when strategic renewal attempts fail: a case study of a family firm
TRANSCRIPT
When strategic renewal attempts fail: a case study of a family firm
failure
Mariem Hannachi
University of Avignon – France
Normandy Business School – France
Abstract:
The purpose of this paper is to reanalyze the history of Blin & Blin
described in “L’amour du Drap”, Jean Claude Daumas’s book (1999)
to illustrate the reasons of family firms’ failure. This study explores
two questions: why family firms (FF) fail, and how a mismatch
between traditions and strategic renewal attempts could lead to
decline.
Using the example of the development and failure of a large Jewish
French FF in the nineteenth and twentieth century, we demonstrate,
first, that the onset of decline occurs when there is an absence of or
bad succession planning. Second, that change resistance obstructs the
establishment of strategic renewal mechanisms. Created in
Bischwiller, on 1827 by Aron Blin, Blin & Blin was a very important
firm in the wool industry in France at the end of nineteenth century
and the middle of the twentieth century. From a simple craftsmanship
to a large specialized factory in the production of wool cloth, Blin &
Blin was resilient despite the various environmental hazards:
Aryanization, First and Second World Wars, economic and financial
crises…. Nevertheless, in 1975, Blin & Blin went bankrupt.
Introduction:
Why where FFs succeed others fail? The literature on failure and
success of FF remains thin and few are the writings that raise this
question. The adage of “the first generation creates and develops, the
second maintains and the third squanders” is probably not an
explanation of the disappearance of the entity that
aggregates supposedly two separate worlds: the family and the
company.
According to the association of century-old family businesses
(“Association des Entreprises Familiales Centenaires” (EFC)) in
2011, 50 firms, world-famous celebrate their centenary. Only 12 of
them are family, added to the 1300 centennial FF already existing.
Meanwhile, Henokiens, (Association of family and bicentenary
companies) are now 40 companies in the world. Blin & Blin has
reached its centenary in 1926, but failed to reach its two hundredth
birthday.
In this paper, we study the case of a sesquicentenary FF, but failed for
bankruptcy in 1975. The focus will be raised about the sustainability
efforts of the family patrimony that was undertaken during the period
preceding the bankruptcy filing.
And what if the factors of failure of these companies were
heterogeneous, where should we seek the origin? The evolution of the
wool industry in the mid-twentieth century also played an important
role in the fall of this FF that was one of the most influential Norman
companies in the sector. From a simple craftsmanship, weaver, Blin
& Blin’s founder – Aron Blin-, broke with family tradition, on
creating his company. That became become in few generations a
symbol of the national wool industry.
However, environmental change, currency crisis, textile industry
crisis, new technologies, competition, persistence of the CEO not to
prepare his succession, family breakdown and loss of identity and
family cohesion were the factors for its disappearance. Nevertheless,
Blin & Blin was able on several occasions to thwart changes and
troubles in order to insure its continuity.
After a review of the literature on FF failure and its ability to
regenerate, we detail the story of Blin & Blin, the context and factors
of its creation, its development and decline. This qualitative paper is
made from re-use of qualitative data that is organized around a single
source, the book "Blin et Blin: l’amour du drap" by Jean Claude
Daumas (1999 ) and some archival data. With an inductive approach,
which explains the discrepancy of the theoretical and empirical parts,
our paper aims to show that although strategic renewal efforts have
been made in Blin & Blin, failure was inevitable and the factors were
not sufficient to counter the internal and external forces that
contributed to his downfall.
1. Strategic renewal in family firms: entrepreneurial efforts to ensure
family patrimony sustainability.
FF enables us to study attractive and particular organizational
phenomena (Chrisman et al, 2003) although it has long been
considered us an outdated form of business (Allouche and Amman,
2000) and accused of economic decline in Great Britain (Chandler,
1990).
However, the development of the FF field and writings on the subject
(special issues of journals - Entrepreneurship Theory and Practice,
Strategic Entrepreneurship Journal, International Journal of
Business Management and Social Science, French Review of
Management ... - associations family businesses, special reviews –
Family Business Review, Journal of Family Business
Strategy,...) demonstrate the importance of this form of business and
show their superiority over non-family businesses and the lessons that
managers, consultants and researchers can draw (Sharma, 2005)
(exp. Managing for the long run by Danny Miller and Isabelle Le
Breton Miller (2005)
and Perpetuating the family business of John Ward(2004)).
FF implements strategic renewal mechanisms in order to ensure its
sustainability and its transmission to the next generation (authors,
2010). This desire for sustainability and transmission to the next
generation is the main characteristic element of the FF’s definition
(Chua et al, 1999). However, failure that can be likened to bankruptcy
(Zacharakis et al, 1999) is often not studied in this type of business.
1.1. The family business: between tradition and renewal
With the speed of environmental change, and in order to avoid threats
to its success and sustainability, FF tends to adapt more to this
development (Chirico and Salvato, 2008). Between continuity and
change adaptation issues of sustainability arise (Mignon, 2000). By
studying a sample of EF perennial Mignon (2000, 2001), proposes
three types of sustainability: sustainability of power (which
corresponds to the sustainability of control and power in the hands of
the same family), sustainability of the activity (which is considered as
the continuity of the business and traditional knowledge) and
organizational sustainability. Organizational sustainability is defined
as "the ability for a company to initiate or deal in its history to
external or internal shocks, while preserving much of its identity"
(Mignon, 2009, p. 75).
