January 15, 2025 • 23 mins
Devin DeCiantis and Ivan Lansberg, the Managing Partner and co-founder respectively of Lansberg Gersick Advisors, run down their new book, THE ENDURING ENTERPRISE: How Family Businesses Thrive in Turbulent Conditions, including info on why family businesses are more resilient than others, managing risk, balancing identity and change, managing continuity vs growth, and why stability is a double-edged sword.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Gary Michels (00:00):
Welcome to Let's Talk Legacy. I'm your host, Gary
(00:02):
Michels and I am excited todayabout our show and the guests
that we have for you. IvanLansberg is the co founder of
Landsberg Gersick Advisors, andDevin DeCiantis is the Managing
Partner. LGA serves as a trustedadvisory and education partner
(00:23):
to the world's leading familyenterprises, and they've
recently released the book TheEnduring Enterprise, How Family
Businesses Thrive in TurbulentConditions. Welcome to the show,
you guys.
Devin DeCiantis (00:36):
Thanks so much for having us, Gary.
Gary Michels (00:37):
So can you each give us a little bit of a
rundown on your backgrounds andalso on the work that you do at
Lansberg Gersick Advisors?
Devin DeCiantis (00:48):
Sure, I'll dive in first. I've been fascinated
by this topic of family businessever since I met Ivan nearly 20
years ago, and he introduced meto this new species of private
enterprise that nobody evertaught me about business school,
but that I have since come tounderstand is the dominant form
of capitalism around the world,which has been a terrific
(01:09):
journey for me. And I wasinstantly inspired by their
longer term planning horizons,their deep commitment to
stakeholders and communities,their strong emphasis on family
values and organizationalculture, and as a reformed
investment banker, I was alsoreally impressed by how they
tend to outperform non familybusinesses over the longer run
(01:32):
and over the years of our worktogether, advising enterprising
families around the world, alongwith our team, our travels have
taken us to some of the mostaffluent and stable countries,
like the US, of course, but alsosome truly exotic and volatile
places. And in recent years,we've actually turned our
academic lens to studying someof those differences, the
(01:52):
differences between thesecontexts, and quickly discovered
that at Frontier family firmstake a very different approach
to managing risk given theirlong history of navigating these
kinds of moments of uncertainty,and as a result, they tend to
prioritize a different set ofstrategic objectives, for
instance, resilience rather thangrowth, which is the opposite of
what often gets taught in mostwestern business schools and
(02:15):
gets practiced in most westernboardrooms and and that's the
counterintuitive notion thatbecame the foundation for this
book and for subsequentresearch, and which we're
excited to talk to you abouthere today.
Ivan Lansberg (02:26):
So for me, the topic is very personal. I grew
up in Venezuela. I'm the son ofan entrepreneur, and witness up
close the difficulties of notjust building an enterprise, but
actually transferring anenterprise from one generation
to the next in a context that'ssort of falling apart. So I went
(02:49):
to graduate school here. I Myfirst job was at the Yale School
of Management, and when I got toYale, I began to get interested
in basically two questions. Youknow? Why, if succession
planning, for example, orcontinuity planning, as we call
it, is so obvious, why is thatso few people do it? And the
(03:10):
second question really had to dowith what can be done? You know,
what can we how can we mobilizethe internal resources of an
enterprise and of a family to beable to get them to do the, you
know, take the steps they needto take in order to continue the
enterprise that they work sohard to build.
Gary Michels (03:30):
I think it's interesting this topic. How did
the two of you guys startworking together and start
collaborating? I'm curious.
Devin DeCiantis (03:37):
There's actually a family story there
too, Gary, and it's this conceptof families of choice, so to
speak, the familial networksthat end up combining and
uniting disparate tribes intothis fabric of of trust. I went
to grad school with Yvonne son.In fact, we're roommates, and so
for many years, would spendAmerican Thanksgiving with Ivan
(04:00):
and his family as a Canadian,didn't have much to do that
weekend, and began to embracethat tradition as a byproduct of
socializing with with Dan andIvan and their wonderful family.
And it wasn't until years later,over casual conversations, that
we first began to explore thepossibility of training some
some of my consultativeinterests, training that lens in
(04:22):
the world of family enterprise,and I couldn't have asked for a
better friend and mentor andpartner in that journey.
Ivan Lansberg (04:28):
Yeah, no. I mean, I think we also share an
interest in economicdevelopment. Devin comes from a
sort of blended Lebanese andItalian background, and in my
case, my father was Dutch.That's why my name is not
particularly Latin sounding. Soit was a joy to collaborate with
Devin and find, you know, commoninterests around this, you know.
(04:48):
So we put Thanksgiving to gooduse.
