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Forcing Succession: An Ultimatum at Alberto-Culver

At 74, the company’s founder, chairman and CEO, seemed tired. A legend in his industry, he’d become set in his ways. Marketing suffered. Acquisition opportunities were passed up. Stagnation set in. Unwillingness to make compensation competitive with other companies caused the company’s best talent to move to greener pastures.

Having worked in the company for nearly 18 years, the founder’s daughter and son-in-law watched the situation with growing frustration, said Business Week in a recent article (April 19, 1999). In their early 40s, the couple faced a dilemma not uncommon for the children of successful entrepreneurs: Do we wait respectfully until Dad passes from the scene, confront him with an ultimatum, or just go our own way? They chose confrontation, and marched into their father’s office. The Demand? Hand over the office of CEO to the son-in-law and remain as chairman. Also, add three outsiders to the board. As Dad saw it, his only alternative was to sell the business, so he reluctantly stepped aside.

While this scenario could have been played out at many family businesses, this one was toiletries giant Alberto-Culver. Carol and Howard Bernick confronted her Dad, Leonard Lavin. Carol, an outstanding marketer, has created such products as Static Guard, Mrs. Dash salt substitute, and Molly McButter a low-calorie butter flavor. Howard is the financial brains of the business. Married in 1976, they have three children. The family owns 41% of the publicly-traded company.

Once empowered, the Bernicks started changing things, including installing modern financial controls, revamping compensation, reinvigorating marketing, and standing the company’s patriarchal top-down management culture on its head. The results include employee turnover cut in half, attracting executives from Procter & Gamble, Kraft Foods and Frito-Lay rather than losing people to them, a reinvigorated corporate culture, and substantially improved bottom line performance. In the five years since the Bernicks took over, profits have improved by 85% to $141 million on a 50% revenue growth to $1.8 billion.

Perhaps Business Week’s article headline said it best: “Daughter Knows Best.” The article contains valuable information for business owning families (especially for second generation successors who follow tremendously successful founders), and the Bernicks provide an excellent example of how to manage family business culture.

 

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