However, governed by relational rules and traditions, the FF is
frequently resistant to change (Lumpkin et al, 2008). The attitude of
the founder or his descendants, clinging to traditions and history of
the company, can lead to a form of strength and rigidity of its strategy
(Beckhard and Dyer, 1983 and Lumpkin et al, 2008 ).
Tradition – which is considered as a practice, a way to organize and a
technology that are transferred from generation to generation through
socialization of children working in the company (Mariussen et al,
1997) -, is a key feature of family system that determines the
entrepreneurial orientation of the family business (Lumpkin et al,
2008). Zahra et al (2008) highlight the lack of literature on the
strategic flexibility of FF placed in a changing environment
(competition, technology, internationalization ...).
Faced with a constantly changing environment, the hyper-
competitiveness and the maturity or decline of the company, firms
must regenerate (Baden Fuller and Sopford, 1996, Pappas and
Wooldridge, 2002) and have a flexible strategy (Volberda ,
1996).Regeneration (or renewal) in this context consist on changing
the strategy or structure of the organization (Sharma and Chrisman,
1999) or having the ability to link environmental change to the
strategy of the company by changing the link in time (Barr et al,
1992). This regeneration can result in flexibility which is the ability to
adapt quickly to environmental change, creating new demands,
adapting to new technologies and developing new markets and
redefining. Volberda and Baden Fuller (1997) propose four
mechanisms of strategic renewal:
Reanimation: radical change that part is to revitalize some of the
existing skills within the company to test a new product / service;
Rejuvenation: total radical change resulting in the revitalization of the
core competencies of the company in terms of its structure, strategy,
or technology;
Venturing: incremental change that consists in part the creation of
new entrepreneurial entities within the organization;
Restructuring: total incremental change leading to a restructuring of
new entities and new products of the organization.
Sum of all, the company must constantly be on alert and never
consider a win-win situation for granted (Detchenique, 2010). This
strategic flexibility and regeneration dynamics allow the FF to ensure
its sustainability and continuity through the generations. Ultimately,
the FF, characterized by its attachment to its traditions, values and
family identity, may fall into decline by trying to reconcile the
paradox of "change and be yourself" and "to comply with the
constraints of the environment and know how to transform "(Mignon,
2000). In contrast to organizational sustainability, we find the
organizational death, which according to Smida and Khelil (2008) is
the failure of the company to preserve its identity, which is generally
known by the name of its founder. In the next section, we consider the
failure as a total failure that corresponds to the death after bankruptcy
liquidation (Smida and Khelil, 2008).
1.2. Factors of family firm failure
The success of the FF is strongly related to its entrepreneurial ability
(Kellermann and Eddleston, 2006) and their capability to
regenerate. The failure, which may be seen as the non ability of the
company to achieve its goal expected (Lethielleux and Combes,
2008), comes after a series of deline phases. Studying 8 cases of
organizational death, Sutton (1987) proposes a process of
organizational decline. In 1989, Weitzel and Jonsson propose also a
similar process of organizational decline; in this paper, use the
Weitzel and Jonsson (1989) process of failure to illustrate the decline
of Blin & Blin.
The process of decline, proposed by Sutton (1987), based in one hand
on the relationship between the organization and its members in
decline and on the other hand, the influence of managers
interpretation of the perception of decline among the other members
of the organization. In this paper, we use the process of decline
proposed by Weitzel and Jonsson (1989) which seems more
appropriate to the study of our case.
Weitzel and Jonsson (1989) identify five phases of decline leading to
the failure of the company.
The first phase corresponds to "blinded phase", during which the
company is unable to recognize the internal or external changes that
threaten long-term survival. Internal changes can often be qualitative
to which the company may be less sensitive than the quantitative
(lower sales, sales,..).Qualitative changes may be due to changes in
public expectations and consumer preference for a service or product,
the technological advance that change the basis of technology. The
inability to analyze trends in the environment can trigger the
decline. This blindness is more common with a lack of
communication between company departments.
Inaction is the second phase of decline that can result in a fall in
turnover, sales or profits. This decrease may not be large, but
observable to members of the company. Atrophy of the organization
in this stage may be due to misinterpretation of indicators by the
members of the organization who do not take corrective action. This
inability to take these steps may result from fear of failure by the
leader who becomes more prone to authoritarianism with a narrow
and does not involve other members of the company in decision
making.
The third phase, "faulty action" is characterized by a degradation of
performance indicators. The failure in adaptation to discontinuities
and changes in the environment comes from the differences of
opinion on the need for change, the nature of change required, the
decision-making and implementation. At this stage, the failure can be
avoided but it becomes more difficult to remedy.
Once in the fourth phase of the "crisis", with failed attempts to solve
problems, it becomes imperative to reorient the company and to
regenerate in order to avoid the "crash". In this phase, with the
impossibility of solving the problems, stakeholders are beginning to
disengage from the company and restrict their relationship. Replace
the officers is necessary in some cases.
