Thursday, April 26, 2012

Are Disney's studios "just mickey mouse?"

The New York Times recently reported that Rich Ross, the head of the studio division of Walt Disney World,  stepped down under pressure. His boss, Robert Igar the CEO, is expected to have trouble filling the job. One reason is that the heads of the studios themselves, John Lasseter of Pixar, Kevin Feigel of Marvel and Sean Bailey of live-action Disney movies, are very independent and require little supervision. Certainly the first two heads represent brands in their own right. Moreover, the Times notes that Igar himself exercised close supervision of the studios. For example, “He visits Pixar’s headquarters outside of San Francisco several times a month, and discusses scripts with important Disney partners like the producer Joe Roth, who is working on “Oz.” Why should someone take a job squeezed between two power centers, the CEO and the studio heads?

One way to think of this situation is to consider it as an example of a disordered hierarchy with too many levels. Many decades ago, Elliot Jaques formulated the novel and powerful idea that hierarchies should have only the requisite number of levels.  The head of each level was responsible for planning over a particular time horizon. For example, a division chief might be responsible for plans that unfold over five years, while the CEO might be accountable to the board for plans that unfold over fifteen. Should two executives in adjoining hierarchical levels work within the same planning horizon, they were bound to get in each other’s way.  The result would be interpersonal conflict and organizational politics.

Jaques' view of what he called the “requisite organization” was quite strict. Organizational politics and interpersonal tensions resulted primarily from a disordered hierarchy. To eliminate tension and conflict he argued, don’t improve communication, don’t promote collaboration, don’t teach negotiation, instead, get the structure right! According to this way of thinking Ross should have been in a staff role, responsible for marketing the films and scheduling their release dates, without having any direct supervisory authority over the studio heads

One issue which Jaques did not convincingly address was why corporate leaders would the get the structure wrong. Was it simply a matter of ignorance or was the error motivated?

The Times article is suggestive here. The studios are less relevant to Walt Disney than then were some decades ago, accounting now for only 15% of the firm’s revenues. But is Walt Disney prepared to abandon its identity as a company whose fortunes and viability once depended on the vividness  and appeal of the fictional characters its films created? Moreover, even today, film characters, as the Times notes, can  fuel the sale of Disney’s  merchandise and the marketing of its theme parks.  One hypothesis is that Disney, and Igar as its CEO,  are betwixt and between, unsure which is the dog and which is the tail. Are films the crown jewels propelling sales, or are they incidental to the Disney enterprise as a vast entertainment company. If the former then Igar should supervise them directly, if the latter than he should not.

But why would Igar be stuck in this betwixt and between position? One hypothesis is that it takes considerable psychological work to let go of Disney’s older identity. After all, its very name is the name of  one of greatest film directors and producers in American history. He still casts a shadow, though he has been dead for 46 years.

Psychologists speak of the “work of mourning.”  Sometimes, to let go of a once treasured relationship which is no longer meaningful, one is led to discount it, to identify and dwell upon its limitations. This may happen when a protegee separates from a mentor, or an adult child, from a parent.  But sustaining  feelings of reverence and disregard at the same time is itself difficult, and  as psychoanalysis suggests, anxiety provoking.

There is an old phrase in American English, “It is just mickey mouse,” which is a way of announcing that something is trivial. Has the film division, which generates only 15% of the firm’s revenue become “just mickey mouse,” or more charitably, simply one instrument among many for generating profit?  If so can this reality be acknowledged?

Wednesday, April 25, 2012

Family business and the fantasy of continuity

The New York Times recently carried a story about a feud among family members who are heirs to the Samsung fortune. The current CEO, Lee Kun-hee was appointed head by his father, just as the latter was about to undergo surgery for cancer. Yet Lee Kun-hee was the third son. The eldest was passed over. The Times quotes Mr. Lee, reflecting on that moment, “ I still cannot forget the shock.” Now the elder brother, who calls Mr. Lee “childish and greedy,” is suing, along with his sister, for a greater share of the family fortune. Mr. Lee swears, “I won’t give them a single penny. I will fight them to the end going all the way to the Supreme Court and even to the Constitutional court if I have to.”

People who work with family firms, (my colleague, Nancy Drozdow, is a leader in the field), are familiar with the feuds that can divide siblings and generations. The potent mix of family and money accentuates conflict. Siblings, parents and children who are part of, or share in the wealth of a family business cannot simply treat each other instrumentally, and negotiate their differences, much as they would with shareholders of a publicly held company. Their differences are bound up with feelings of obligation, sacrifice, fairness, self-regard, loyalty, love, and of course hate. Family business relatives can become “intimate enemies.”

