Don Schwerzler

Family Business Consulting Pioneer
An Interview

Don Schwerzler

Don Schwerzler is a top family business expert and the founder of the Family Business Institute which is headquartered in Atlanta GA.

Organized in the early 80’s, the Family Business Institute became the very first multi-disciplined, full service resource for family-owned businesses.

Schwerzler began studying and advising family business entrepreneurs in 1967 – a career span of more than 40 years! Schwerzler is internationally recognized as an expert in family business dynamics. Schwerzler has been published in many leading business magazines, newspapers and trade magazines.

The web site Family Business Experts launched late in 2001 is the highest-ranked, full-service family business resource web site on the Internet.

Twice the web site has been recognized by the Journal of Accountancy (AICPA) as one of the top 10 web sites on the Internet - one dealing with succession!

Understanding Family Business is published by Family Business Experts as is the Family Business Blog

Complimentary subscriptions to both Understanding Family Business and the Family Business Blog are available on the Family Business Experts web site.

This interview with Don Schwerzler was done by David Jones for Understanding Family Business.

Don Schwerzler

UFB How did you get started as a family business consultant?

Don Schwerzler: After serving in the USAF and then graduating from the University of Wisconsin at Madison, I was recruited by a management consulting firm with offices in Chicago and New York. Our work was focused on developing and implementing productivity improvement strategies for our clients. Our work was grounded on industrial engineering concepts. We were very successful in helping our clients to significantly improve the growth and profitability performance of their businesses.

However, with the family-owned business clients we were never sure as to which generation was the client – the senior generation running the business or the next generation of family who would be running the business in the future. As ideas and strategies were discussed, I could see that there was a wide gap between how the two generations saw the problems and the opportunities of the business.

UFB Were the differences minor or significant?

Don Schwerzler: They could be both – but what caught my attention was how emotional the debate could become between generations and amongst members of each generation. Let’s say you have two brothers who had taken over a business started by their dad. The two brothers are equal owners of the business and each brother has adult children working in the business as key members of the management team. In this instance you are going to have issues between the brothers about who is making the bigger contribution to the business – and each of the brothers is likely to want their kids to take over the business. Amongst the cousins, similar debates will be taking place – in fact some times these differences can develop in family feuds that can Balkanize the management team of the business.

These differences helped me, as a family business consultant, to better understand how family businesses differ from other businesses. Most businesses follow the models that are taught in business schools at colleges and universities – that you have rational problems and rational solutions. However, family businesses tend to have rational problems and EMOTIONAL solutions. This was a major conceptual breakthrough – as it allowed me to understand that decisions in family businesses are not necessarily made for what is best for the business, but what might be in the best interest of the family or of a particular member of the family.

UFB Interesting juxtaposition – rational versus emotional!

Don Schwerzler: It gets even more complex. As part of our "triage" process we must ascertain if we are dealing with a “family first business" or a “business first family" Every problem or issue a family business will address will have dramatically different solutions – depending on which of those models best describes their family’s business. That is why our family business assessment process is so vital.

UFB What is the Family Business Assessment?

Don Schwerzler: It is a two or three day meeting where we do confidential one-on-one interviews with the family members, key non-family executives and professional advisors to the business. It is where we gain an understanding of how to best develop and manage the succession process. We are also identifying the operational strengths and the weaknesses of the business. By gaining an understanding of all of the individual points of view – we can facilitate reasonable resolutions to different points of view. We position ourselves as the "Ombudsman" for the business – to make sure that in the succession process the family does not kill the goose that is laying the golden eggs. It is an interesting process and underscores the observation made by Zig Zigler, "You can have anything in life you want, if you will just help other people get what they want."

UFB "Family-owned business" sounds like an assortment of "mom and pop" businesses?

Don Schwerzler: That is an unfair characterization. It is estimated that family-owned businesses represent more than 60% of the Gross Domestic Product and they produce most of the new jobs in our economy. Not all family businesses are small businesses – about a quarter of the Fortune 500 companies are family-owned or controlled businesses. Some of the most difficult problems impact the family business when one generation is getting ready to hand over the reins to the next generation – planning for the succession is crucial to the survivability of the family business.

UFB How important is succession planning?

Don Schwerzler: Overall the statistics are not very good. Only about 30% of family businesses successfully transition to the second generation and only about 12 % to the third generation. The problem is two fold. Developing a formal succession plan is not easy and is time consuming. And implementation of the succession plan and management of the succession process is a real minefield of problems. In fact, the logo of the Family Business Institute is three interconnected circles that represent the major problem areas that must be engaged at succession – the family issues, the business management issues and the ownership issues. Problems and issues in any one of these spheres of influence can derail the succession process.

UFB Why is succession planning so difficult for family businesses?