Finally, the company enters its final phase, the "dissolution", that
becomes irreversible. Capital depletion, loss of markets, deteriorating
reputation and exodus of employees, including the most qualified, the
company is in a phase of slowing down. Even the replacement of
members of management in this phase is unnecessary because their
replacement will result in additional costs to the company. The only
remaining solution is the sale of the business or simply dissolves it.
We resume in the following table (Tab.1) the different phases
proposed by Weitzel and Jonsson (1989).
Stages Organizational
cation
Blinded Onset of decline :
failing to anticipate or
detect the pressure
Inaction Failure to take
corrective action
Faulty
action
Making wrong
decisions and
implementations
Crisis Erosion beginning :
ruthless environment
against inappropriate
action
Dissolution Slow disappearance or
quick death
Table 1: "Stages of Organizational Decline
and CorrespondingOrganizational actions", Weitzel and Jonsson, 198
9, p. 97
Cater and Schwab (2008) emphasize the scarcity of work on the
organization decline in management literature. They also show the
perceived decline in the manager that may be due to external causes
despite on their external and internal nature (Boyle and Desai,
1991). The disappearance of the company is here understood as the
total dissolution of the company following a bankruptcy and not
included under any other legal form or bought by another group or
company. The decline of the company leading to its disappearance is
even higher if with the speed and extent of environmental change the
organization can not anticipate change and respond readily, that could
threat the company survival (Weitzel and Jonsson, 1989). The decline
in FF is even less present in this literature.
The triad family-property-management forms the specificity and
complexity of the FF (Hirigoyen, 2009) and tension from these three
components can be fatal to the company. In addition, the shocks that
the company faces could be counteracted to ensure its survival
through the mobilization of internal or external resources - via
corporate networks in the case of a FF - (Bégin and Chabaud,
2010). Certainly, the absence of a successor due to biological
accidents (death, illness) or bad planning and preparation of
succession can cause problems or even the disappearance of the
company. However, the disappearance can be as the result of a
deliberate decision. In the case of family successor absence, it is
common that the leader prefers to end the business instead of seeking
an external successor or a buyer (Lotti and Santarelli, 2005). Failure
is a complex and multidimensional phenomenon but to understand
why companies fail or disappear, we must look at its definition and
factors even though the literature is not dense and consensual. In a
wider sense, the failure means the difference between the expected
and desired outcomes (Cannon and Edmondson, 2005).Gillespie and
Dietz (2009), from a literature review, consider the failure of
organizations define as "a single major accident or a cumulative series
of incidents resulting from the action or (inaction) of agents of the
organization, threatening the legitimacy of the organization and has
the potential to undermine the welfare of stakeholders of the
organization "(p.128).
In a more economic approach, Honjo (2000) defines the failure of the
company as the situation in which the company cannot pay its debts
and carry out economic activities. However, it is necessary to
emphasize that the failure is different from the disappearance of an
organization following a merger-acquisition; it is indeed a total
liquidation after bankruptcy (Porolli, 1999).
In addition, all companies, all types and all sizes, are threatened by
failure. However, the failure rate in young firms is higher than in
established firms (Knott and Posen, 2005). This was explained by
Stinchcomb (1965) by the cost of learning of new roles and tasks,
limited resources, lack of informal communication structures and the
absence of formal ties with customers and suppliers. This is in the
same direction as Hannan and Freeman (1977) which show that most
established organizations they are less likely to disappear.
For the proponents of the theory of ecology population, the ability to
acquire resources is the determining factor in the survival of the
organization. Thus, Hannan and Freeman (1977) consider that in a
competitive environment, only organizations that are able to acquire
the necessary resources can survive. However, according to
Mintzberg (1984), more the company is established more is
threatened by the decline, "once established, organizations pick in
their service to society and then begin to decline" (p.221).
Moreover, according to Miller and Friesen (1983), the failure of the
company is inevitable with the life cycle of the company. They
distinguish 5 phases (phase of birth, growth phase, mature phase,
recovery phase and then decline). However, the last phase is often the
one that corresponds to the period of succession which can be fatal
(Carroll, 1984). So, being a decisive phase in the life of the company,
succession must be well planned and followed.
Peay and Dyer (1989) point out that one reason for business failure is
due to the inability of the leadership to transmet needed competencies
and skills, knowledge, contacts with customers and suppliers and the
power, to the next generation. The successful transmission has
various advantages: saving employment, to bringing new vigor to the
company and new business opportunities (Cadieux and Brouard,
2009). The question of transmission is more common in the field of
FF. Often the leaders, especially founders, want to pass their business
to their offspring. Considering the company as projects that was born
and grows throughout the years of development, the entrepreneur
wishes to see it pass into the hands of his children to sustain the
family assets he founded.
Ultimately, on the one hand, threats to the survival of the company
from external pressures for change resulting from new technologies,
internationalization, deregulation of industry, privatization and the
emergence of new organizational forms (Volberda and Baden Fuller,
1997). On the other hand, at an organizational level, the threats of
conflicts arising within the company are: rooting of family members,
succession process, altruistic behavior, the company's strategic
inertia, difficulty of introducing foreign shareholders to drain the
funds of the company, the incompetence of family members active in
the company, the rigidity of the company, conflicts between family
members and poor governance (Arrègle and Mari, 2010). In the
following section, we reread the story of a FF that failed after 150
years of existence. With theoretical lighting, we try to understand the
factors of failure and how renewal efforts were aborted.
