Developing Gut Instincts: Learning through Action

Mike Hamra traveled the bumpy road of success and failure during his early career in Washington, DC—and wasn't derailed. When he was fired, he did not quit. He learned.

Leaders like Hamra develop an instinct to lead from the painful but rewarding process of trying out new things, making mistakes, and learning from them. Experience—not only gained through action but guided by personal values—leads to improved intuition. When he got his paycheck from the FCC, Mike Hamra learned the value of accountability in a political culture that did not reinforce it. Good leaders see what others often fail to learn—what it is they value. Such self-awareness and subsequent self-confidence can help successors find the lesson in their failures rather than seeking sources for blame, as is our natural tendency.

Mike had proved his strength as a leader outside of the business, but he still needed to gain credibility within Hamra Enterprises. When Mike joined his father's company, Sam Hamra had just gotten into Panera Bread in the Chicago market. He asked Mike to help with the development of the Chicago market and a new market to be developed in Boston. When Mike saw that Hamra's first partner in Boston was mismanaging the operation, Mike fired him. A lack of accountability, accompanied by a tolerance of mediocrity, was unacceptable.

One of the marks of a leader is the ability to make hard decisions, like firing marginal employees. Letting go of incompetent employees in key positions, Mike trusted his gut instincts. His cumulative work experience, including being fired from the FCC job, helped to understand the importance of accountability and to develop the self-confidence to make difficult judgment calls on a company's most valuable resource: its employees. Fire mediocrity; hire competency.

The only way a leader can develop the instinct to make the tough (and right) calls is through the painful but instructive process of taking action. To engage the world and learn from the experience involves taking action and making mistakes. These are often painful. A child learns that the stove is dangerous by touching it when it's hot. Pain, born from experience, is a good data source. The accumulated lessons form a leader's intuition. This is the gut feeling that he or she learns to pay attention to and to trust.

The creation and formation of the gut of a leader is shaped by learning that can only come through taking action, the trauma of mistakes, and the layers of accumulated experience that leads to expertise. The more experiences, the greater the leader's awareness of his strengths that helps him trust his instincts. At the same time, they are conscious that their intuition can sometimes produce biases, and they use self-awareness to pair their gut with the data to make the right decisions. Self-awareness demands pushing against the world, finding out what works, taking chances, and being accountable for the outcome.

Hamra's values guided his gut—and his decisiveness.

The Hard Road to Leadership

The leaders we have studied thus far emerged from the shadows of the family mythology to write their own stories, with themselves as the owners of the narrative. To do so, they had to establish their own identity apart from their parents. This is differentiation, which I spoke about in Chapter 2.

Successors falter when dysfunctional family patterns make it difficult to pursue differentiation. These include mental illness, addictions, family trauma, and personality disorders. Dealing with these may require professional intervention. All the qualities we have looked at so far in emerging successors of family businesses point to an ability to deal with family dysfunction and integrate family values and tradition with their own values and convictions.

A family business becomes stronger through the generations as children learn to leave their parents without leaving them behind. Dealing with the family's hard stuff so the stuff of the family business can be dealt with. Successors must develop the strength to perpetuate the family legacy while separating from the family (and its dysfunction) so they can lead the business. In a family business, this requires a shift in the relationship, from doing what their parents want, to start doing what they think is right for the family and the business. And understanding that what they want is an extension of who they are, and how they can uniquely contribute to the world. This revelation rarely manifests as a magical “aha” moment, but through a process of failing, learning through action, trusting their gut, learning what one likes and dislikes, and continually assessing the gap between goals and outcomes.

This is how a successor develops intuition, to trust what's right. Living in the shadow of the myth, successors are told what's right or they pursue their interpretation of what their parents think is right. But credibility is earned by actually experiencing what is right, rather than taking someone's word for it, and by building a track record of success through action. Parents have a set of experiences that have led to their gut instinct about what to do in certain situations. Because of the era in which they lived, their experiences and failures, their personality, their economic status—this gut instinct worked for them. But successors must come to realize that they are different persons, in a different time, with a different context.

Many successors are so mired in the past they can't get to where they want to go. Successors must develop their own gut instinct. When I counsel family businesses, I remind them that they are always in this constant equation of, “What do I need to hold onto about the past and nurture, and use as meaning-making and a foundation, and what do I need to let go of and change to move forward?” You hone your decision-making capacity through action.

