Editor’s Note-Succession Plans
Most of the time, we are assiduously provincial in our selection of stories for Twin Cities Business, assigning writers only topics specific to Minnesota. We feature Minnesota-based individuals and companies with a strong presence in our state, and we often say that if a story would fit in a business magazine in another state (or a national business magazine), it isn’t right for us.
And then every so often we depart from that policy—as we have in this issue, where you will find excerpted a letter to shareholders of Berkshire Hathaway from CEO Warren Buffett. We think you’ll appreciate his trenchant comments on how and when he expects his board to replace him. (He does not expect to resign: When the abilities of managers ebb, “so usually do their powers of self-assessment,” he writes. “Someone else often needs to blow the whistle.”)
Buffett’s thoughts on the selection of his successor bring to mind the most intriguing business study of the past year, conducted by researchers at McKinsey & Company and the London School of Economics. Its conclusion: Among 700 midsize manufacturing firms in the United States, the United Kingdom, France, and Germany, family-owned companies tend to be run better than other firms—except when they are run by the oldest son from the controlling family.
On average, the researchers say, companies in which one family owns a majority of stock are no better or worse than other companies in such key metrics as productivity, market share, and sales growth. But the businesses they studied that were run by eldest sons did 10 percent worse than non-family-owned companies. Those run by a non-family member or any family member except for a first-born son did 12 percent better than non-family-owned companies—in part, perhaps, because family ownership enables managers to take a long-term view in decision making.
As a first-born son myself, I am loath to criticize the conventions of primogeniture. And although we know first-born sons who are splendid at running family companies, this conjecture by the researchers makes sense: “Any company that considers no one else for the top job automatically excludes better potential candidates in the talent pool.”
Moreover, “someone who expects to lead a company by birthright may put less effort into acquiring the necessary skills and education than do people who expect to compete for their jobs.”
››› On another matter: If you were a close reader of this magazine’s masthead , you would note that Shelly Elmore, who for the past six years has been director of marketing and then sales and marketing, has been promoted to associate publisher.
My associates at Twin Cities Business have initiated a number of new programs and publications to which Elmore’s contributions have ranged from substantial to fundamental—fundamental meaning they would not have happened without her. Those projects include the January Business Information Guide, now the 13th annual issue of the magazine; Arrow: A Resource Guide for Growing Companies, a 14th annual issue that will debut in June; two annual issues of Minnesota BioSciences; and several recurring supplements, including Giving, which addresses issues in philanthropy. She has also expanded the Minnesota Business Hall of Fame™ program; had a critical role in initiating Small Business Success Stories™, Emerging Leaders in Business, and Health Care Heroes; and took the lead in establishing the Super Real Estate Agents program. Yes, there’s more, but you get the idea.
Her new title better positions her to replace me as publisher, although that decision won’t be mine to make. (If Warren Buffett doesn’t get to choose his successor, should I?) Nor is it imminent; at age 56, I am nearly as engaged and vigorous as Buffett is at 76. This is a milestone issue for me, my 100th as editor. If it’s okay with you, I’m ready for several dozen more.