2. Methodology and empirical study
In this section, we present our methodology, re-use of qualitative
data primarily from a book by Jean Claude Daumas on the history of
a FF, complemented by archival data (municipal archives ...). After
that, we illustrate this story in order to better understand and
apprehend it.
2.1. Research Methodology: Re-use of qualitative data
Rooted in the field of FF, this research has emerged after a long
documentation and cases of FF in order to compare cases of success
and failure. The case of Blin & Blin lent itself to this
exercise. However, the nature of the empirical study, exploratory and
descriptive, with the density of the material used does not lend to a
confrontation or a multi-case study. From a thesis in company history,
this case study is mainly based on reuse of qualitative data. This
methodology, which the delimitation is difficult, is often used in
management science but can be different in practice (Chabaud and
Germain, 2006). From the four types proposed by these authors, our
analysis lends itself more to the supra-analysis that they consider as
the treatment a new question from a unique data set.
Even if this study is not the same and the output does not lend itself to
any comparison, the reuse of Maclean's book of 1942 by Karl Weick
(1993) can establish legitimacy and feasibility of our research project.
As for the analysis of Weick (1993) of Mann Gulch disaster, our base
material was unique, and characterized by density and expanded by
the description of the methodology and the conditions of the
investigation. In the initial study, the author describes the history of a
FF for 150 years of existence to which we added data from other
documents. Different from a monograph, the historical approach is
more expanded and deeper, since it takes place on different levels of
analysis.
The history approach lends itself well to clarify the research issues
that must be analyzed from several levels. In other words, the issue of
strategic renewal and the failure of the FF and its success can only be
considered if all elements of the business environment are
analyzed. This can be explained by the multiple dimensions of the
causes of the failure occurring at all levels, and the implementation of
strategic renewal mechanisms that often depends on changes in the
external environment or internal one or even both.
The use of historical data with encrypted data is well suited to
measuring operational risk in economic studies and is one of the
pillars of the operational risk (Belhassen, 2006). However, our study
is based on qualitative historical data. The crossing of the documents,
internal and external to the company, reports and economic, historical
and political studies throughout the study period, personal notes
written by the members of the business, studies, testimonials of the
last members of the company and the family, the archives of the
business and chambers of commerce and other institutions,
photographs and much more are the holdings from which Daumas
developed his study of the history of the business, the family, the
industry, and Alsace and Normandy regions. The book "L’amour du
drap" seems fairly comprehensive and well fleshed out and allowed
us to study the issue of strategic renewal and the FF failure.
The inductive approach of this study may explain the discrepancy
between the theoretical and empirical part. Moreover, we highlight
the impossibility to summarize 150 years of existence of a wool
dynasty of the nineteenth century, with all its specificities, five
generations and all the events that took place.
2.2. Empirical study: Blin & Blin: an industrial and familial adventure
Blin & Blin was created in the early nineteenth century, when Aron
Blin, Jewish Alsatian peddler, decides at the age of 24 years to create
his own weaving of wool in Bischwiller with his brother. However,
Blin & Blin throughout its existence was confronted to various
difficulties - crises, wars, migration, competition, external and
internal environment changes… - which have been fatal to many
companies in the same trade.
In the following section, we detail the story of Blin & Blin by cutting
it into three periods. The first runs from 1826 to early 1870, shows the
conditions of its creation, its first steps in the wool industry and its
development in Alsace until the flight and transfer to Normandy. In
the second part, from the plant in Normandy at the end of World War
II, we describe the trajectory and growth of the company with a focus
on major events that have played an important role in the changing its
strategy and organization. The final part contains the conditions of his
death and the factors that led to the tragic end. To better understand
the evolution of this family business over time it seemed sensible to
place his story in it’s economic, political, industrial, social and
family, context. Although the work of investigation, data collection,
literature and archives, which was huge, leading to a thorough thesis
and a book in business history, its recovery, to study the strategic and
recovery efforts - the aborted late - seemed interesting in that it sheds
light on aspects related to management and the specifics of the
company. Throughout its existence, the direction of Blin & Blin was
assured by 5 generations members of Blin family. The fifth
generation, absence of succession planning and the refusal of
members of the company to provide leadership after the death of the
CEO, entered the company in a phase of decline. The family tree,
(Appendix 1) shows the succession of company executives and family
members who were also part of the management of the company at
different stages.
2.2.1. Premise of a family dynasty
Born in 1798 in Haguenau, Aron Blin, son and grand-son of peddlers,
decides to end his life of wandering and moved in 1825 to Bischwiller
which was, in the seventeenth century, a small village whose
inhabitants lived by raising cattle. He moved with his family, his
older sister Sarah and younger brother Jacques. Backed by his family,
Aron, smart, active, prudent and persevering man, was only Jewish to
settle in Bischwiller and had the audacity to try his luck in the
manufacture of drapery and succeed. In 1927, without giving up his
shop and grocery tissue, in partnership with his brother Jacques
created successively several machines for tissue manufacture. They
wove the fabrics by hand and sold them. On this date, 1827, the first
lines of the portrait of a family dynasty and the beginning of a
glorious history of the family Blin begin to emerge. Aron and Jacques
began their business by two trades of weaving woolen cloth, which
they sold to their account to a local clientele. Due to the development
of their business, the brothers set up their workshop in 1829 in the
family home and soon supplemented by a dry cleaner.