In light of the emotional burdens and costs a family business can impose why does it persist as such a vital form of capitalist enterprise, even into the twenty first century? It has of course much strength. When the family coheres, the blood, as they say, “is thicker than water.” Feelings of loyalty can trump family members’ temptations to pursue their own self-interest. So when the family firm works, it stands undivided, unlike many other corporations or institutions.

But in this blog I want to point to another dimension that gives the family firm its staying power. It carries and underlines the idea of the “continuity” across the generations, a feeling and experience not available to many families, where children go their own way, with career choices and life styles often quite different from one another and their parents. 

It is useful to look at this historically. The early modern Family in Europe emerged out of a prior communal milieu in which a wife's loyalty could be to her family of origin rather than to her husband. Among the wealthy, a marriage was really a kind of political alliance between two clans. The medieval Catholic Church also privileged the community of believers over families, while in the protestant reformation, the nuclear family with the father as the paterfamilias, and its religious leader, became dominant. Natalie Zemon Davis, a great historian of early modern Europe, shows how parents of this new nuclear family set themselves upon the task of preserving the family’s continuity down through the generations while increasing its patrimony. (Ghosts, Kin, and Progeny: Some Features of Family Life in Early Modern France" pages 87–114 from Daedalus, Volume 106, Issue #2, 1977.) That is why family firms were so instrumental to the early development of capitalism.

I suggest that this fantasy of continuity remains strong today, and is one of the main psychological attractions of family business. Few of us have the opportunity to feel a part of history, to take up the gifts of the generation that precedes us and pass on our wisdom, resources and creative solutions to the next. The uncertainties are too great, so much is unpredictable; we often lead our lives in fragments, bringing coherence to it only in retrospect. The family business is a vehicle for overcoming this fragmentation.

Perhaps this helps explain why succession is so difficult in family businesses, and why many are sold to outsiders just when the next generation could succeed the prior one. At the moment of succession, when a parent gives way to a child, the fantasy of continuity is tested in the most concrete way. Will the child be true to the parent’s vision, will the parent trust the child to preserve the firm, does the child feel authorized by the parent, will the child’s innovations diminish the parents’ contribution, will continuity elevate both sides or lead to the devaluation of either or both?  Just when continuity seems possible, it is most difficult to achieve.

Monday, April 23, 2012

The long cycle

The New York Times carried two articles recently, whose subjects I believe are quite connected. The first reports on the automobile industry’s struggle to interest young people in cars, (, the second, on the eclipse of the “prime time” as a way of watching television. ( GM is asking MTV to solve what the first article calls a most vexing problem, namely; “Many young consumers today just do not care that much about cars.” This, in contrast to a time when men in particular loved cars, and young boys (at least in my cohort) knew the names of all the automobile models for all of the car companies. At the same time, NBC “has lost an average of 59,000 prime time viewers (about 3%) in that 18-49 age category compared with the same period last year. CBS lost 239,000 (8%), and Fox lost 709,000 (20%).” Viewers, who now have extensive private viewing libraries, can at long last “time-shift,” watching what they want, when they want.  

Two disconnected reports? Perhaps. But one hypothesis is that these developments are in fact intrinsically connected. Consider the conception of the economic “long cycle,” a powerful if controversial idea. It is based on the notion, that over a number of interconnected decades, the society, economy and culture become a coherent whole. Industries, infrastructure, and patterns of consumption are matched, resulting in high rates of profit and high wages. After World War Two as the story goes, automobile sales, the love of cars, the building of the interstate highway system, the expansion of suburban tract housing, the availability of low cost housing loans, the baby boom, the nuclear family, the unionized workforce, the ascendance of mass media, the superiority of American manufacturing, all came together to create a sustained period of economic growth.

As the graph shows, the high point of the post-war period, was the mid-sixties, and of course that was just when the economy and society began losing coherence. As the graph also suggests the long cycle is long. The profit rate began rising again in 1994 almost 50 years since the long cycle’s inception.

Hegel said that the “Owl of Minerva flies at dusk.” We don’t understand an era, its essential coherence, until it is passing, and by the same token, it is hard to glean the contours of a new era in its early stages. The sixties counterculture signaled the beginning of the end. Perhaps today, almost 50 years later, the car’s declining status as a cultural object and the collapse of prime time, are the “whimpers” -not the “bang”- signaling the end of the great post-war long cycle. They are the last nails in the coffin.

But what comes next? We know that it has something to do with social media, ubiquitous computing, single parent families, children born outside of marriage, niche markets, narrow audience segments and life-long learning. But as the recent financial crisis suggests, we are far from achieving coherence. At this early stage of the next long cycle can we tell what is “missing,” and what will restore coherence?  One hypothesis is that material and psychological culture comprise our “distance early warning system," our ‘DEW' line, for marking out historical transitions. Economists, business leaders and political elites, like the executives of GM, need to read the tea leaves of culture, the ways in which meaning is created and sustained, if they are to make good and fruitful decisions.