The Great Differentiator

The hallmark of the differentiated leader is the ability to make decisions that push the company forward into unknown territory at critical moments in a company's history. Tough decisions are gut checks, especially when the prosperity of the family business is dependent on the decision being right. The right decision isn't always guaranteed, of course. Strong leaders are decisive, even when the outcome isn't guaranteed. Leaders who abdicate their role in making crucial decisions become a liability to the business. The business can't move forward if the leader isn't moving forward. Decisions reveal a leader, and demonstrate how successfully he or she has differentiated from the founder, or in the case of Lansing Crane, five generations of successors who followed the founder.

Lansing Crane used his values to make gutsy decisions and move Crane & Company forward into the twenty-first century. In doing so, he differentiated his leadership from that of previous generations. For many successors, differentiation happens as they find their way in the family business. However, for Lansing, differentiation began outside the family business. Lansing studied law but developed expertise in psychiatry. While teaching both at Yale, he drafted legislation protecting the rights of psychiatric patients in Connecticut. His perceived outsider-insider perspective proved to be an asset. “It was because I had done something different from other Crane family members that the family elders felt that I could add something.”⁶ Lansing understates the urgency of that call, and the nature of his differences. In reality, the company was floundering and it needed an insider with an outside perspective—someone who could stand in the gap between what the company had been and what it needed to become. Someone who was credible in his own right and had credibility with others and could see the bigger picture.

We are all faced with the task of differentiation, the process of developing the ability to stand in the presence of emotion and stay in command of our decision making. But the task morphs into a bigger challenge in a family business with a storied history. Family mythology, as I have argued to this point, can weigh heavily on a successor. In Crane & Co., it wasn't the mythology of just a founder, it was the weight and legacy of generations of the company that threatened to engulf the next family leader. For Lansing Crane, the burden was lessened because he differentiated outside the family business. Having some separation from the family business allowed him to develop his sense of self, separate from the family. While the task at hand wasn't any easier, he had a sense of confidence that was based on what he accomplished apart from the influence of the five generations that preceded him. Simply, he became his own man before he entered the business.

Decisions are the steps a successor takes as he or she walks out of the shadows of a legendary founder. They reveal a leader's self-awareness, experience, and knowledge, as well as his or her clarity of vision and values. If these are muddled by the shadows of the founder, the way forward is often unclear. When Lansing came home to Crane & Co, he was able to lead the organization, informed by the collective wisdom and experience of the board, and having a strong sense of his own credibility from a long track record of success.

Once formed, people's self-concepts are an important source of input to their decisions. Lansing's outside career accomplishments helped form self-esteem and establish his reputation (external credibility) to make the right decisions at a critical juncture in Crane & Co.'s history. In making those decisions, Lansing leveraged the mythology of the Crane brand (its “emotional meaning to Americans over many generations”⁷) while harnessing technology to augment the company's core products on a global scale. “Our move into the international market was a big deal for us,” he says. “It requires more talent and focus, has made us more competitive, and has increased our level of diversification. It's reinforced the company's strengths. I think my predecessors in the family would have understood that and been excited about it, as we are.”

Cutting the Gordian Knot

In 1879, the US Treasury, dissatisfied with its currency paper supplier, put its contract out for bid. On May 27 of that year, Winthrop Murray Crane—a future US senator—sent a telegram to the Crane home office from Washington, DC: “You must let me use my judgment about changing the bid… No time to spare.”

“They already had the bids in,” says Lansing Crane. “He went in at the last minute and bid one-fourth of a penny below the next-lowest bid. We'd never made the paper before, and we weren't sure we could.”⁸ But Crane & Co. got the contract.

To decide is to act, and to decide wisely is to act decisively, making informed decisions without being impulsive or reckless. All the leadership traits that we have looked at so far—building credibility, becoming self-aware, learning through trial and error, building values, articulating a vision—are wrapped into the larger task of differentiation. The undifferentiated leader is more likely to be swayed by emotion, others' opinions of them, and their own fear of failure. By contrast, the differentiated leader acts more decisively. The decision becomes the tip of the sword that cuts the Gordian knot. Differentiation says, “I have inherited all of these from the family, but I have made them mine. I bear the family coat of arms but also leave my distinct imprint. I am proud of my family but also of my unique contribution. I have added value.”

In the end, though, it's testing that proves leadership. The acid test is when the leader is called to make tough personal decisions. A differentiated leader manages both the emotion and the data. He or she works to understand and balance the needs of both the family and the business. The generative successor knows when the business needs to sacrifice for the family and when the family needs to sacrifice for the business. Lansing, for instance, had to fire some family members. At this point, “The business comes first,” he says. A decision that would put considerable strain on his relationships with both siblings and cousins needed to be made for the long-term health of the family business system.