The evolution was slow but steady in the mid-1830s, the brothers
already employed 25 employees, they had eight looms, and install a
workshop finishes. In 1836, Aron decided to specialize in the
manufacture of drapery and therefore abandoned his grocery store and
fabrics and includes production subcontracted. During his lifetime,
Jacques and his brother had bought plots and houses that returned all
in 1843 to Aron after Jacques death. With the increase in demand of
sheets on Bischwiller, Aron, in order to adapt to the market, had
developed its productive weaving with the extension and integration
of downstream operations. However, the company’s funds were not
sufficient to transform the technical basis of the company and catch
up with changing demand. To do so, Aron decided, in 1849, to use
external funds and get partners with David Bloch a Jewish merchant
from Alsace. Involving his eldest son, Maurice Blin, the company
changed its name and becomes a partnership, "Blin father and son and
Bloch-Javal." Mechanization and development of the mill sheets were
accompanied by business development and turnover in the mid-
1850s, that increased fivefold, reaching 500 000 francs. This was due
to obtaining the first concession in France of the operation of the
loom to weave the cloth, the introduction of the train mechanics,
woolens to multiple contacts and tensioner blade hard in the late
1850's (Roquelet and Cretot, 1986).
However, in 1866, with the death of the founder - Aron - the company
again changed its name, with the introduction of the second son of
Aron, Theodore, in 1861 and David Bloch’s son, Sylvain in 1866 to
become Blin & Bloch. Nevertheless, Blin family had always the
control and had a majority holding in 2 / 3 of the capital. Wanting to
keep the business in the family and prevent its dissolution, Aron had
arranged that prevented in-law to get inside. The association with
David Bloch has enabled the company to move from one status to the
status of manufacturing plant. Therefore, Aron and his associates
acquired the first factory in 1851 and the construction of a second in
1863. This allowed a better integration of labor and mechanization of
its production. These investments next to a purchase of a hydraulic
motor spinning led to an increase in sales, with an annual rate of
increase of 7.9% between 1851 and 1861.
The company stood out from 1855 with a specialization in the
manufacture of black woolen sheets despite the evolution of fashion
to the new base of combed wool, which was cheaper and lighter. With
the rising prices of new products and other products, Blin decided to
manufacture the finest articles and colorful turning to an easier and
more elegant customer. To this end and in order to expand its market,
Blin decided to establish a trade policy different from that practiced in
Bischwiller. It combines advertising, representation of people and
sending sample. With this trade policy and the development of
railways, Blin could penetrate more easily Parisian market and the
domestic market which has acted as a distributor through wholesalers
that addressed the company. Later, Blin sold more easily on the
domestic market and addressing other important trades places such as
Bordeaux and Lyon. In the 1960s, Blin exported its products
abroad. This transformation of Blin’s customer, that began local,
resulted in an increase of turnover, which tripled between 1852 and
1869, and increasing the number of customers who had reached 154
in 1852 and 234 in 1869.
Meanwhile, the capital of the company has continued to grow thanks
to a funding policy and increased capital. These were of various
origins and consist mainly of retained earnings and any funds
collected by the partners with the rents, gifts, inheritances, but mostly
the dots of young associates.
This increase resulted between 1851 and 1870 an increase of 727.7%
and a profitable year throughout this period. The two dimensions of
entrepreneurial and family business has led to a willingness to take
risks but reasoned, a cash flow through the home network and the
involvement of family members, a paternalistic policy and a
strategic flexibility. However, with the signing of the Government of
the defense of the Treaty of Frankfurt which ceded Alsace and
Lorraine to Germany, the company Blin & Bloch, as many
manufacturers in the region, opted to retain French nationality and
migrate to the departments remained French, and the history of the
company took a new turn.
2.2.2. Oscillating and resilient trajectory
With the annexation of Alsace, the members of the company chose to
leave and moved from Bischwiller (Alsace) to Elbeuf
(Normandy). This event has also changed the structure of the
population and the economic fabric of Bischwiller where 22% of the
population has made the same choice and about 80% of
manufacturers of drapery settled in the departments who remained
French and more than 80 % of traders, which is explained by their
sectarian. The choice to settle in Normandy was the result of long
reflection on the part of leaders of business and visits to centers wool.
Elbeuf was the privileged destination, the main center wool Norman
in 1870, the city experienced a golden age between 1830 and 1860,
with its manufacturing techniques and the growth of its
industry. Elbeuf was specialized in woolen, house specialty Blin and
Bloch. After explorations by Maurice Blin, the officer, and his brother
Theodore, the company moved there in June 1871 and built a factory.