No Mistakes; Just Learning

Despite the lasting stereotypes of the Silver Spoon Club, the vast majority of children of successful and wealthy parents tend to succeed, whatever they choose to do. But the harder road to success might be committing to the family business. For some, that commitment will demand a sacrifice of self: an abandonment of professional and (sometimes) personal pursuits. It is a vow of loyalty, a covenant to the ongoing success of the family (not merely the business). Bella Hoare of C. Hoare & Co. gives this piece of advice: “Don't join until you're damn sure you want to stay there. It's worse than getting married and then getting divorced. Lots of people get divorced; it doesn't mean you're a bad person. But leaving your family business makes you almost unemployable. So don't slide into working there by mistake. Make a conscious decision.”

Erma Bombeck once referred to “The family ties that bind and gag.” In family business, to bind the family, rather than gagging it, means that children have to gain a measure of independence from their family of origin. As we have discussed, they have to become their own persons. Successors like Bella Hoare and Mike Hamra achieved success within the family only after assuring they were ready to do so. They developed their leadership and business acumen far away from their families. This is when trial and error taught them what they liked, were skilled at, and would most naturally succeed at.

Living in the shadow of the myth makes it more difficult for successors to find their identity. Their identity tends to be inseparable from the business and, therefore, to the myth of the founder or predecessor. They come into leadership not because of experience but because of name. As Dick DeVos said, “Sometimes people are born on third base and the problem is they think they hit a triple.”

Credibility is hitting a triple, which demands practice, persistence through the slumps, and tweaking one's form. Successors in family businesses must get to the point where they have developed the internal credibility to say to their predecessors, “I can be successful with or without you, and I choose to be successful with you.”

That's not to say that successors have to leave to lead. Yes, the general rule is that it's easier to differentiate if you're not ingrained in the everyday life of your family. But the myth is that outside work experience is the only way to differentiate. There are exceptions all the time. It's not a death knell if a leader doesn't get outside work experiences. There are those whose passion overcomes the obstacles of differentiation within the context of the family business. They figure out a way to fill in the gaps of inexperience. In the trenches, they try out multiple jobs in the organization; they seek a secondary education, like an MBA; they find a mentor; they sign on for executive coaching; or they join a professional network. Simply, they find the tools to develop while remaining open to the lessons learned on the job.

This was the case for Jean Moran, who says that she “pretty much went to school within the business.” Jean transformed her father's company, Label Makers Inc., into LMI Packaging Solutions, a leader in the flexible packaging industry. Jean's father, Chester Sykes, started the company in the back of a Chicago butcher shop after he was laid off for secretly building a press in a garage. Chester would do anything to have his own company. His mission statement, “a place where his employees will always have a voice,” was a reaction to the company he had worked for, whose ownership muzzled its employees.

Chester was self-taught, “a genius who didn't finish high school and could fix anything.” Of her own bachelor's degree in recreation Jean says, “Everybody gives their condolences, until I tell them that the entire curriculum was based on Murphy's law, that if anything can go wrong it will. Like, “You're planning a picnic for 3,000 kids, and it rains. What do you do?” It's just like business.” Jean shares her father's propensity to take away vital lessons from every learning experience, especially when things go wrong. “There are no mistakes,” she says, “there's just learning.”

Jean tested her philosophy early on, when she was working part-time for the company, and made one of her biggest “non-mistakes,” a perfect example of Murphy's law in action. “I didn't know anything,” she says, “and a supplier calls me and says, ‘The price is going up on your material, but if you order today, you'll save $30,000; if you wait until the day we are scheduled to deliver, it will cost you $30,000.’ This was a no-brainer, I thought. Send the material. The next day five semi-trucks show up on our little neighborhood street, blocking all the traffic, including me in my car, and I say, ‘What the hell is going on!’”

Not only was she clueless about what was going on, she was also clueless that she was responsible. She had no place for the material and no cash to fund it. That's the day she learned her first of many lessons from Professor Failure: “When you screw up, the best thing to do is just keep going.” Strong leaders are good learners who get top grades in the subject of failure. When a long line of trucks arrived with the material, there was no place to put the trucks or the materials. Jean had to get people to move their cars in the parking lot, and shift materials in the warehouse and the office to make room for all this material. Jean said, “We had skids of material everywhere, for months. I cringe in thinking about it again.”