Vision tells a company where it's headed; values keep it on course; and, decisions get it there. At a point of crisis, a successor earns the right to lead by taking decisive action to create a new way forward. In “The Tests of a Prince,” Ivan Lansberg writes, “The history of every family company that survived for generations tells us of heroic feats at decisive moments that consolidated the authority of untested successors.”⁹

These are defining decisions that employees, shareholders, and family members look for in a successor, a leader who acts decisively from his own conviction. This is especially the case when there is no clear way forward, and a leader must build a bridge across a chasm of uncertainty. It calls for creativity and innovation—and calculated risk.

While we would like to think that a leader always knows exactly what to do, but often the way forward is unclear. “You have to be able to take risks—not crazy risks, but risks,” Crane says. “At key points in Crane's history, we've taken risks, and it's paid off. We stayed vibrant. We survived. That's how. Also, we don't ever get too far from our old-fashioned values: integrity, quality, honesty.”¹⁰ Risk involves being able to deal with ambiguity. It is rare that a leader has 100 percent certainty in making a decision. Generative successors have the capacity to deal with the ambiguity and not be overcome with anxiety. They neither rush to a decision, nor do they succumb to the paralysis of analysis. They make a decision and learn from it. Innovators are not imitators. They respect the past and are grounded in its values, but they can make a new way when the situation calls for it.

It's the difference between being reactive and proactive. The reactive approach to ambiguity is, “I am going to do what my parents did. I'm going to do what everybody else defines as success.” The proactive approach is, “I'm going back to my value system and choosing the best course of action that fulfills my mission, leads me towards my vision, and is consistent with my values.”¹¹

One Decision after Another

Good leaders make decisions that assure that their organizations move in a purposeful direction. A proactive leader makes decisions and learns from them. A good decision can be reinforced by another, and a bad decision can be corrected by a good one. It's a long progression in the same direction. Big decisions are rarely precipitous or fortuitous; rather, they tend to be deliberate and slow, requiring thought and strategic planning, because they set the long-term course of a growing company. Leaders need both the fast thinking of intuition and slow thinking of logic and collective wisdom.

Lansing Crane's decision to invest in the “Motion” technology required years of adapting the company's core technology to banknotes. And it followed the earlier decision to buy the Swedish Tumba Bruk paper and print subsidiary from Sweden's Central Bank. Smaller decisions reinforce the big ones, keeping the company on course. Making both kinds of decisions, big and small, is a learned skill, and the only way a leader learns to make decisions is by making them.

Failure Makes the Business Hero

Successors develop the ability to make good decisions when parents give them opportunities to make decisions early on, well before they are thrust into senior leadership roles. It starts small when the risk is low and the capacity for learning is high. This can happen naturally and with minimal pressure, when children start to “hang around” the workplace with their parents. Parents can capitalize on their curiosity by first giving children small tasks and then meaningful tasks involving decisions. Dick DeVos started by moving boxes in the basement. Mary Andringa's father gave her the controls of his Piper Cub airplane when she was 14, and Mary had her pilot's license three years later. “You will figure it out,” said Jean Moran's father. When she figured it out, her self-confidence soared, and her father gave her bigger tasks.

Successors prematurely pushed onto the big stage of leadership are exposed. They can't fake it. Successors who make big decisions before they have learned the decision-making process often make poor decisions. The fault is often that their family has idealized them. As Massimo Ferragamo says, “Idealizing a child is not ideal for the business.”

I have described the process of idealization as exaggerating positive qualities in a person. Idealization provides the illusion of perfection, and idealized children are perfect to a fault, and then to a failure. They are not given the opportunity to learn and develop their gut in the real world of trial and error. Protecting a child from this, a parent sets up his or her child for failure as an adult. As adults, when they make decisions that will inevitably fail, they often lack the fortitude and confidence to learn from the failure. That failure translates into, “I am a failure,” because they have not learned to differentiate their real self from their idealized self, who is seemingly immune to failure.

In some cases, a successor who has been idealized grows an inflated sense of self. The story these successors wrongly believe is that they can do no wrong. Take Peter (not his real name). Peter was the first-born son of Lawrence Haubt. Lawrence was a creative visionary who very much wanted to see his son, Peter, and daughter, Mary, run the furniture manufacturing business that he had built. The business had become known as one of the most creative luxury furniture businesses in the world. Peter had a very gregarious and outgoing personality, was a hard worker, and was liked by all; however, his track record with the company was spotty at best. The fact that Peter was well liked caused Lawrence to overlook much of Peter's poor performance at all levels of the company. In fact, he never held his son accountable for his performance. So when Lawrence stepped back from leadership, handing the reins of the company to a 28-year-old, Peter had no grounding in who he was. He thought he was infallible. It wasn't until several of his decisions threatened the future of the company that his father developed a real sense of his son's ability. Lawrence stepped back in, but at a huge emotional cost to his son's self-esteem.