The factory was characterized by its mechanization and production
pushed as far as possible. The social policy was strongly influenced
by the identity and family paternalism. The company executives have
created several social institutions for the benefit of their employees
with benefits that differentiated them from other leaders of
Elbeuf. Employing 409 people in 1876, the company has continued to
attract immigrants from Alsace and other refugees to reach a
substantial number of employees who placed it among the largest
business sector with over 1,600 employees in 1900. This increase in
the number of employees has been accompanied by an expansion of
the plant area that has tripled from 1872 to 1914 and an increase in
turnover and sales. With the departure of Sylvain Bloch, Executive
Officer, the company chose to diversify its products. After the change
of men's fashion that supported their specialization in the black cloth,
Blin directed towards the manufacture of cloth lady who has been
very successful, but short, and the cloth of uniform for institutions
(railway and urban transport, schools ...).
However, this development has been slowed in 1883 following the
economic crisis. In 1884, after the withdrawal of Bloch members of
the company, "Blin & Bloch" becomes "Blin & Blin” under the total
control of one family.
The diversification strategy has resulted in an increased rate of
turnover and sales as well as investments to modernize the fleet of
machinery and plant expansion which was accompanied by a
considerable debt. But all the years have been beneficiaries until
1896.
The end of the century was marked by increased bank loan to
establish their diversification policy and successive losses.
Discovering the situation that has been hidden, a crisis broke out
between the creditors and company executives. Therefore requiring
the repayment, a recovery solution has been proposed. With this
crisis, relations between the two branches of the family of the third
generation, the son of Albert I Blin - Maurice, Ernest and Andrew -
and the heirs of Eugene Blin - his widow and son - were shaken
and the result is a definitive break in 1917. The situation has
continued to worsen with the claim for reimbursement from creditors,
banks and associated clients. Jeanne Aron - widow of Albert - comes
to the aid of his son and their aunt - sister of Jeanne - by lending them
money that allowed them to repay some debt and to boost the
reorganization plan of the factory. This allowed them, in 1913, to
record an improvement in sales and a modest profit. With the
outbreak of World War I in 1914, which has avoided liquidation and
has consolidated sales trends and increased sales to markets they have
entered into with the Government for the manufacture of linen
military. This resulted on an extension of the area of the plant with
additional investments in machinery and the acquisition of new
facilities and finishes spinning.
The market for military cloth which was more than half of their
production, has recorded an increase of 497.1% of sales between
1914 and 1919. But this increase was only temporary due to the
reduction of labor and the decline in the civilian market. A solution
therefore has been proposed by the leader of the company - Ernest
Blin - to overcome the financial difficulties the company encountered:
opening of capital and business transformation into a limited
company.
A multitude of mergers with other houses, including the home of rival
cousins Fraenckel, have been proposed and initiated by joint
purchases of subsidiaries and joint contracts for the purchase of raw
materials and equipment, but have all failed. Note also the effects of
the economic crisis of 1921 which aggravated the situation of Blin &
Blin. It was not until 1924 that the company opens its capital to
partners outside the family. However, the company retained its family
dimension with the management triumvirate of brothers who were
Blin shareholders holding 60% stake. The capital increase in 1927
allowed the injection of money and an outcome of the situation.
In the late 1920s, Blin & Blin saw himself obliged to renew its fleet
equipment and reorganize its production. They have fundamentally
changed their production, replaced the old equipment with more
efficient machines, integrated production and set up subsidiaries. This
was done in order to externalize certain functions of the company, to
entrust the business to a new subsidiary in place to assure itself and
obtain additional inputs. However, the outcomes of these efforts were
delayed by the crisis of 1929, rising wages and falling prices. Blin &
Blin, like so many other French textile companies, saw himself forced
to reduce costs and increase productivity by using the method of
timing - developed by Charles Bedeaux - raising the resistance and
distrust of employees. A new direction guided the company's strategy
of Blin & Blin - which remained specialized in expensive fabrics and
carded for wealthy clients - export. This policy has served the
company as its industry peers, but soon, the Second World War was
handicapping the company raised in its development and other major
difficulties.
A defeat of 1940 and the placement under the joint supervision -
German and Vichy - many companies in the occupied territory had to
adapt. The winter of 1940 was marked by the implementation of a
policy of Jewish spoliation, called "Aryanization".
Therefore, the Ministry of Industrial and Production through the
appointment of a receiver of any Jewish organization seeking to
prevent the transfer of ownership to the occupant. Blin, being Jewish,
anticipated these measures in spring 1940 and complete the transfer
of ownership and management on the French Bedaux - which has
already intervened in the development of timing in the 1930 -
. Engineer at Bedeaux, Ferdinand Touillon held the position of CEO
but while continuing to receive instructions from Ernest Maurice -
fourth-generation, until the eve of their departure in the south of
France, fleeing deportation. Kept hands of the prisoners, despite the
delicate situation, Blin & Blin continued to turn and make the number
even if the performance was not at the same level as before.
However, with this cover-up, which for other major groups had not
been as successful, such as Galeries Lafayette or Shoes André, have
not escaped the German investigations, Blin has not escaped to the
appointment of a receiver.
Of the 42,227 Jewish businesses placed under provisional
administration, more than 22% were sold to Aryans and over 17%
awarded by the provisional administrator. However, considering that
the health of the company, the continuity of the business and
safeguard jobs, Blin, like many business leaders, did not hesitate to
collaborate with the Germans by selling sheets military. Listed
UK.Betriber (defense firm), Blin & Blin had some advantages: a
priority for the supply of raw materials and energy, but in return
subject to strict control by the Germans, which allowed achieving a
certain level of sales and turnover to ensure its continuity.