Gary Michels (04:51):
I love it. So I know you guys are aware that our
shows about legacy, I knowthat's a big part of the work
that you guys do, and one of thebest. Examples of creating and
passing on a legacy is familybusinesses, as we're discussing
here, and you say that familybusinesses are actually much
more resilient and enduring on aworldwide level than other types
(05:12):
of businesses, and can withstandmore turbulent conditions.
Before we go into why that is,if you could lay out what some
of the most common threats arethat usually topple businesses
and and why resilience isimportant.
Devin DeCiantis (05:27):
Absolutely Gary, in fact, what's
fascinating is in familybusinesses and non family
businesses, our attention almostalways immediately focuses in on
on business oriented risks,operational risk, security risk,
safety risk, reputational risk,compliant risks. But it's only
this sort of the second orderreflections that get us to
thinking more about things likeineffective governance or asset
(05:50):
concentration, where, in thecase of family businesses,
disengagement and dependence anddeath and divorce and a whole
bunch of other DS and so forth,that could very easily derail an
enterprising family in its questfor legacy, but which are
obvious if you pay enoughattention to them, and which can
be attended to proactively.
Ivan Lansberg (06:09):
Yeah, for us, the issue of continuity is really
quite important because it oftenis a key priority. Enterprising
families make decisions not justfor themselves, but for their
kids and for their grandkidseven. So they have a as Devon
suggested, a long term horizonin terms of the choices and
priorities that they that theymake. So it is critical.
Gary Michels (06:33):
Talk a little bit more about risk. It's such a
powerful one word, and you justthrow out there several
different areas of a businesswhere there's risk.
Devin DeCiantis (06:43):
Oh, it's, it's absolutely essential for a
variety of reasons. One is,it's, it's a critical function
of any any enduring enterprise,any organization that aspires to
continuity, ought to attend tothe things that could derail its
success. So the the realchallenge of of managing risk is
essentially predicting andpreempting crises, enduring them
(07:03):
effectively as quickly as onecan, and bouncing back quickly,
and in that moment, reviewingand reflecting on what worked,
what went well, what didn't, sothat when we bump into the next
risk, we have a bit of aplaybook. And so in a way, you
can call risk management is, ina way, it's crisis prevention or
(07:24):
preparation and crisis recovery.It's the it's the thoughtful,
proactive, pragmatic, strategicapproach to containing crises
which inevitably occur and andallowing an organization to
better metabolize those momentsand escape on the other side,
possibly even better off thanwhen they entered it.
Gary Michels (07:44):
You're talking a lot about risk management here.
Where does taking risks comeinto play? Because no risk, no
reward. We've heard that before,right? Do you see a difference
in a family run business thanmaybe not, a family run
business, and how they takethose risks?
Devin DeCiantis (08:02):
It's a terrific question. In fact, what we see
is a distribution of riskappetite across all of humanity.
You know, if you were to gatherany number of humans, we've done
this countless times inclassrooms and in large group
settings. And you sort of, youask, you know, on a scale of one
to 10, where does everybody'srisk appetite play out from
absolutely none, never to, youknow, put all the money on black
(08:25):
and roll the roulette reel, andyou'll find that there's, in
fact, a pretty normaldistribution across human beings
as it relates to their riskappetite. You'll find that
entrepreneurs tend to skew alittle more toward the risk
seeking behavior, maybe evenexcessively, so, some might
argue, and taking on thoserisks, but that's part of the
entrepreneurial spark that thatis so catalytic in in a in a
(08:48):
free market, in our moderneconomy, and yet that same
impulse can get you into troubleif you're taking on too much
risk, especially when you'rewhen you're anchoring or
tethering The risk appetite ofthe organization to a single
individual, and not necessarilyreflecting the distribution of
appetite and the capacity tobear that risk across the entire
(09:10):
system. And we, we talk a lotabout that in the book as well.
Ivan Lansberg (09:13):
Yeah and one of the things that's unique about
families is trying, particularlyfamilies that endure as business
families, is finding an optimalbalance between tradition and
change, basically between beingable to harness their identity,
the way they do things, theirconnections, their resources,
(09:35):
while at the same time beingconscious that with every
generation, you have to innovateif you're going to stay in
business, right? So being able,and obviously, sometimes within
the same generation, given thepace of change that we're
experiencing, striking a balancebetween those two is a real
skill, and enduring enterprisesmanaged to do that very well.
(09:56):
You know, families can get verycaught into. You know, very
caught up in into what they'vedone, and continue to try and do
it forever, but that that neverquite does well.
Gary Michels (10:07):
So we often talk about a concept called SWOT
analysis, strengths, weaknesses,opportunity and threats. Do you
guys see that family businessestend to do a better job at that
analyzation of that, are theymore resilient than a typical
business that isn't tiedtogether by family ties?
Devin DeCiantis (10:28):
We'll say that enterprising families that we've
met, especially the ones thatwe've studied, that end up
standing the test of time, tendto be more attuned to the
threats, certainly, even perhapsmore so then the opportunities,
not that they both aren'timportant to your point earlier.