One successor (let's call him John) tells the story of the challenge of dealing with failure. A member of his senior leadership team had just made a mistake that had cost the company $3 million. John called this individual into his office and asked him if he knew why he was there. The individual said, “You're going to fire me.” To the man's surprise, John said, “I just gave you a $3 million education. Why would I fire you? And let someone else take advantage of that learning?”

Optimistic leaders like Jean Moran understand that when they fail, they have also learned something, and they view obstacles as opportunities to make corrections or to innovate. They overcome failure and build self-esteem by persevering through repeated attempts at getting it right. This perseverance brings their actual selves into alignment with their ideal selves.

Jean's ascent to leadership is a case study of learning by trial and error, starting with what she didn't know, and persevering until she had it down. “My dad and I were very close,” Jean says. “I would have done anything for him, and when I took over the business, my dad knew something that I didn't yet know: there was no way I was going to let this thing fail.”

Jean's learning curve was not steep so much as it was relentless and steady. Her trajectory looks like a primer in perseverance: continuing education, a CPA degree, leadership coaching, a leadership development program run by Vistage, mentors, family counseling, asking for help from anyone who knew more than she did. It also included taking calculated risks, like losing big clients to gain more profitable ones.

Supporting Failure

Children begin to get a sense of their capacities and limitations as they start to explore their world and test themselves against it. Some personalities gravitate to challenging environments—difficult and demanding situations that call for risk; they are willing to learn by failing at something that exceeds their capacity. These are the kids who always want more. Children who are risk takers want to run before they can walk. They thrive on the challenge, and eventually rise to it, even if they break a few bones on the way.

With children who may not be natural risk takers, parents may encourage them to take risks by, simply, not demonizing their children's failure. In wealthy and successful families, children who rise to leadership learn early on that risk can bring reward. Their parents encourage the process by giving successors opportunity for failure, as long as the failure doesn't threaten to sink the ship. In these families, failure is not a deterrent.

I have explored the mythologies surrounding family success, and how difficult it is for successors to emerge from the shadow of legendary predecessors. But some families also perpetuate a mythology of failure, a mindset that inhibits risk. Nick Perrino carried such a mythology into his business. When he told his son Joe, “With your stupid ideas, six months after I die you're going to blow up this business,” that was fear talking. Joe Perrino's ideas were neither stupid nor would they blow up the business. In fact, they grew Home Run Inn exponentially.

Fear drives a mythology of failure because it is a perception based on prior experience that precludes the possibility of success. Past failure may mean a family filters what's new through the lens of fear. Nick Perrino interpreted Joe's innovation as an impending apocalypse because Nick had experienced his world falling apart. As a result, his approach was always cautious: “Let's protect ourselves.” Joe, however, saw opportunity, emerged from that fear-based mythology, and wrote a new story of success.

Some successors use reflection to push through the fear. Others need reinforcement from the community that they aren't getting from their parents or predecessor. One would think that the barrage of negativity from his father would have caused Joe to shy away from risk. No doubt, Joe's naturally more positive personality contributed to decisions. But Joe also received positive feedback from his community, who praised him for his leadership on the baseball diamond. A successor gains an accurate sense of who he or she is through self-reflection, parental reinforcement, and environmental factors. When failure becomes shameful and stigmatized, the culture of the system begins to discourage measured risk taking that is important to the growth and development of the company.

When feedback mechanisms fail, a mythology of failure may be internalized. The successor is more prone to perceive him- or herself as a failure. One job of parenting is to prevent children from identifying themselves by their mistakes. Instead, they must encourage (even celebrate) failure, because this is how strength is built. When parents encourage their children to explore and experiment, they are also preparing children to be comfortable with failure. Failure is not only an option; it is a likely outcome. When children are free to blaze trails and let ideas fly, failure can be one of the guideposts along the way to success. We need to let successors experience failures, but failures that won't sink the ship.

For parents to help successors fail well, they need to help their children identify their mistakes, and understand them, and to move beyond a culture of blame and shame, developing the understanding that failure happens.¹

Bob Vermeer, chairman emeritus of Vermeer Corporation, talked about how his father helped him deal with failure. Bob shared, “The one thing that I always appreciated [about my dad] is that he didn't seem to hold a grudge [when you failed]. He always looked at it and asked what you learned from the experience and moved on. It needed to be acknowledged, but then you moved on.”