If accountability had started at a much earlier age, perhaps Peter and the family would have been spared the trauma of removing Peter as CEO.

Trap of Perfectionism

When a leader is caught up in her own mythology, she avoids decisions that might shatter her heroic stature.

This is the trap of perfectionism. The desire for perfection is rooted deep in our psyche, and our mythologies bear this out. All cultures have stories of the mythic leader (the king archetype we discussed earlier) that reveal our desire for a sovereign who brings order to chaos, and makes our world right.

These large stories are written small in all our lives, and successors continue the archetypal pattern when they celebrate and portray leaders as fearless, brilliant, and almost flawless. These legendary founders always made the right call, the “perfect decision.” But the real world doesn't work that way. Rarely, if ever, does a leader make a perfect decision.

Vulnerable leaders, as we have seen, have the courage to be imperfect and to make decisions that reveal their vulnerability, not their invincibility. Mistakes are how they learn. Vulnerable leaders also have the strength to sit in ambiguity, when a decision they have made does not bear immediate and successful results. Certainty is safer than ambiguity, but it closes the door to the “what-ifs”: “What if we do it this way?” “What if we try this?” A successor who does not have a strong sense of self, and has not pursued differentiation, will settle for the “what I know.” He will play it safe, but will also remove the opportunity of ambiguity, the creative struggle to work through it. Often, it is from the creative struggle that an organization's greatest discoveries and innovations are born. Brene Brown, author of Daring Greatly, asserts that our greatest creativity and innovation comes from a place of vulnerability.¹² A leader who has not learned to be vulnerable and to be comfortable with ambiguity will never break through.

A differentiated leader is confident enough to make a call—even if it's the wrong one—because he is less concerned with sustaining a cult of personality than with doing what is right for the business. He isn't worried about how a wrong decision will hurt his image. But he is worried about making a decision that is in the best interest of the organization. These leaders understand that you don't always get it right. Some ideas work, some flop. They use a foundation of values and their sense of mission and vision as their guide.

At the end of a failure, a successor comes to a fork in the road and can either take the path of defeat or the path of instruction. To learn from defeat, however, a leader must be humble. Differentiated leaders are humble enough to learn from their mistakes, and strong enough to grow from them. Failure is part of that trial-and-error process. It gives us data to use as we seek to improve and grow. An undifferentiated leader is more likely to attribute failure to something being wrong with him, rather than saying, “I failed. So what? Move on.”

Think and Do: The Decision-Making Process

John Tyson went to college, but he went to school at work. As he said, “They don't teach you business at a business school.” Perhaps that's because students tend to not make many real-life decisions at school. You can't mimic the pressure of meeting payroll; you can't simulate the pressure of making decisions that impact the lives of hundreds of families. Decisions reveal what a leader has learned, and they help a leader learn more. “To learn to make decisions, you must have a thought process,” says Tyson. “Have a good thought process; make a decision. Two things happen when you make a decision. It's right and you go faster, or it's wrong and you stop and make another decision.”

Good thinking and good decisions reinforce each other to create action. It's the opposite of a self-fulfilling prophecy in which a false belief reinforces self-defeating behavior. Decisions test the soundness of the thought: Is it grounded in reality and experience? Leaders don't shy away from this process, because they have developed confidence from having made enough of the right calls in previous situations.

They are not afraid of doing the wrong thing, because they know that mistakes are both instructive and most often correctible. As John Tyson says, “If the feedback says, ‘No, it's not right,’ then stop, make another decision right then and there.” The best leaders are not after perfection but progress. And they don't seek to be always right, but more right than wrong. Their thought process and intuition are reliable guides in situations that call for decisive action to move a company forward.

Must-Have Courage

Jean Moran was at the crossroads of a drastic decision. Keep a $5 million client happy, or prove the service that typified her company to a much smaller client.

Jean's company, LMI Packaging Solutions, was one of three smaller companies that serviced the much larger Winpak Portion Packaging, one of the country's largest suppliers of coffee creamers. When Jean asked for more of its business, Winpak rebuffed her every time. It was their intention to keep all three of their suppliers close in volume.

