had always seen his son running the company. Joe, Jr. certainly was smart enough to take the reins, but did he have Vicki’s strong business instincts. Should he expect Vicki to sacrifice her family time to run the company? He wondered if he should consider making them Co-CEOs. Or maybe hiring a professional CEO for the short-term would make sense – it would give him more time to decide. Perhaps he had not been very objective about who is best qualified for the job. With that he poured himself a drink and decided he could give it more serious thought in the morning…….

Discussion Questions

These issues were touched upon in the case study: Founder-Entrepreneur personality characteristics; individual stage development; family boundary differentiation; role confusion, role conflict. Keep these in mind as you answer the following questions:

What appears to be the problem(s) here?

What roles do you see being used/possibly confused?

Discuss how each family member might view the family meeting, from his or her own “lens”. What are some of the issues that each brings to this meeting?

What unintended consequences do you see here?