A Family Business Successor Considers Quantitative Methods

Abstract

This case provides an opportunity to consider that vital period in a family business timeline when a younger successor is moving inevitably toward taking over top management of the organization. In this situation, the son of the founder/owner of a retail shoe business is contemplating the use of quantitative methods as a change in the normal seasonable merchandise buying policy of relying on intuition and experience. The heir-apparent is nervous about the proposed change and wonders if his father and other senior managers will be willing to take the risk. The main character has worked for many years in a successful family retail shoe business. His father and the senior managers have long demonstrated an extraordinary work ethic with a conservative but effective purchasing policy of deliberately overbuying shoes semi-annually, virtually preventing any stock-outs. The business has developed an enviable reputation of good customer service with consistently large and diverse inventories.

Through dogged persistence, starting with a purchased (ineffective) data management system, the younger family member has gradually built his own valuable database. Senior managers and even the young man himself are reluctant to change the normal procedures even though better use of quantitative data would likely significantly improve the profit picture. It is noted that it would be reasonably safe in today's marketplace to make smaller initial buys and rely on subsequent reordering of top-selling items before stock-out occurs. Computerized information systems would signal ordering times. One can empathize with the managers' risk involved in making a buying policy change since the firm has performed well in the past. Should they take the chance?