Don Schwerzler: Family businesses evolve from the founder generation where the business is run by entrepreneurial hard work and the management style is often more "intuitive" than "planful". As the business grows, the problems impacting the business become more complex and more sophisticated. It is essential for the management style of business to become more professional in planning and execution – moving away from where the boss is sticking his/her head out of the door of their office and hollering down the hall to get things done! As a family business consultant, I facilitate these changes - as part of our succession management process.

UFB So by doing a better job of professionalizing the management of the business, the family business will avoid the minefield of problems at succession time?

Don Schwerzler: I wish it were that easy. In many cases, the time and effort family businesses put into planning is not worthwhile – the plans do not work. At the Family Business Institute, we coined a phrase to explain the main planning problem for family businesses – it is called the "Dualism Dynamic". What we are talking about is the relationship between the family and the businesses. For example, if a family business is going to create a mission statement for the business, we suggest they FIRST develop a mission statement for the family. If they are going to develop a strategic plan for the business, FIRST develop a strategic plan for the family. In other words, the planning for the family should be driving the planning for the business – if you want the planning for the business to be effective.

UFB Business Week did a pod cast about your Family Business Innovation Program – what is that all about?

Don Schwerzler: For years, the mantra for many family businesses was simple: "If it ain’t broke, don't fix it." The first time I heard someone challenge that philosophy was the then Chairman of Coca-Cola, Roberto Goizueta. Twenty-five years ago Goizueta opined that his core business philosophy was "If it ain’t broke, break it!" That should be the mantra for family business innovation – "if it ain’t broke, break it!"

Succession time is an extremely important opportunity for family business innovation. The focus of the succession process should be more than “transgenerational" it should be “transformational". “Succession time is an opportune time to work on creative changes and new ideas for the family’s business. It helps to regenerate and reinvigorate the family business with a passion that is associated with positive and healthy change."

UFB What are the implications for the “family" of a family-owned business?

Don Schwerzler: Just as important as it is for the professionalization of the business management process, it is crucial for the family’s communication system to become more formalized. We do that using family business meetings and retreats to sort out and resolve issues within the family. This is a time for the entire family to open up new channels of communication. This is especially important when some of the kids are involved in the business and some are not - yet both groups have “their" sense of the importance of the legacy of the family’s business.

UFB Giving/selling shares of the business to the kids can help keep peace in the family?

Don Schwerzler: You have just put your finger on one of the most difficult issues a family business owner must confront – how to be fair and equal to all of your children. Based on 40 years of working with family businesses, I would recommend that shares in the business only go to the kids who are working full time in the business. There are other ways estate equalization can be reached than by giving stock to kids not involved in the business.

With the kids receiving stock in the company – a buy-sell agreement should be in place before any stock is exchanged. The buy-sell agreement will address the kinds of problems that can happen – early death, divorce, drug or alcohol abuse, etc,. and it can lay out a formula for a stock holder to leave the business and feel he/she had a fair settlement.

UFB How do you know what a family business is worth?

Don Schwerzler: The smartest strategy is to have a formal valuation done by a professional valuation firm. Every industry has “thumbnail" formulas for suggesting the value of a business - and most are wrong, most of the time. We recommend a formal valuation be done every 2-3 years. That information is valuable not only for tax and estate planning – but for measuring the success of the strategic plan and even as a compensation guide or benchmark for key non-family executives.

UFB As a pioneer in the family business consulting profession – what are the biggest changes you have seen?

Don Schwerzler: Clearly the changes in how birth order and gender are considered in the succession process. Over the past 25 years the old “prima genitor" (oldest son inherits the business) has changed to where successors are being selected because they have an education and are competent to run the business. Over the past 12 years, selection of the successor has become more gender neutral. Daughters and sons are seen as equal competitors for the top job. Moreover, in our work with family businesses, we know that "succession should not a spectator sport" and we recommend the role of the NEXTERS include "succession" as part of their job responsibilities in the succession management process.

UFB Your work certainly sounds interesting!

Don Schwerzler: My work as a family business advisor has enabled me to work with hundreds of family businesses - one thing I know for sure – every family business has its own set of unique and complex issues that confront and confuse the family. Succession management is tough work – but assisting a family business resolve and/or avoid the mistakes that can wreck the business and/or ruin the family relationships, makes all the work worthwhile. It is very gratifying work and I am pleased with all of the successes - and that I have made so many very good friends along the way.


Our One-on-one with the World Leading Expert on Family-owned Businesses, Don Schwerzler

Contributed by David Tang, Founder & CEO Flevy

Don Schwerzler is arguably a world-leading expert on family business. In fact, he has been working and advising in this field since 1967, a track record of almost half a century. Don has been published in many leading business magazines, newspapers, and trade magazines. He is also the founder of the Family Business Institute and runs

Recently, we had the distinct pleasure of picking Mr. Schwerzler’s brain about this topic of family business. Read on for our interview with family business subject matter expert, Don Schwerzler.

What are some typical growth challenges that arise in family-owned businesses?