You know, without taking on riskthere, there can be no reward.
But enterprising families thatsucceed over the long term tend
(10:51):
to be or let's say, prioritizedmanaging the downside risk more
so than they would prioritizechasing the upside. It's one of
the key differentiators betweenfamily controlled companies and
non family controlled companies,and that manifests in their long
term out performance. In fact, alot of really terrific research
has been conducted that hasdemonstrated that, you know, up
(11:13):
to a third of all long term outperformance is that the
contribution to that outperformance comes from how an
organization manages throughcrisis. Because when you're
managing over 25 year cycles or50 year cycles, crises are
inevitable, sure, and it's howthey respond in those moments
that actually lead to their longterm out performance. They they
(11:33):
understand that this is amarathon, not a sprint, and they
manage their resourcingaccordingly.
Ivan Lansberg (11:38):
I mean, it takes a mindset of of continuity,
rather than of growth. Thatcontinuity, in and of itself, is
a worthy goal to pursue.Obviously, you need to grow if
you're going to be, you know,viable in the markets in which
you operate. But how you growmatters if you're if you're
making decisions like manypublic companies do, you know,
(12:00):
quarter by quarter. If that'syour focus and all of your
incentives are wired to shortterm results, then your ability
to not lose sight of the longterm gets compromised.
Gary Michels (12:13):
Right. Well, most of our listeners are located in
the United States, which youwould consider United States an
advanced economy, and thatsounds like a good thing, but
you say that can actually oftenmean people are less equipped to
deal with the uncertainty orcrisis. Can you explain that?
Devin DeCiantis (12:31):
Yeah. Thank you, Gary for pointing that out.
It was one of the big counterintuitive insights that, for
that emerged from from our earlywork and study of this that
stability is, in fact, a doubleedged sword, while it can foster
prosperity and thatpredictability can allow you to
deploy capital with moreconfidence, it can also lead to
complacency and to a lack ofpreparedness. And advanced
(12:55):
economies, for instance, haveenjoyed a period of stability
that has led to some immenseprosperity, but in the absence
of any extended periods ofuncertainty or crisis, they tend
to lack resilience. If you lookback across the long, sweeping
arc of history, there's been amore or less 80 year period, a
golden age of stability, onemight argue, that began after
(13:17):
the Second World War, and hasled up until the last you know,
10 years or so, and it's onlynow, literally a lifetime ago,
that leaders are having toconfront the kind of, you know,
sudden and unexpected regimechange or shifts in policy or
macroeconomic conditions,inflation and so forth, that
(13:38):
have been, you know, thatHaven't persisted for a
generation, and so we don't havethe muscle memory for how to
deal with that. You contrastthat with Frontier economies,
where they understandintuitively that building
resilience is essential forsurvival and success, because
they have to deal with this notonce every 25 years, but you
know, once every 25 minutes.
Ivan Lansberg (13:58):
Well, you're putting your finger on something
really important there Gary,because it's one of the
counterintuitive things aboutthe book, is that advanced
economies in general, butbusinesses operating in advanced
economies have something tolearn from the way businesses,
and particularly familybusinesses, operate in frontier
markets, right? You know,there's an analogy that we use,
(14:21):
that I think sort of works verywell for this. There's some
research in biology that thecloser you live to a developed
health system, the weaker yourimmune system is. It's sort of
the organizational analog ofthat very construct we begin to
take for granted all of thethings that we have, the
(14:43):
institutional frameworks, themarkets, the regulatory systems
that provide law and order andso forth and so on and and
before you know it, you you knowyou just assume that that's the
way life is. All of a sudden youget something like COVID come in
and. And then it turns yourworld upside down and and you
(15:03):
know, for for family enterprisesthat succeed over generations in
volatile environments, that'sjust a way of life. It's
chronic. It's not episodic.
Gary Michels (15:13):
Right. I always ask when I have our guests on a
question of the research and thework that you guys are doing,
how does it impact anybody?Because there's people that are
going to hop on to this podcastand they're going to go, that's
really interesting about familybusinesses, and there's other
people that are going to go, Idon't have a family business. Or
how does that affect me? And Iwanted to ask you guys why it
(15:37):
does matter?
