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Engines at the ready

Red Rocket is a $150 million manufacturing and distribution company located on the outskirts of a major American city. The company's focus is the manufacturing and distribution of children's toy cars, trucks, ambulances, and helicopters etc. This second generation company has been in existence since 1955. The company's workforce of 175 includes a sales team of 25 across North America, Europe and Australia. The company is family-owned and has always been profitable. Suggestions to go public have been dismissed, as they have worked hard to develop and maintain strong professional managers, and have little employee turnover.

Sean Leeds, the patriarch and founder of Red Rocket, died in 1982 following a long bout of cancer. He founded the company having had a life long joyous relationship with toy cars. He maintained that enthusiasm in his role as chair of the research and development team in the company. Sean's wife Mary is alive and well and living in the same town as the company headquarters. Sean and Mary had two children, Patrick and Anne. Anne, who was single, died tragically in a car accident in 1970.

Sean's 57-year old son Patrick is the current president and CEO of Red Rocket. Patrick took over the business in 1980, and has been running it ever since. Patrick has an MBA in finance and also has an accounting background from a prominent mid-western university. He had 4 years experience working in Europe prior to his entry into Red Rocket. Patrick holds 100% of the family shares and has voting control over the company.
Patrick is married to Kelly who works in the company and is the chief information officer. They have five children Sheila (31), Robert (29), the twins Courtney (27) and James (27), and Ted (age 23). The two daughters Sheila and Courtney are both married and established in their professions. Robert and James have been working in the business for several years; both have MBAs and were being groomed as future leaders of the business. Ted has just finished his undergraduate degree and is working in a business environment. He is considering returning to college to complete an MBA.

Both Robert and James are single, and have worked hard to develop their careers. They have been involved with Red Rocket since their youth as part of children's' focus groups. Robert is quiet and reserved, thoughtful and well-respected; his background is in the management/accounting side of the business. He is head of accounting and distribution. James is more outgoing, a sales personality with lots of energy. He has been heading the sales team and has been a member of the research and development team. Throughout their history they have been playful and competitive. Both went to separate universities and had a separate set of friends. They rarely socialise together and don't have much in common other than the business.

Patrick was caught unaware when Robert requested a breakfast meeting with him, during which he inquired about his father's succession plans. During that conversation, Robert indicated that if he is not made president of the company by the following year he would leave and pursue his own entrepreneurial ventures. Patrick was not only completely surprised by the request, he was shocked at the tone in which the request was given.
A week later, James took his father aside during a family gathering, and said that if Robert was made President, he would leave the company. James further stated that he should be made president and proceeded to give his father the same ultimatum as Robert – that if he were not made president within a year, he would leave. Patrick, though, still perceived himself as too young to slow down or relinquish control. He had always thought the two boys would run the company together in about 10–15 years. Patrick felt overwhelmed and completely unprepared to meet his sons' demands.

Commentary 1
While this may seem to Patrick like an insurmountable problem, it is good news that the issues are being brought to the surface at a relatively early stage.

Patrick and Kelly should stabilise the situation by sitting down with Robert and James and asking them to be patient and co-operative as they all try to work out a solution.

There are a number of issues to resolve. Patrick and Kelly need to explore their dreams and desires for the business and for themselves. Patrick should try and map out what his ideal succession scenario would be.

The need to explore what led Robert and James to issue an ultimatum to their father, and what their vision is for the future of the business. These discussions might open avenues for them to consider the possibility of working together in a collaborative fashion rather than an either/or situation.

Bring together Patrick, Kelly, Robert and James to agree upon a collective vision for the business; the strengths and weak­nesses of Robert and James and how they fit in with this vision. These discussions should take place over time so that roles and responsibilities may emerge.

Create and implement a leadership development program to help identify what is required and strengthen the successor's skills to lead the business into the next generation and beyond.

Ron Prehogan is the President of Equitas Consultants Inc. Strategic Family Business Advisors in Ottawa, Ontario, Canada.

Commentary 2
I would be curious to know why both James and Robert had expected to be made president of Red Rocket. Clearly they are anxious to reach the top and are highly competitive. It would be interesting to explore the family dynamics that have lead to such high expectations and competition.

The current crisis gives Patrick the opportunity to make clear his sense of when he will want to relinquish the presidency and what he believes the qualities and skills of the next leader should be. To do this Patrick may need some help in articulating his ideas.
It is important that Patrick informs both James and Robert on precisely what is expected of the leader of the business and what  knowledge and skills each would need to attain. Both brothers need assistance in evolving their own leadership development plans. This might include mentoring, experiences outside the company and further education.

It is clear that these two men need some opportunity to develop their abilities to work together as siblings, whether that is as owners or as owner managers. Currently neither son is comfortable with working with each other so Patrick needs to make clear that they need to learn to do so, if they are to become joint owners of the company.  Patrick had never had to address this issue as he had lost his only sibling at a young age.

Family council meetings, the development of a family mission statement to articulate the families and business goals and the development of an outside board of advisors would be useful in helping Patrick assess the progress of the next generation.

Fredda Herz Brown PhD is founder and managing partner of The Metropolitan Group, which provides Relative Solutions to family enterprises.

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