Failure can be a badge of honor instead of a mark of shame, like a scar that tells a story of a daring feat that didn't quite go right. But there was the courageous attempt. A parent supports the effort, encouraging children to continue to stay engaged with the world to learn from the actions that they have taken. Shame discourages engagement. Shame promotes withdrawal: to pull up, pull back, to avoid failure. The goal becomes to not fail instead of trying to achieve a goal.

When Jean Moran's father told his daughter to figure it out, he was also giving her the permission to make mistakes. What Jean internalized was the audacious idea that there are no mistakes, only learning. Successors learn by taking action through the encouragement of their parents. Richard Branson said in an interview that his mom had no qualms about dropping him off three miles from home and saying, “Find your way back.” He said in the interview, “I made it home safe and sound, but that wasn't the only time Mum put me to the test. When I was 12, she had me cycle 50 miles to a relative's house all by myself.… Going through with these feats was anything but easy, but it forced me to experience the world on my own.”² What some would say bordered on bad parenting, he interpreted as extreme confidence in his ability to do what he needed to do. It set him up later in life to possess extreme confidence.

Exposure to failure also encourages the development of self-awareness, a leadership trait that I have stressed throughout this book. Parents who expose their children to failure do not say to them, “Suck it up; it builds character.” Instead, they will ask their kids, “What did you learn?” So the children can reflect on what the failure has taught them. When I asked one CEO, “What did your parents do that made you successful?” she said, “Whenever I failed, my dad said, ‘Good job! What did you learn?’” It's about creating a context for failure in the midst of a mythology of success. If failure is not allowed, if success is the only reality, children will find it difficult to step out of the shadow of their legendary parents. What they will internalize is that they can't possibly live up to the legends that preceded them.

Obstacle Courses

Parents who teach their children to deal with failure do more than just passively allow their kids free run of the farm or the forest. They also place thoughtful challenges (obstacles) in their pathway. Just as brain teasers build the cerebral cortex, obstacle courses build tenacity. Playgrounds can be set up as obstacle courses for children. Play can present great opportunity for children to learn limitations by pushing their boundaries. Hanna Rosin's article “The Overprotected Kid” explores the merits of a new adventure playground in England, called the Land.³ Daring conventional wisdom about play (and the peace of parents), the Land looks more like a dump than a schoolyard playground. There isn't a child-safe plastic slide, swing, or tic-tac-toe board in sight. Instead, there's a frayed rope that swings a child over a creek; a barrel in which children can create a fire; rough-edged pallets for building; a pile of tires for climbing; and discarded mattresses upon which to bounce. Rosin writes: “The idea was that kids should face what to them seems like ‘really dangerous risks’ and then conquer them alone. That…is what builds self-confidence and courage.”

When risk, pain, and struggle are scrubbed from life, the chance to discover meaning and to overcome challenges that create self-esteem is lost. It's that process of meeting challenges through which children develop internal credibility.

Consistency is the hallmark of this kind of challenging parenting. Children who are challenged one day and indulged the next learn only to try to work the system to get reward and avoid punishment. They may not internalize the value of their actions until they are allowed to live with the consequences. Parents in wealthy families often opt out of the task of consistently challenging their children and holding them accountabile, preferring instead the way of indulgence. A parent who struggles to put food on the table can easily say, “No, you can't have a PlayStation.” A wealthy parent has the means to do both, and must decide whether or not to say no. This is what can help children understand the difference between need and want.

The Family Launching Pad: Go Out and Get It

Scientists and engineers do not build a rocket to admire it, as it sits on the launching pad. Mission control's most exciting moment is the launch sequence. The family is ground zero for a successor's development and growth into a leader. All the family resources are focused on that defining moment when the girders fall away and the child launches.

In this new phase of life, it's critical that the emerging leader develop his or her own support system. Most critical is the feedback loop and the establishment of accountability. These lead to the emotional intelligence and stability that a successor will need to guide and stabilize a business through inevitable transition and change.

A self-appointed accountability system is especially important for children of wealth. Those with a wealth of resources, money, intelligence, and tremendous capacity have fewer natural obstacles. They travel life's highways with fewer traffic jams. They often can become blind to their own faults. No matter how good a leader is, it's peers who decide how far he or she goes. The emerging leader learns to check his or her emotions against reality, coming to terms with truth that people have baggage.