Devin DeCiantis (15:38):
Absolutely. Well, I mean, your podcast is
oriented around the concept oflegacy. And so you know, if you
if you look to some of thelongest surviving enterprises in
the world, that familybusinesses are
disproportionately representedin any list of those, whether
it's, you know, Google theworld's oldest family
businesses, or you look upcommunities like Les Zeno quien,
(16:01):
which are a community theworldwide of family businesses
who have all been around for atleast 200 years. I mean that
family even in the books of JimCollins and porous A Good to
Great and built to last and soforth, family enterprises are
disproportionately representedamong the samples of businesses
that are seen as the as the sortof the gold standard for for
(16:25):
continuity, for standing thetests of time. And that's
despite the fact that corporatelife spans have been shrinking
for the better part of the lastcentury that the in the context
within which all businessestaking place has become more
dynamic and complex and morechallenging to navigate, and so
for for enterprising family tobe able to demonstrate an
(16:46):
organizational solution thatinvolves the transference of
power, of leadership, of of ofcontrol, of wealth, of culture
and values and so forth acrossgenerations is is truly
something that Non familybusinesses would ignore at their
own peril, and that familybusinesses can look to in the
case of many of the cases thatwe feature in the book as
(17:08):
exemplars of what what one coulddo and embrace within your
organization in order to achievecontinuity, assuming, of course,
that's something that's that'sof interest to you.
Ivan Lansberg (17:18):
One other comment I would make in terms of what's
what's applicable, we've alreadyrattled off a few. You know, the
long term view, the fact thatfamily businesses managed to
bring together threeconstituencies that need to be
managed on an ongoing basis, theowners, the family itself, and
the managers and executives andemployees that work in the
(17:41):
company, those threeconstituencies need to be
harnessed to move in a commondirection, and there is a real
skill in managing thosestakeholders in a coherent way,
and that's where governance comein, which we talk about
extensively in the book. Butbeyond that, family companies, I
think, are wonderfullaboratories for learning how to
(18:02):
deal with paradoxes, you know.So you know, how do you how do
you deploy nepotism andexcellence at the same time? How
do you long term at the sametime, while you're managing, you
know, trying to be expedient andresponsive to the demands of the
market? How do you think youknow? How do you develop big
dreams, but yet attach them todeadlines and not hold
(18:25):
yourselves accountable to thosebig dreams? These are very
powerful ideas, and that's oneof the reasons why we wanted to
document them and provide ampleexamples of families that do
this well. And you know, ouraspiration, our conviction is
that these ideas are actuallytransferable to people who are
not in family businesses. Let mejust make a caveat there,
(18:48):
because a lot of it singleentrepreneurs are just family
businesses in waiting,essentially, if you succeed
right, and you build some wealththrough your family through the
enterprise, you very quickly aregoing to bump up against the
issue, who do I leave things to?What do I do with it? And
(19:10):
clarifying that fundamentalquestion of what is your purpose
and why are you in businesstogether is one of the key
things that we find familyenterprises that endure and
really invest some energy?
Gary Michels (19:23):
Yeah, well, you include some really powerful
real world examples in the book,including stories about family
businesses in Peru, Korea andSyria that all found ways to
flourish in times of hardship.Could you share a few of those,
or even a specific company inthe United States that you saw
that I'm having some challenges,and with working with you guys
(19:44):
and kind of, kind ofcollaborating, there was some
growth there?
Devin DeCiantis (19:48):
I'd love to share an American example, or a
series of American examples,just to provide some of the
context and in the US youmentioned it earlier. Gary, we
consider this to be, of course,not just us, but most of.
Economist an advanced economy,it is sophisticated, it's
complex. It's for the most part,post industrial and that means
that there are a lot ofinstitutional stabilizers out
(20:09):
there. There are a lot of marketmechanisms to provide access to
capital and so forth. But thatwasn't always the case. You
know, we gotta, we don't have tolook that far into history to
recognize that at one point, theAmerican economy was an emerging
economy, and at one point beforethat, a frontier economy, truly
a frontier economy. And in allthe ways that we might look to
Venezuela or Nigeria or Yemen orSyria and so forth today, and so
(20:33):
if you look back in the annalsof American history, many of the
iconic family businesses thatare around today were forged in
the crucibles of crises, as itwere, you know that the Marriott
family enterprise was built,essentially was launched during
the Great Depression as a as aroot beer stand, attending to
the needs of of the displacedduring the Great Depression.
(20:56):
You've got organizations likeCargill and Mars that were
founded in the 18th century,during a time of tremendous
industrial upheaval andstructural disarray, and yet
they are now among some of thelargest businesses in the world.
And so, you know, in theAmerican example, we don't have
as many in the book that arebased in sort of the modern
(21:18):
experience of what it's like tooperate in the US, because,
frankly, the the investments ininstitutional stability have
been made so that companiesdon't have to attend to all of
these and invest in all theserisks. They can just focus on
the unbridled pursuit of profit.But you don't have to go back
all that far. In fact, you knowonly about 100 years or so to
(21:40):
realize that so much of ofAmerican capitalism was built in
these more frontier conditions,and it's part of what created a
lot of that early dynamism thatled it to become one of the
leading countries in the world.
Ivan Lansberg (21:53):
And today, you see, you know, the beginnings of
some destabilizing elements inAmerican you know, society in
general, but the economy, theeconomy in particular, where,
again, part of our messagethrough the book is to alert
leaders not to take thoseinstitutional stabilizers for
(22:14):
granted.