That's when temptation came knocking. One of Winpak's customers, whom LMI was not currently serving, needed a product that Winpak did not want to provide. Winpak, the lowest-cost producer of a similar product, did not want to bastardize their existing business and so refused to give it to them.

“Can you supply us?” they asked Jean.

“Although we didn't have exactly what they needed, I said, ‘Of course we can.’ All it would take was a little creativity.”

Jean had a good relationship with Winpak and asked straight up if LMI Packaging could give this other company what it needed, since Winpak did not want to. When Winpak said no, “we had a decision to make,” says Jean. “That is, I had a decision to make, and I decided to take this client's business.” When Winpak's VP of sales called Jean to tell her to back down, she responded, “I will, if you let me supply what they need.” When he refused, Jean told him that LMI was going to do it anyway.

Three months later, the president of Winpak, who was a close friend and mentor to Jean, came to her office and fired LMI as a vendor. “As soon as he left the room,” Jean says, “I pumped my fist in the air, and yelled out, ‘YES!’ like some psychotic.”

The reaction belied her true feelings. She had just caused the company to lose a long-time customer who represented one third of their business. But bolstered by her own bravado, Jean called a meeting to inform her leadership team of the decision. “I was rah-rah-rah, we can do this” she laughs. “I had their full support. They trusted me.”

It was only later that Jean found out that she had made the right decision. Winpak was a $5 million client with a 5 percent margin; the new client was only a $2 million client, but with a 40 percent margin. It was a difference of $550,000 to the bottom line.

Jean Moran trusted her instincts even as her more rational mind waved a red flag. She weighed all the factors and made a judgment call even when she did not have all the information (as we rarely do). The results vindicated her decision. This illustrates an important aspect of decision making. It is more than cerebral. It involves passion born of deep commitment to the family business, an alignment with its values, analysis of the data, and confidence in one's instincts and abilities. Informed decisions are not perfect decisions, but every decision made, right or wrong, brings more clarity to the path forward. Differentiated leaders can more realistically and quickly assess those decisions. A leader never has crystal clarity, and must learn to deal with a certain amount of ambiguity in any situation without becoming mired in indecision or a desire to placate everyone involved. The future is not set; leaders shape it with decisive action. And their people follow, just as Jean's plant manager did: “You just tell us what we have to do, boss, and we'll do it.”

A Sense of Where You Are

On May 30, 2009, Air France Flight 447 pancaked into the equatorial Atlantic Ocean. The airplane turned 225 degrees off course and was flying due west with its nose up, wings nearly level. Thoroughly stalled, it was progressing at merely 107 knots, with a descent rate, despite full thrust, of 11,000 feet per minute. The impact was shattering, and all 228 people on board died instantly. A series of small errors, triggered by a relatively benign malfunction in a speed indicator, turned a state-of-the-art cockpit into a death trap. For an agonizing 4 minutes and 20 seconds preceding the moment of impact, the pilots misinterpreted data streaming at them from the instrument panel. They did precisely the opposite of what their instruments told them to do. The pilots had lost all orientation.¹³

The tragedy was compounded by the fact that everything was behaving exactly as it should. Except for the pilots. They had conceded their skills to automation. Aviation experts tell us that once pilots are put on automation, their manual abilities degrade and their flight-path awareness is dulled. This process is known as deskilling, and in extreme cases, pilots lose all orientation and control. The only way to reverse this process is to turn off autopilot and let the pilots learn to fly again, to “reskill.”

It's also known as the OODA loop, a theory developed by fighter pilot John Boyd. OODA stands for observe, orient, decide, and act. Boyd was dubbed “40-second Boyd” for his standing bet that beginning from a position of disadvantage, he could beat any opposing pilot in air combat, maneuvering in less than 40 seconds. No one ever took up Boyd on the bet. He continually outdueled pilots who flew technologically superior planes.¹⁴ Because he abided by the OODA process, he was able to observe changes in the environment, orient himself to the changes, and move to decision and action faster than his competition. He simply processed information faster. This is the skill of the generative successor.

The acquisition of this skill requires a regular environment, opportunity to practice, and feedback about the accuracy of thoughts and actions. As this skill fully develops, a leader is able to better make in-the-moment intuitive judgments. If a successor is mired in the myth or overcome with his or her own emotions, it slows down this process. A marker of skilled performance is the ability to deal with vast amounts of information swiftly and efficiently. “If it's right, you go faster.” John Tyson follows the same principles in chicken production as John Boyd did in aerial combat, and with the same results: He beats his slower competitors. “You make a decision that gives you a competitive advantage; now let's go run with it as fast as [you] can to separate yourself from the competitor.”