This war has had a dramatic impact on the wool industry, until 1944,
with a decline in production son wool 80%, a reduction in the
workforce, a fall in demand, a delay in the supply... However, even
with the recording of losses, Blin and Blin recorded regularly
operating profit. Despite financial, economic, political, social
difficulties, Blin & Blin was able to emerge unscathed. The postwar
period was, until 1952, a glorious period for the company that became
a major French industries exporting wool.
However, this triumph was not sustainable and Blin & Blin fell into a
period of decline, characterized by an influx of difficulties and
problems which have been fatal.
2.2.3. The agony of Blin & Blin
Sclerotic leadership, a dissolution of identity with a family crisis in
relationships, an obstinacy of the CEO not to prepare his succession, a
traditional dedication to the business of the house, a business strategy
in opposition to changing market of the prét-à-porter, a machinery
obsolete and outdated by technological and technical instability of the
labor force and inflexibility of social policy, a strategy of short-term
survival with minimal risk-taking , a deterioration in profitability ... a
range of symptoms announcing the descent into hell of the glorious
house wool Blin & Blin after its peak and growth.
After the Second World War, changing consumer behavior against
clothing made from woolen alters the structure of the textile market
and wool, with a decline in spending on clothing. In parallel, the
demand for institutions (SNCF railways, RATP public transport
company, army...) chose the combed rather than carded. Progress also
in terms of chemical fiber and automation of manufacturing processes
have played the main role in the transformation of the wool industry
and the techniques used. This led to an upheaval in the structure of
the industry with the disappearance of more than 75% of
establishments between 1949 and 1966 and reduced labor. Many
other economic phenomena: lower exchange rate, deregulation of
exports and imports with a mismatch between supply and demand
could only be one engine to the disappearance of Blin facing an
internal environment hostile to change and conflict. This resistance to
change was not specific to Blin & Blin, but also to all of the wool
industry of Elbeuf. These companies were resistant to change and
diversification of traditional craft, the carded Elbeuf consider that a
competitive advantage and brand image.
In addition, with competition from other French textile centers and
their ability to follow market developments, Elbeuf became the
cemetery of textile company. This city, which was for centuries an
important center of wool in France, buried its companies one after the
other. On the eve of the disappearance of Blin & Blin there were only
two companies and the last disappeared in 1992.
Facing the situation of the wool industry in Elbeuf, Claude Zimmer,
son in law of Maurice Blin – and Blin & Blin’s CEO, waives all
shareholders and Albert Blin proposals - last of the family Blin – of
diversification and orientation of the profession and chose instead the
integration strategy by acquiring an entity dye which only increased
the cost of the company. Claude Zimmern, physician training,
missing skills and technical knowledge, commercial and managerial
vision and had a short-term approach of the strategy. As a result,
conflicts have emerged within the leadership and formed clans that
ended up excluding some of which Albert Blin.
Refusing to prepare his succession, even after accepting the
intervention of an audit firm who stressed the importance of this
aspect, after his death in 1970, Blin & Blin faced a major problem,
ensure management, especially after the rejection of all remaining
partners.
The direction was entrusted to a Management Board composed of the
son of Claude Zimmern, Michel, Fernand Touillon - Deputy Director
General - and the majority shareholders. But this directory refused the
proposal to refocus its business and geographic diversification,
too. This choice has worsened the financial situation of the company,
especially with the inadequate supply of Blin & Blin with the request
of countries where it sells its products. These countries, apart from the
European market did not correspond to the cultures and climates of
other countries. A final intervention of another consulting firm,
proposed, in 1972, a set of solution that will enable the company to
reduce costs and attract sales and turnover. But, as usual members of
the company refused that path and make the choice to keep the job
and refuse woolen diversification strategy.
In this situation, compounded the failure to find a buyer, all proposed
acquisitions, mergers or other were all aborted because of the serious
difficulties encountered by Blin & Blin. Even the proposal of the
Ministry of Industry in 1974 was disappointing that the textile sector
was not a government priority. Overall, there were the company that
filed for bankruptcy and the end of the family and industrial
adventure.
3. Results and discussion
The three parties briefly summarized the history of Blin & Blin. The
evolution of the company over time has been marked by cycles in
which the company launched a project or following any strategy and
is growing but quickly overtaken by an internal or external change
and is obliged to seek solutions and declines.