Welcome to Let's Talk Legacy. I'm your host, Gary
(00:02):
Michels and I am excited todayabout our show and the guests
that we have for you. IvanLansberg is the co founder of
Landsberg Gersick Advisors, andDevin DeCiantis is the Managing
Partner. LGA serves as a trustedadvisory and education partner
(00:23):
to the world's leading familyenterprises, and they've
recently released the book TheEnduring Enterprise, How Family
Businesses Thrive in TurbulentConditions. Welcome to the show,
you guys.
Devin DeCiantis (00:36):
Thanks so much for having us, Gary.
Gary Michels (00:37):
So can you each give us a little bit of a
rundown on your backgrounds andalso on the work that you do at
Lansberg Gersick Advisors?
Devin DeCiantis (00:48):
Sure, I'll dive in first. I've been fascinated
by this topic of family businessever since I met Ivan nearly 20
years ago, and he introduced meto this new species of private
enterprise that nobody evertaught me about business school,
but that I have since come tounderstand is the dominant form
of capitalism around the world,which has been a terrific
(01:09):
journey for me. And I wasinstantly inspired by their
longer term planning horizons,their deep commitment to
stakeholders and communities,their strong emphasis on family
values and organizationalculture, and as a reformed
investment banker, I was alsoreally impressed by how they
tend to outperform non familybusinesses over the longer run
(01:32):
and over the years of our worktogether, advising enterprising
families around the world, alongwith our team, our travels have
taken us to some of the mostaffluent and stable countries,
like the US, of course, but alsosome truly exotic and volatile
places. And in recent years,we've actually turned our
academic lens to studying someof those differences, the
(01:52):
differences between thesecontexts, and quickly discovered
that at Frontier family firmstake a very different approach
to managing risk given theirlong history of navigating these
kinds of moments of uncertainty,and as a result, they tend to
prioritize a different set ofstrategic objectives, for
instance, resilience rather thangrowth, which is the opposite of
what often gets taught in mostwestern business schools and
(02:15):
gets practiced in most westernboardrooms and and that's the
counterintuitive notion thatbecame the foundation for this
book and for subsequentresearch, and which we're
excited to talk to you abouthere today.
Ivan Lansberg (02:26):
So for me, the topic is very personal. I grew
up in Venezuela. I'm the son ofan entrepreneur, and witness up
close the difficulties of notjust building an enterprise, but
actually transferring anenterprise from one generation
to the next in a context that'ssort of falling apart. So I went
(02:49):
to graduate school here. I Myfirst job was at the Yale School
of Management, and when I got toYale, I began to get interested
in basically two questions. Youknow? Why, if succession
planning, for example, orcontinuity planning, as we call
it, is so obvious, why is thatso few people do it? And the
(03:10):
second question really had to dowith what can be done? You know,
what can we how can we mobilizethe internal resources of an
enterprise and of a family to beable to get them to do the, you
know, take the steps they needto take in order to continue the
enterprise that they work sohard to build.
Gary Michels (03:30):
I think it's interesting this topic. How did
the two of you guys startworking together and start
collaborating? I'm curious.
Devin DeCiantis (03:37):
There's actually a family story there
too, Gary, and it's this conceptof families of choice, so to
speak, the familial networksthat end up combining and
uniting disparate tribes intothis fabric of of trust. I went
to grad school with Yvonne son.In fact, we're roommates, and so
for many years, would spendAmerican Thanksgiving with Ivan
(04:00):
and his family as a Canadian,didn't have much to do that
weekend, and began to embracethat tradition as a byproduct of
socializing with with Dan andIvan and their wonderful family.
And it wasn't until years later,over casual conversations, that
we first began to explore thepossibility of training some
some of my consultativeinterests, training that lens in
(04:22):
the world of family enterprise,and I couldn't have asked for a
better friend and mentor andpartner in that journey.
Ivan Lansberg (04:28):
Yeah, no. I mean, I think we also share an
interest in economicdevelopment. Devin comes from a
sort of blended Lebanese andItalian background, and in my
case, my father was Dutch.That's why my name is not
particularly Latin sounding. Soit was a joy to collaborate with
Devin and find, you know, commoninterests around this, you know.
(04:48):
So we put Thanksgiving to gooduse.
Gary Michels (04:51):
I love it. So I know you guys are aware that our
shows about legacy, I knowthat's a big part of the work
that you guys do, and one of thebest. Examples of creating and
passing on a legacy is familybusinesses, as we're discussing
here, and you say that familybusinesses are actually much
more resilient and enduring on aworldwide level than other types
(05:12):
of businesses, and can withstandmore turbulent conditions.
Before we go into why that is,if you could lay out what some
of the most common threats arethat usually topple businesses
and and why resilience isimportant.
