President Donald Trump pulled off the improbable in winning the presidential election. Now, for his next long-odds feat, he aims for his business empire to thrive even though he has stepped back back from day-to-day management of the Trump Organization.
Passing a family enterprise from the founding father to heirs is a notoriously tricky task. The annals of American commerce are so filled with examples of companies that disintegrate after a generation or two that Andrew Carnegie coined the saying “shirt sleeves to shirt sleeves in three generations.”
Trump already has successfully managed one such inheritance. He took over the family company from his father, Fred Trump, in the 1970s and built a much larger organization.
Responding to concerns about potential conflicts of interest, the president-elect this month said he would give up his position as an officer in the Trump Organization.
Trump outlined a plan to turn his properties over to a trust managed by his adult sons and a longtime Trump Organization executive. The move places The Mar-a-Lago Club in Palm Beach and Trump International golf courses in suburban West Palm Beach and Jupiter under the control of Donald Trump Jr., Eric Trump and company executive Allen Weisselberg.
Trump’s lawyers said he would limit communications with his company to receiving financial statements.
The managers and staff won’t change at Trumps’ properties, and Eric Trump promised to maintain the high standards of his famously detail-oriented father.
“Business as usual!” Eric Trump said recently in an email. “We are incredibly proud of these properties and they will continue to operate meticulously.”
Rick Gonzalez, a West Palm Beach architect who has worked for the Trump family for more than 20 years, said he has worked with Eric and Ivanka Trump (who won’t be involved in day-to-day management of the Trump Organization) on various projects.
“They have a keen eye like their father,” Gonzalez said. “His eye for detail is spectacular, and his kids have been around that. They’re going to be the same way.”
Experts in business succession say there’s little reason to doubt the Trumps’ promises of a smooth transition.
“I would suggest there would be little or no change whatsoever,” said John Pankauski, a West Palm Beach estate attorney who helps clients pass family businesses to heirs. “Companies change executives all the time. He’s been in business for so long that I would presume that his sons know exactly how Mr. Trump would want to run the business.”
Long before last week's announcement, Trump took pains to place his children in prominent roles in his company, said Judy Hogel, executive director of the Chicago Family Business Council.
“From what I’ve seen, his children are more than capable,” Hogel said. “They’ve been running the business for years.”
While family resentments can sabotage family businesses, the Trumps showed a united front during the presidential campaign. Trump’s children were staunch supporters of their father’s candidacy.
Yet transferring companies from one generation to the next rarely goes smoothly. Sibling rivalries can pose a stumbling block. So can resentments from employees who see the heirs as undeserving of the throne.
Founding fathers can be too overbearing, or too lenient. The next generation might not possess the same passion for the business, or the same strategic acumen.
"In the United States, close to 70 percent of the proprietors of family enterprises say they would like to keep their businesses in the family, but only 30 percent succeed in passing the reins on to a second generation," writes management expert Noel Tichy in his book Succession: Mastering the Make-or-Break Process of Leadership Transition. "Only 12 percent succeed in passing the reins on to a third generation."
For the Trump Organization, the stakes are high. Trump’s net worth as of Friday was $3.7 billion, according to Forbes’ magazines ranking of billionaires.
The Palm Beach County Property Appraiser’s office estimates that properties owned by Trump and his businesses are worth $51 million.
The Mar-a-Lago Club earned a record $9 million last year, according to documents Trump disclosed in September as part of a legal battle with Palm Beach County.
During his news conference last week, Trump vowed to hold his sons to exacting standards.
“I hope at the end of eight years I’ll come back and I’ll say, ‘Oh, you did a good job,’” Trump said. “Otherwise, if they do a bad job, I’ll say, ‘You’re fired.’”
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