In the following table (Table 2), we resume the strategic renewal
efforts made by Blin & Blin
Event Strategic renewal
mechanism
From the
1840s,
increased
demands of
sheets
Venturing : creation
of new entities
weaving,
integrating
operations and
downstream
processing of the
technical basis for
the company to
adapt to the market
From the
1850s,
increased
prices for
new products
Reanimation :
revitalization of
existing skills in the
manufacture of
black wool carded
to test new finer
products and
colored for new
customers
Turnover tripled
from 1952 to 1962,
increased number
of client: 154 in
1852 to 234 in 1869
From the
1970s,
changes in
men’s
fashion
Reanimation :
revitalization of
existing skills,
specializing in the
manufacture of
black wool for men
to test new products
(cloth for ladies and
for institutions)
Increasing turnover,
but slowed in 1883
following the
economic crisis
1929 crisis
and rising
wages and
falling prices
Company
restructuring : cost
reduction and
introduction of the
method of timing
World War
II, placing
the company
under
supervision
of and
administrator
and
degradation
of the wool
industry
Restructuring : new
products
manufactured
exclusively for the
german army
From the
1950s,
changing of
the consumer
behavior,
automation
of
manufacturin
g processes,
technological
change, use
of chemical
fiber, lower
exchange
rate…
Attachement to the
company’s tradition
in the manufacture
of carded wool,
non-renewal of the
obsolete machine
fleet
During the
1960s,
economic
and
Refusal to reorient
the business and opt
for venturing
through the
industrial
difficulties,
lower
turnover,
debt…
acquisition of new
entities dye
Increased costs and
debts of the
company
From the
1970s, death
of the CEO,
internal
conflicts,
debt of the
company
Attachment to the
tradition and refusal
to reorient the
business and
restructure the
company
Insolvency and
deterioration of the
company
Bankruptcy and disappearance of Blin & Blin in 1975
Table 2: strategic renewal efforts of Blin & Blin
The beginning of Blin & Blin and development until the eve of his
fall is close to the companies studied by De Geus (1997). Blin & Blin
had the first common feature of long-lived companies: sensitivity to
its environment. Blin & Blin has reacted to the change, even if it
sometimes stumbled. The actions taken by the company were all to
boost the activity and breathing new life, and that in order to respect
the will and purpose of the company, to ensure its
sustainability. However, the last part, with the entrance of the son in
law who lacked maturity and managerial competencies was the
beginning of the end.
From the 1960s, the company has entered in a process of failure with
the first phase of decline as described by Weitzel and Jonsson model
(1989). Blin & Blin reproduces the phases of this model.
With the change in consumer behavior against the woolen and its
orientation towards material lighter and cheaper-based synthetic
fibers, the direction of the company would not pay attention to this
phenomenon, and merely the result as it did not show any significant
drop through, or rather because of the export. The inability to analyze
trends in the environment triggered the decline.
Drop in turnover, sales, and the rigidity of the corporate strategy
favored the "inaction". The fear of the CEO and his attachment to
tradition are also symptomatic of this second phase of decline.
The decision of one seeking geographical diversification into new
markets has only increased the costs of Blin & Blin and presses it into
a series of losses and debt: third phase of decline "faulty action".
The “crisis”: inability to reorganize the business and move towards
the path of renewal, especially after the death of the CEO, who had
not prepared his succession and the refusal of partners to provide
leadership or find a buyer.
In sum, the only way out was to file for bankruptcy and dissolve Blin
& Blin in 1975.
In addition, the state of mind of the leader and emotion played an
important role in the development of the regeneration strategy
(authors, 2010). In the end, Claude Zimmern focusing on the
traditions of the company and resistant to any changes refused any
attempt to diversify the business and refocusing of the company. On
the other hand, the typology of the FF proposed by Levinson (1983)
tells us about three types of business: traditional, confrontational and
entrepreneurial. We can classify Blin & Blin as the traditional FF: set
for 5 generations, with a good reputation for product quality,
systematic integration of a son in the company, paternalistic guidance
and important place occupied by the leaders company in the
community (Jewish and Jewish Alsatian later).
However, the fifth generation, Blin & Blin turns into a business
conflict: a desire to continue the tradition, disputes and conflicts over
the direction and power (the formation of clans in the family with to
part of the clan Albert Blin and the other clan Claude Zimmern) in
response to changing demand and market decline, members of the
company to continue to insist that that do they know ("We are wool
and wool we still wool"). Resistance to change, claiming the
attachment to tradition can be fatal to the company, a solution that
Smith (1993) has shown in the study of Indian FF in the 18th century
is a combination of tradition and flexibility. This combination would
not be appropriate to ensure the sustainability of the FF?
Conclusion:
In this paper, we tried to illustrate, from a recovery in the history of
Blin & Blin, multi-dimensional factors of FF failure and the role of
attachment to the traditions and inflexibility of its strategy to
changing environmental and pressure for change. We were able, from
the model of the decline phases proposed by Weitzel and Jonsson
(1989), tracing the stages of decline of Blin & Blin who were also
sometimes triggered in periods prior to his fall but quickly overtaken
by a desire to perpetuate the business by establishing strategic
renewal activities. We can say, finally, that the mood of the leader
and his great attachment to tradition by fear of change has pushed the
company to disappear. From the case of success story we can learn
good management practices and lessons of good conduct in particular
situations, the history of chess can be as an aid to decision making for
managers today (Siffert et al, 2008).
According to this history, we saw first, the effects of attachment to
tradition deal with change and resistance members to align the
company to market demands which led to the agony of company. In a
second point, the refusal to prepare the succession has also
contributed to the decline of the company was poorly managed and
already bad situation. All these factors have jeopardized the existence
of this company and put an end to a great industrial and family
dynasty.
Meanwhile, our work is full of theoretical limits and / or
methodological. However one of the major limitations of our work is
the reuse of qualitative data and the absence of primary data that
could be crossed with historical data of Blin & Blin. Future research
can be conducted with the comparison of our results with other cases
of FF and non-family.
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