Lego’s restructuring: Three lessons for family businesses

Lego has announced a restructuring that will see CEO Jorgen Vig Knudstorp relinquish his current role and become chairman of a new holding business called the Lego Brand Group. Thomas Kirk Kristiansen, the great-grandson of Lego’s founder, will also become deputy chairman of the new group. The moves have been described in the media as the biggest reorganisation of the famous family-owned toy group in all of its 84 years of history. Given the high esteem the Lego company is held in the world of family businesses, here are three lessons family enterprises can take from the reorganisation.

Hold onto your top performing staff

Knudstorp is widely regarded as one of the most successful CEOs in any business. He turned around Lego’s fortunes after joining in 2004. The year before, Lego was haemorrhaging money and looked to be going nowhere. But the ex-McKinsey consultant gradually turned things around and Lego today is the most profitable toy company in the world.

Every family business wants a Knudstorp, but they aren’t too many of them. As such, if a business is lucky enough to find a Knudstorp, who also works well with the family owners, it’s imperative to keep them happy and hold onto them for as long as possible. Lego’s family owners know this and this is likely to be one of the reasons they’ve given him his new job – to keep him engaged with the business, but also to give him more space to pursue a new course. His dynamism can still bring the company great fortune, but in a new, fresh, and different role.

Engage family owners in the business

When family businesses become as successful as Lego and at the same time have passed through several generations of ownership, the tendency is for family owners to take more of a backseat. Non-family professionals are given greater responsibilities and increasingly the family owners sit often remotely on boards and foundations, happy to collect annual dividends and have no say in the operational side of the company.  

If this happens, as Andre Hoffmann, who sits on the board of his family’s pharmaceutical company Roche, has said, the family owners start seeing the business just as an investment. OK, Lego isn’t appointing family member Thomas Kirk Kristiansen to the vacant CEO position, but by giving him a deputy role in the new Lego Brand Group they are trying to engage the family more in the business. Here’s a Viewpoint about the problems of remote family owners. May be the Lego family read it…

It’s never too late to turn the business around

Lego’s turnaround must feature in about every MBA program in the world, or if it doesn’t, it should. But, although Knudstorp was crucial to the reversal of the company’s fortunes and should feature centre stage of any such case study, it was the Kristiansen family who made the decision to hire him. They were brave enough to admit that a family member after seventy years in control was no longer capable of running the business so they brought in an outsider. They knew they needed to turn things around. 

The move worked and the rest is history, but the decision by the family was innovative at a difficult juncture in the company’s history. Sometimes these decisions only come about through necessity, but it was nevertheless a smart one. For those family businesses grappling with growth, the Lego example should provide some inspiration. Indeed, even when family businesses have failed they can be brought back to life again, as Family Capital recently documented.