How do you go about the very complicated business of taking a family that has built a significant enterprise and transferring the ownership and management to the new generation? Leonard A. Lauder, Chairman Emeritus of The Estée Lauder Companies Inc. and Mariano Puig, former President of Puig shared lessons about their respective family businesses and their personal careers during the first IESE Family Business Forum held in New York.
Ivan Lansberg of Lansberg, Gersick & Associates, an expert on family businesses, moderated the conversation of these two iconic global business leaders who each saw enormous expansion of their firms during their tenures as heads of their respective firms.
The power of smart people
"I am a New Yorker, born in New York, and my parents were born in New York," began Leonard A. Lauder.
"In 1954, I realized – our company was a tiny company then doing about $250,000 worth of sales per year – that I would learn very little from my parents if I simply stayed around. So I enlisted in the U.S. Navy for a total of eight years, three and half years on active duty and five years in the reserve. I applied for officers’ candidates’ school and was accepted. Why? Because that’s where I thought I would get real leadership training. And that was probably the single best decision that I made."
"My job in the Navy meant I was surrounded by people who were better than me," explains Lauder. "I realized there were a lot people who were better than me and they came from places I had never even heard of, like Chicago," which drew laughs from the room full of family business owners and executives.
"Surround yourself with smart people," Lauder advised the audience.
Good cop, bad cop
While commissioned on two Navy ships, Lauder learned important lessons: "In each ship….there was a captain of the ship who was the responsible person. He was the nice guy. And there was the executive officer…he was the mean guy," said Lauder. "The captain of the ship is supposed to be the leader, and the exec is supposed to be the tough guy, the mean guy. …that was probably my best lesson in leadership. Good cop, bad cop."
Applied to the business field, Lauder thinks there’s a need for an enforcer. "I loved everyone…and I had a COO who was the tough guy," he said.
"I had one guy be the one to run the numbers, and I was the one who did the branding overall, and that worked…When you have someone who is the chairman, president and CEO – I see that in many corporations – that doesn’t work for me…I prefer the two-tiered approach."
Family as a value for business
Mariano Puig, an alumnus of IESE as well as a member of IESE’s Board, did not agree entirely with Lauder’s good cop, bad cop approach to family business leadership.
"[The CEO] can be tough and a nice guy together. It’s not easy, but this can be done," said Puig.
"If you are working in a company that is either a family business or a family in business as we describe it, the family has to bring something to the table that a non-family organization doesn’t. What we bring to the table is love, security – everything that makes a family company different from a big, non-family corporation," said Lauder.
Both retired, Puig and Lauder described their lives now as busier than ever. Though no longer involved in the day-to-day management of The Estée Lauder Companies Inc., Lauder stays very connected and supportive of the 35,000-plus employee firm his parents founded and describes his current role as TIC: Teacher in Chief.
"You communicate the culture of your firm through your example," said Puig.