Family Businesses Need One Person to Conquer and Another One to Rule

Sometimes when we work with the entrepreneurial founders of family businesses, we hear them grumble that the next generation lacks the single-mindedness needed to run the business. They get bogged down by family matters. They don’t get involved in the nitty-gritty of everyday decision-making. They just aren’t detail-driven, or thrifty enough, or hungry enough. They simply lack the right stuff.

Inherent in these complaints is the belief that there is really only one kind of leader. We call these leaders “conquerors.” Conquering CEOs play an essential leadership role. They create great businesses. Indeed, there would be no business without the conquerors’ obsessive devotion to growing the company.

Conquerors’ are filled with entrepreneurial spirit and rapaciously go after market share. They are often workaholics who ignore other aspects of their lives. Almost anyone who’s ever worked in a founder-led business is familiar with a conquering CEO.

But conquerors are hardly the only type of leader that works or is needed as a family business evolves. “Rulers” who can manage the organization are equally important. If conquerors build empires, rulers govern them. But the tension between conquerors and rulers is legion. The two leaders are often at odds in companies, to the detriment of organizations, which need both sets of skills.

This dynamic is not unique to family businesses, of course. There comes a time in the life cycle of most businesses when a focus on all-out growth gives way to administration, and when entrepreneurs cede power to managers.

But the dichotomy between these two types of leader is greatly intensified in family-owned business. That’s because the conqueror is often a parent or other family member who can exert a great deal of influence over the ruler. What’s more, ruling in a family business is made infinitely more complex by the fact that there are multiple and related owners.

Let’s take a closer look at how the conqueror/ruler relationship plays out in family businesses.

Consider the situation of one of our clients. The patriarch is a classic conqueror who inherited a controlling interest in a single business from his father and built it into a huge, complex, multi-business enterprise. At family owner meetings, he immediately drills down into very detailed discussions of the company’s products, where they come from, and how they are built. He is always thinking of the next investment opportunity. The depth of his expertise is extraordinary, but he can’t pull himself away from the operational minutiae, which he clearly loves.

Meanwhile, his son, an archetypal ruler, busily arranges family owner group meetings and tries to get the entire family – parents, aunts and uncles, siblings and cousins – to reach consensus on divisive issues. The family had no legal agreements for how shares are owned, but the son worked behind the scenes to put together a process for signing them. He pushed for the creation of a corporate governance structure that could manage everything that his father had built. He also focuses on building a new generation of leaders, both family and non-family. This vision is entirely his own.

In our experience, all large family businesses will need a ruler at some point in their evolution. We see examples where there is a succession of conquerors, but it becomes increasingly difficult to manage with an iron fist as the business and the family get larger and more complex. Family owner groups have different needs as the complexity grows. It’s no longer good enough to just have high-performing businesses; managing the needs of a growing constituency of owners, family members, and employees – all with their own interests – becomes essential.

Rulers have to think strategically about both the business and the family ownership group from a broad emotional and developmental standpoint. This is what we mean when we say that rulers are 360-degree leaders. They are multidimensional. They must continue to build the success of the business, but they also have to keep the branches engaged and working together. The conqueror may have to keep five children in line; the ruler is typically trying to negotiate among dozens of relatives across multiple branches, many of whom are also owners.

Additionally, rulers must put good governance structures in place and form boards. Indeed, these leaders must be masters of organizational strategy. They also have to think about the broader implications of daily decisions. For example, rulers have to concern themselves not only with assessing investments, but they must also weigh the impact of the company’s dividend policy on the family:  “If we hold back dividends to fund the growth of the business, then how do we keep peace in the family?” Conquerors, especially family business founders, don’t have to worry about this. They can simply say, “This is my money, and I’ll do whatever I like with it.” But rulers don’t own the business; they share it with the entire ownership group.

And yet the contribution of rulers is almost always overlooked or minimized, even when the need for them should be obvious. Take the father described above. He would be happier if his son walked the shop floor and focused more on the numbers – despite the fact that there are plenty of executives who can do this. Many family ownership groups want (or think they want) that conquering, charismatic CEO, and they press rulers to mimic the conquering style. Often this is because conquerors are the only kind of leaders they’ve ever experienced. The reality is that the conquering model is not always sustainable or replicable or even desirable. It’s misguided to say that we need a conqueror when the business needs have changed.

Unfortunately, many family executives buy into the conqueror syndrome, and they, too, undervalue their roles as rulers, often feeling that they’re just babysitting the family. They want to run the business. They have trouble accepting the fact that their role as the inspirational leader who governs is valid and critical in a family business. Instead, they are determined to run operations — and sometimes run them right into the ground.

When that happens it’s a real tragedy for the business and for the family ownership group. While both types of leaders are essential in family businesses, smart family business owners can (and do) hire great operational, non-family conquerors to run the business. But a ruler almost always must be a family member. Families would simply reject any outsider who attempted to play the role of bringing harmony and order across multiple generations. Consequently, the business (and the family) would be torn apart.

Ideally, the two kinds of leaders each bring their particular strengths to the family business, and they complement each other like yin and yang. That’s the beauty of the relationship between the father and son in this example. They may see and think about leadership in fundamentally different ways, but the son knows that without his father there would be nothing to rule. His father knows that without his son, there would be nothing to leave behind to the next generation. And in a family business, this is what it looks like to have the best of both worlds.

First Published: 3 Dec, 2014. Harvard Business Review