Devin DeCiantis (05:27):
Absolutely Gary, in fact, what's
fascinating is in familybusinesses and non family
businesses, our attention almostalways immediately focuses in on
on business oriented risks,operational risk, security risk,
safety risk, reputational risk,compliant risks. But it's only
this sort of the second orderreflections that get us to
thinking more about things likeineffective governance or asset
(05:50):
concentration, where, in thecase of family businesses,
disengagement and dependence anddeath and divorce and a whole
bunch of other DS and so forth,that could very easily derail an
enterprising family in its questfor legacy, but which are
obvious if you pay enoughattention to them, and which can
be attended to proactively.
Ivan Lansberg (06:09):
Yeah, for us, the issue of continuity is really
quite important because it oftenis a key priority. Enterprising
families make decisions not justfor themselves, but for their
kids and for their grandkidseven. So they have a as Devon
suggested, a long term horizonin terms of the choices and
priorities that they that theymake. So it is critical.
Gary Michels (06:33):
Talk a little bit more about risk. It's such a
powerful one word, and you justthrow out there several
different areas of a businesswhere there's risk.
Devin DeCiantis (06:43):
Oh, it's, it's absolutely essential for a
variety of reasons. One is,it's, it's a critical function
of any any enduring enterprise,any organization that aspires to
continuity, ought to attend tothe things that could derail its
success. So the the realchallenge of of managing risk is
essentially predicting andpreempting crises, enduring them
(07:03):
effectively as quickly as onecan, and bouncing back quickly,
and in that moment, reviewingand reflecting on what worked,
what went well, what didn't, sothat when we bump into the next
risk, we have a bit of aplaybook. And so in a way, you
can call risk management is, ina way, it's crisis prevention or
(07:24):
preparation and crisis recovery.It's the it's the thoughtful,
proactive, pragmatic, strategicapproach to containing crises
which inevitably occur and andallowing an organization to
better metabolize those momentsand escape on the other side,
possibly even better off thanwhen they entered it.
Gary Michels (07:44):
You're talking a lot about risk management here.
Where does taking risks comeinto play? Because no risk, no
reward. We've heard that before,right? Do you see a difference
in a family run business thanmaybe not, a family run
business, and how they takethose risks?
Devin DeCiantis (08:02):
It's a terrific question. In fact, what we see
is a distribution of riskappetite across all of humanity.
You know, if you were to gatherany number of humans, we've done
this countless times inclassrooms and in large group
settings. And you sort of, youask, you know, on a scale of one
to 10, where does everybody'srisk appetite play out from
absolutely none, never to, youknow, put all the money on black
(08:25):
and roll the roulette reel, andyou'll find that there's, in
fact, a pretty normaldistribution across human beings
as it relates to their riskappetite. You'll find that
entrepreneurs tend to skew alittle more toward the risk
seeking behavior, maybe evenexcessively, so, some might
argue, and taking on thoserisks, but that's part of the
entrepreneurial spark that thatis so catalytic in in a in a
(08:48):
free market, in our moderneconomy, and yet that same
impulse can get you into troubleif you're taking on too much
risk, especially when you'rewhen you're anchoring or
tethering The risk appetite ofthe organization to a single
individual, and not necessarilyreflecting the distribution of
appetite and the capacity tobear that risk across the entire
(09:10):
system. And we, we talk a lotabout that in the book as well.
Ivan Lansberg (09:13):
Yeah and one of the things that's unique about
families is trying, particularlyfamilies that endure as business
families, is finding an optimalbalance between tradition and
change, basically between beingable to harness their identity,
the way they do things, theirconnections, their resources,
(09:35):
while at the same time beingconscious that with every
generation, you have to innovateif you're going to stay in
business, right? So being able,and obviously, sometimes within
the same generation, given thepace of change that we're
experiencing, striking a balancebetween those two is a real
skill, and enduring enterprisesmanaged to do that very well.
(09:56):
You know, families can get verycaught into. You know, very
caught up in into what they'vedone, and continue to try and do
it forever, but that that neverquite does well.
Gary Michels (10:07):
So we often talk about a concept called SWOT
analysis, strengths, weaknesses,opportunity and threats. Do you
guys see that family businessestend to do a better job at that
analyzation of that, are theymore resilient than a typical
business that isn't tiedtogether by family ties?
Devin DeCiantis (10:28):
We'll say that enterprising families that we've
met, especially the ones thatwe've studied, that end up
standing the test of time, tendto be more attuned to the
threats, certainly, even perhapsmore so then the opportunities,
not that they both aren'timportant to your point earlier.
You know, without taking on riskthere, there can be no reward.