The scarcity of resources–specifically, time, and money are at the top of my list of growth challenges for small to medium sized family businesses.

Next challenge would be the lack of planning and the lack of infrastructure, because that creates a glass ceiling that impedes and constricts growing the business; and sustaining the growth of the family’s business. Next on the list of challenges would be family issues like family feuds that suck the positive energy out of the family business. Third on my list of challenges would be not having a formal (written) succession plan that the family has agreed to. Fourth would be the business owner not dealing with one of the really tough issues – how to be fair and equal to all of the kids with doing their estate planning. Lastly would be not having a family business advisory board that provides a safety net for both the family and the family business should a catastrophic event occur, such as the incapacitation or the unplanned death of the family business owner.

What are some issues inherent in family businesses that other organizations don’t face?

Our logo has three interconnected circles that represent the three major “systems” that are at play in a family business: the family system; the management system; and the ownership system. For a family business to be successful, all three of these centers of influence have to be connected and working well. The problem for family businesses is that an issue/problem in one of these “systems” will cascade into one/all of the “systems.”

For example, the business owner getting a divorce could affect all three “systems.” A son or daughter who is part of the management team and who has an alcohol or drug addiction problem would impact the family system and the management system, but, if they are not yet a shareholder in the business, the ownership system. Furthermore, these kinds of problems will typically impact or even stall the succession planning and the succession management process.

What are some important considerations for a family business when selecting a member for its board?

If we are talking about a family business advisory board, the most important consideration is in selecting a candidate who resonates with the values of the family. My next recommendation is selecting a candidate who is not connected with the family and who is not connected with the family’s business.

I have helped to create more than 70 family business advisory boards–helping to recruit and evaluate potential candidates–and then coaching the family members involved in the family business to learn how to prepare for and accept the advice from a board member.

What are the most common problems that your clients seek advisory in?

Probably about 70% of my clients come to me because of family problems that have been ongoing for a period of time and the person who reaches out to me understands that they are not going to solve the problem by trying to ignore it. Family disputes that are not addressed and resolved are like a cancer that will wreck the business and destroy the family relationships.

30% of my clients are family businesses that want to avoid family problems–who want to make sure that the “energy” of the family’s business is not dissipated or distracted by family feuds and other types of family related issues. The point here is that almost all of the problems that impact family businesses are avoidable. They just need a map to help navigate the minefield of issues that impact family-owned businesses.

Does a family business have any competitive disadvantage when competing against a public or non-family business?

Just the opposite is true. Family businesses can have a competitive advantage when competing for business.

The problem is that so many family businesses “hide in plain sight” because they do a poor job of publishing and marketing those values of the family that drive the decision making process for the business. Customers and potential customers understand that they can expect a higher level of service when the owner’s name is on the door!

Yet, many family businesses do not talk about the values of the business on their web site and in their marketing peripherals–a wasted opportunity in my opinion.

What are some strategies to prevent family issues from affecting the business?

Improving communications within the family business and amongst family members (both those who are involved in the business as well as those family members who are not involved in the business). Professionalizing the management style of the business and formalizing the communication system for the family can make a significant difference. Having formal family business meetings helps keep the channels of communication open and productive. Having a family business expert facilitate the family meetings and the family retreats can make sure that the “tough emotional issues” get addressed and resolved.

Can you tell us more about the Atlanta-based Family Business Institute and the web organization

An early pioneer in the field of family business consulting, I began studying and advising family business entrepreneurs in 1967–a career span of more than 40 years. Over the years, I have perfected a process for dealing with the unique and complex issues that impact family businesses (especially related to the problems associated with managing the succession process) that have proven highly successful, simple and effective.

In the early 80s, I organized the Family Business Institute, which is based in Atlanta, the very first multi-disciplined consulting firm exclusively serving family-owned and closely-held businesses. We are responsible for developing many of the strategies used by successful family businesses.

In the mid 80s, I became the founding sponsor of the first college-based family business program in the USA. Today, there are more than 300 family business programs at colleges and universities across the US–and many more worldwide.

Late in 2001, we began work on our web site–a work still in process! The site does not have any flash or gimmicks, just a lot of great content. Today, because it is a content-rich site, it is the highest-ranked, full-service family business resource site on the Internet. Last month, we registered more than 100,000 page views and each month we host visitors from more than 100 different countries.

Our web site has been twice recognized by the Journal of Accountancy (published by the American Institute of CPAs) as one of the top 10 web sites on the Internet dealing with succession.

The vast majority of businesses around the world are family-owned businesses. These aren’t limited to mom and pop shops. Some of the world’s largest organizations, such as Walmart, Samsung, Tata, and Foxconn are family businesses. You can learn more about Don Schwerzler and family business on his website:


If you would like to contact Don Schwerzler about an issue or problem you are having with your family business – use the Ask The Expert Form and Don will respond to your question, personally.

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