Caught in a power vacuum - management strategies for family-owned businesses

Nation's Business, April, 1990 by Richard Beckhard, Robert O. Middleton

Caught In A Power Vacuum

"We can't make any strategic decisions," laments Tom Thompson Jr. Tom, 40 years old, has been president of Transco, a transportation-services company, since his father, the founder, retired eight years ago.

Tom shares management with one brother and three sisters, who, like him, have worked in the business for about 15 years.

Prior to retiring, Tom Sr. established a management-succession plan, grooming each child for an appropriate management role.

Tom Sr. also relinquished control of Transco, a general partnership, but did not directly transfer ownership of the company to any of his children.

Instead, Transco is now owned by several long-term trusts and a family holding company, which are neither willing nor able to assume the duties of a general partner. The trusts are controlled by in-laws who have no expertise in running Transco.

And although Tom Sr. dominates the board of the holding company, he devotes his interests to other family assets and refrains from involvement in Transco.

While Tom Jr. and his siblings sit on the holding company's board, they feel intimidated by their father and have simply pursued the objectives he set before he retired.

Although he is Transco's president, Tom Jr. does not feel fully authorized to make strategic decisions that involve risking significant assets of the business.

His siblings are not comfortable assuming authority beyond their respective management duties.

Simply put, Transco is operating without direction. What can be done to provide the company with the leadership it needs?