But enterprising families thatsucceed over the long term tend
(10:51):
to be or let's say, prioritizedmanaging the downside risk more
so than they would prioritizechasing the upside. It's one of
the key differentiators betweenfamily controlled companies and
non family controlled companies,and that manifests in their long
term out performance. In fact, alot of really terrific research
has been conducted that hasdemonstrated that, you know, up
(11:13):
to a third of all long term outperformance is that the
contribution to that outperformance comes from how an
organization manages throughcrisis. Because when you're
managing over 25 year cycles or50 year cycles, crises are
inevitable, sure, and it's howthey respond in those moments
that actually lead to their longterm out performance. They they
(11:33):
understand that this is amarathon, not a sprint, and they
manage their resourcingaccordingly.
Ivan Lansberg (11:38):
I mean, it takes a mindset of of continuity,
rather than of growth. Thatcontinuity, in and of itself, is
a worthy goal to pursue.Obviously, you need to grow if
you're going to be, you know,viable in the markets in which
you operate. But how you growmatters if you're if you're
making decisions like manypublic companies do, you know,
(12:00):
quarter by quarter. If that'syour focus and all of your
incentives are wired to shortterm results, then your ability
to not lose sight of the longterm gets compromised.
Gary Michels (12:13):
Right. Well, most of our listeners are located in
the United States, which youwould consider United States an
advanced economy, and thatsounds like a good thing, but
you say that can actually oftenmean people are less equipped to
deal with the uncertainty orcrisis. Can you explain that?
Devin DeCiantis (12:31):
Yeah. Thank you, Gary for pointing that out.
It was one of the big counterintuitive insights that, for
that emerged from from our earlywork and study of this that
stability is, in fact, a doubleedged sword, while it can foster
prosperity and thatpredictability can allow you to
deploy capital with moreconfidence, it can also lead to
complacency and to a lack ofpreparedness. And advanced
(12:55):
economies, for instance, haveenjoyed a period of stability
that has led to some immenseprosperity, but in the absence
of any extended periods ofuncertainty or crisis, they tend
to lack resilience. If you lookback across the long, sweeping
arc of history, there's been amore or less 80 year period, a
golden age of stability, onemight argue, that began after
(13:17):
the Second World War, and hasled up until the last you know,
10 years or so, and it's onlynow, literally a lifetime ago,
that leaders are having toconfront the kind of, you know,
sudden and unexpected regimechange or shifts in policy or
macroeconomic conditions,inflation and so forth, that
(13:38):
have been, you know, thatHaven't persisted for a
generation, and so we don't havethe muscle memory for how to
deal with that. You contrastthat with Frontier economies,
where they understandintuitively that building
resilience is essential forsurvival and success, because
they have to deal with this notonce every 25 years, but you
know, once every 25 minutes.
Ivan Lansberg (13:58):
Well, you're putting your finger on something
really important there Gary,because it's one of the
counterintuitive things aboutthe book, is that advanced
economies in general, butbusinesses operating in advanced
economies have something tolearn from the way businesses,
and particularly familybusinesses, operate in frontier
markets, right? You know,there's an analogy that we use,
(14:21):
that I think sort of works verywell for this. There's some
research in biology that thecloser you live to a developed
health system, the weaker yourimmune system is. It's sort of
the organizational analog ofthat very construct we begin to
take for granted all of thethings that we have, the
(14:43):
institutional frameworks, themarkets, the regulatory systems
that provide law and order andso forth and so on and and
before you know it, you you knowyou just assume that that's the
way life is. All of a sudden youget something like COVID come in
and. And then it turns yourworld upside down and and you
(15:03):
know, for for family enterprisesthat succeed over generations in
volatile environments, that'sjust a way of life. It's
chronic. It's not episodic.
Gary Michels (15:13):
Right. I always ask when I have our guests on a
question of the research and thework that you guys are doing,
how does it impact anybody?Because there's people that are
going to hop on to this podcastand they're going to go, that's
really interesting about familybusinesses, and there's other
people that are going to go, Idon't have a family business. Or
how does that affect me? And Iwanted to ask you guys why it
(15:37):
does matter?
Devin DeCiantis (15:38):
Absolutely. Well, I mean, your podcast is
oriented around the concept oflegacy. And so you know, if you
if you look to some of thelongest surviving enterprises in
the world, that familybusinesses are
disproportionately representedin any list of those, whether
it's, you know, Google theworld's oldest family
businesses, or you look upcommunities like Les Zeno quien,
(16:01):
which are a community theworldwide of family businesses
who have all been around for atleast 200 years. I mean that
family even in the books of JimCollins and porous A Good to
Great and built to last and soforth, family enterprises are
disproportionately representedamong the samples of businesses
that are seen as the as the sortof the gold standard for for
(16:25):
continuity, for standing thetests of time. And that's
despite the fact that corporatelife spans have been shrinking
for the better part of the lastcentury that the in the context
within which all businessestaking place has become more
dynamic and complex and morechallenging to navigate, and so
for for enterprising family tobe able to demonstrate an
(16:46):
organizational solution thatinvolves the transference of
power, of leadership, of of ofcontrol, of wealth, of culture
and values and so forth acrossgenerations is is truly
something that Non familybusinesses would ignore at their
own peril, and that familybusinesses can look to in the
case of many of the cases thatwe feature in the book as
(17:08):
exemplars of what what one coulddo and embrace within your
organization in order to achievecontinuity, assuming, of course,
that's something that's that'sof interest to you.