Reorientation

Lansing Crane took over a company that was oriented more to the past than to the present, more to its history than its future. Technology was passing by Crane & Co., and would render it a relic if it remained stuck in the past. This is called orientation lock.¹⁵ It's not that they didn't know what was happening; the data clearly showed their main business deteriorating. But they couldn't interpret what the data were telling them. The reason they got into trouble was the reason they couldn't get out of it. The feedback was getting swallowed by the shadow of their history, prestige, and nostalgia for the way things always were.

Companies tend to do what they know how to do. When they encounter orientation lock, they do what they've always done—even if it doesn't work anymore. Yet reputation and pedigree don't count for much if a company can't deliver and meet current demand.

What the company collectively could not do, Lansing did. He changed himself first, differentiated, and reoriented himself to the company by sitting on its board for several years. Then he struck, quickly and decisively, to change the company. Reoriented, the family business became a global leader in currency security. As Lansing proved himself to be, differentiated leaders are change agents.

The Orientation-Locked Family

Families seek to create a sense of stability. This stability is the foundation that nurtures children and gives them a platform to meet the challenges of each life cycle. In order that all needs of all family members are met, as they grow through the life cycles, the family must adapt. Gradually, grandparents, parents, and aunts and uncles must begin to see their children as emerging adults. They must shift their orientation.

Families get orientation lock when they ignore the changes that are happening in the environment (e.g., their kids getting older) and behavior (e.g., their kids becoming more responsible), all of which run counter to the image or orientation that they seek to protect. Husbands and wives, for instance, create family orientation lock when they don't disagree; they get locked into believing a perfect marriage is a conflict-free marriage. Or orientation lock manifests in the family that pretends their father doesn't have an alcohol problem. Or in the family that pretends that a brother, sister, or cousin isn't performing poorly. Orientation lock in a family business is not only a result of a leader rejecting the data that screams “Do things differently!” It also results when a leader protects it at all costs—even when it harms the family legacy. Families that focus on protecting the business or the image of the family at all costs choose protecting image over confronting reality. This creates orientation lock.

A unified family business allows family members to enter and exit the business. Sometimes a leader must make the tough decision to fire the employee when the family vision and mission are at stake. Often, family members flourish outside of the family business, launching their own businesses, for instance, as Jean Moran's brother did when he parted from LMI Packaging. Flowering of a business sometimes happens when family members are allowed to bloom away from their roots. To love is not to possess but to release.

When family business leaders release family members from the business, it does not mean that they place the business over their siblings. Often, the relationship is released to flourish when leaders have the courage and conviction to set their siblings free from something that is not working for them. Take care of the family, and you will keep the business. Neglect the family and you might lose both.

A Decisive Workforce

When “you push responsibility down,” says Massimo Ferragamo, “you bring profitability up.” A differentiated successor knows how to share and amplify the decision-making process.

Good decisions demonstrate the strength it takes to serve a strong family business over a strong ego. Differentiated leaders make decisions for the good of the family business and take pride in engaging the employees and stakeholders in the decision-making process.

An effective family business energizes and empowers its workforce, its community, and its customers. The authority extends to everybody, as long as they listen to the top-down decisions and know their decisions are traveling up to key decision makers. In this way, the entire organization makes decisions together, with the smaller decisions reflecting the bigger ones.

The most successful leaders create a culture of good decision making, where employees are encouraged and empowered to make suggestions that influence the bigger decisions. Employees who are given genuine decision-making authority can radically increase how much energy and focus they bring to their jobs. The organizational habits and patterns that emerge from employees' independent decisions influence the larger decisions that a leader must make.

The family business has a trust that a nonfamily system doesn't have. This means the leader doesn't need to legislate through bureaucracy. Successors must make it clear to everybody what the end goal is and then let others decide and act. The most successful leaders create a culture of decision making in which employees can make decisions that don't all have to cross the CEO's desk. Quick decision making goes down to the people on the front lines who have immediate access to the data. This is yet another way to protect the organization from orientation lock.

A differentiated leader grasps the implications of decisions that set a long-term course of direction. Input and buy-in from family members, employees, stakeholders, sometimes the customer, and the community are needed. This creates unity around a common goal (the vision). Undifferentiated leaders may fear input because they feel threatened by disagreement or too overconfident in their judgment. Or they may feel so worried about failure that they seek everyone's input. Undifferentiated leaders who seek to please everyone tend to become paralyzed. They realize that it is impossible to make a decision that pleases everyone. In an attempt to maintain their likeability, they do nothing. Seeking the wrong kind of input also slows down a leader in times when a situation demands decisiveness, such as in a crisis.