Ivan Lansberg (17:18):
One other comment I would make in terms of what's
what's applicable, we've alreadyrattled off a few. You know, the
long term view, the fact thatfamily businesses managed to
bring together threeconstituencies that need to be
managed on an ongoing basis, theowners, the family itself, and
the managers and executives andemployees that work in the
(17:41):
company, those threeconstituencies need to be
harnessed to move in a commondirection, and there is a real
skill in managing thosestakeholders in a coherent way,
and that's where governance comein, which we talk about
extensively in the book. Butbeyond that, family companies, I
think, are wonderfullaboratories for learning how to
(18:02):
deal with paradoxes, you know.So you know, how do you how do
you deploy nepotism andexcellence at the same time? How
do you long term at the sametime, while you're managing, you
know, trying to be expedient andresponsive to the demands of the
market? How do you think youknow? How do you develop big
dreams, but yet attach them todeadlines and not hold
(18:25):
yourselves accountable to thosebig dreams? These are very
powerful ideas, and that's oneof the reasons why we wanted to
document them and provide ampleexamples of families that do
this well. And you know, ouraspiration, our conviction is
that these ideas are actuallytransferable to people who are
not in family businesses. Let mejust make a caveat there,
(18:48):
because a lot of it singleentrepreneurs are just family
businesses in waiting,essentially, if you succeed
right, and you build some wealththrough your family through the
enterprise, you very quickly aregoing to bump up against the
issue, who do I leave things to?What do I do with it? And
(19:10):
clarifying that fundamentalquestion of what is your purpose
and why are you in businesstogether is one of the key
things that we find familyenterprises that endure and
really invest some energy?
Gary Michels (19:23):
Yeah, well, you include some really powerful
real world examples in the book,including stories about family
businesses in Peru, Korea andSyria that all found ways to
flourish in times of hardship.Could you share a few of those,
or even a specific company inthe United States that you saw
that I'm having some challenges,and with working with you guys
(19:44):
and kind of, kind ofcollaborating, there was some
growth there?
Devin DeCiantis (19:48):
I'd love to share an American example, or a
series of American examples,just to provide some of the
context and in the US youmentioned it earlier. Gary, we
consider this to be, of course,not just us, but most of.
Economist an advanced economy,it is sophisticated, it's
complex. It's for the most part,post industrial and that means
that there are a lot ofinstitutional stabilizers out
(20:09):
there. There are a lot of marketmechanisms to provide access to
capital and so forth. But thatwasn't always the case. You
know, we gotta, we don't have tolook that far into history to
recognize that at one point, theAmerican economy was an emerging
economy, and at one point beforethat, a frontier economy, truly
a frontier economy. And in allthe ways that we might look to
Venezuela or Nigeria or Yemen orSyria and so forth today, and so
(20:33):
if you look back in the annalsof American history, many of the
iconic family businesses thatare around today were forged in
the crucibles of crises, as itwere, you know that the Marriott
family enterprise was built,essentially was launched during
the Great Depression as a as aroot beer stand, attending to
the needs of of the displacedduring the Great Depression.
(20:56):
You've got organizations likeCargill and Mars that were
founded in the 18th century,during a time of tremendous
industrial upheaval andstructural disarray, and yet
they are now among some of thelargest businesses in the world.
And so, you know, in theAmerican example, we don't have
as many in the book that arebased in sort of the modern
(21:18):
experience of what it's like tooperate in the US, because,
frankly, the the investments ininstitutional stability have
been made so that companiesdon't have to attend to all of
these and invest in all theserisks. They can just focus on
the unbridled pursuit of profit.But you don't have to go back
all that far. In fact, you knowonly about 100 years or so to
(21:40):
realize that so much of ofAmerican capitalism was built in
these more frontier conditions,and it's part of what created a
lot of that early dynamism thatled it to become one of the
leading countries in the world.
Ivan Lansberg (21:53):
And today, you see, you know, the beginnings of
some destabilizing elements inAmerican you know, society in
general, but the economy, theeconomy in particular, where,
again, part of our messagethrough the book is to alert
leaders not to take thoseinstitutional stabilizers for
(22:14):
granted.
Popular Podcasts
United States of Kennedy
United States of Kennedy is a podcast about our cultural fascination with the Kennedy dynasty. Every week, hosts Lyra Smith and George Civeris go into one aspect of the Kennedy story.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com