Tauck family fine-tunes the art of succession

WESTPORT, Conn. -- If your parents own a thriving family business, you've got it made, or so some assume. And if your parents are movie stars, you too can be a movie star. Right.

But when Arthur Tauck Jr. started to plan for his retirement he knew the facts: Seventy percent of family businesses don't survive the second generation, 90% don't survive the third.

Arthur Jr. had already beaten the odds when he took over his father's 23-year-old tour operation in 1958 and built it into one of the most respected travel companies through the '60s, '70s and '80s.

He was determined that his own children would be in that 10% minority who succeed in piloting a family business through the third generation.

Handily, Arthur Jr.'s eldest son, Chuck, wrote his MBA thesis on family succession and helped locate a specialist to engineer the transition.

In September 1994, Tauck Tours retained Gary Youell, and with him the family put together a plan to ensure the success of the family business through future generations.

"The family needed to bring in outside perspective," said Youell. "My job was to provide a road map and be an objective party." Youell began the process by establishing a "family council" as a forum for communication and action.

The council put together a "family business constitution," which lays out the basic philosophy of the business, the requirements for family members to work in the business, how salaries are determined and who can buy stock.

"It's for future generations as well," said Youell. "It establishes how these questions will be answered each time they come up."

From studying family businesses' failures, Youell knew there had to be rules for who could join the business. Making it an automatic entitlement was a formula for failure.

The council decided a family member has to earn a college degree and gain experience working outside before joining the family business. "It's best for the individual and for the company for them to prove themselves somewhere else," said Youell. The executive committee comprises the active leaders of the company and makes the final decisions following the established guidelines.

In 1997, the transition was completed. Arthur Jr.'s son and daughter, Peter and Robin, took over leadership of the company as co-presidents. The third sibling, Chuck, opted out of involvement in the business, although he studied family transitions in college and gave his father the contact for the transition specialist.

Arthur Jr. backed off to an overview position as chairman. Growth continued without a hitch. The succession was a success, and Youell accepted the Taucks' offer to join as chief executive officer.

Arthur Jr., Peter and Robin agreed that building a strong foundation for the future required a change in the management structure of the company.

Founded by Arthur Sr., and grown by Arthur Jr., the company always had revolved around a single entrepreneur.

Even as the company expanded under Arthur Jr.'s command, virtually every decision required what became known as "Arthurization." But by the 1990s the company had become too large and complex for all its operations to flow from one person.

From its founding in 1925 to the 1990s, Tauck Tours had been primarily an operator of North American motorcoach tours. But in the 1990s operations exploded beyond national borders: in 1991 to Europe and Australia, in 1994 to Central America, in 1995 to China and Southeast Asia and in 1997 to the Middle East and South America.

"Products and the number of passengers were always growing," said Arthur Jr. "We were constrained by the management system. I felt that we were getting weaker. We weren't empowering people."

Peter and Robin knew it too. "It really drained my dad," said Peter. "He got really maxed out."

The Taucks took steps to change their model of organization from what they called an "entrepreneurial organization," built around one person, to an "empowered organization," in which many individuals in the company have decision-making authority and can take action within their spheres without consulting a higher authority.

The challenge was to make the change without disrupting the company's formula for success. Tauck Tours had maintained a 99% satisfaction rate, and a 50% to 55% repeat rate. The business was built by word of mouth.

The plan was to incorporate the principles that had made the company successful into the organization itself.

In defining the model for the future business, the family found itself continually returning to the original tours run by Arthur Sr., the creator of the company. The more they analyzed the system, the more respect they gained for the creative impulses of the founder.

"So many of the things that are foundations of our business now came about by chance," said Peter. Arthur Sr. had improvised the business as he went along, but his instincts had proved to be sound.

Those basic principles include setting a single price that includes everything necessary; creating experiences beyond what individual travelers can get by themselves, and always exceeding customers' expectations.

Each trip includes surprises that are not in the brochure, what Arthur Jr. calls lagniappes, an Arcadian word meaning "something extra."

"Promise low, deliver high," said Peter. The Taucks consider their products not as tour itineraries, but as "choreographed" experiences.

Tauck World Discovery dates from the early 1920s when a young bank clerk named Arthur Taucknitz dropped a cigar box used to carry coins.

After a dreary night gathering and counting coins, Taucknitz got the idea for an aluminum coin tray that would securely hold a certain number of coins, eliminating the need for counting. He soon left his bank job behind and began traveling to sell his new invention to banks.

While traveling in the Berkshires on business, he noticed it was mostly salesmen who were enjoying the area. Tourists were unaware of it. He became convinced that most tourists wandered aimlessly in search of things to do and stayed in inferior hotels because they didn't know that better ones existed.

He realized his knowledge of the landscape could be of value to travelers. He ran a classified ad in the Newark Evening News asking people to join him on a New England tour.

For an inclusive price he would provide all the necessities. He would see that passengers stayed in the best hotels and saw the best sights and, while they were on their own, he would make his sales rounds.

"All I want is a congenial party," said an early flyer. "Ten minutes after leaving Newark, we shall be just one happy party, properly chaperoned, out for a real good time. I want no grouches or pessimists. There always will be from one to three cars in the party ..."

At first he planned only one tour. But when his passengers returned, the word spread and more tours followed. Taucknitz shortened the brand name to Tauck, and a new kind of business had begun.

Arthur Tauck Jr. joined his father's company as a tour director. In 1954 he took one of four desks at the main office.

Then one day in 1958, Arthur Sr. -- as impulsively as he began -- announced that he was going fishing, and henceforth Arthur Jr. was in charge.

At age 25 the younger Tauck had to learn to run the company "like jumping off a diving board," he said.

Arthur Sr. died in 1960. Fortunately, Arthur Jr.'s years of experience working in the company served him well. And he had inherited his father's entrepreneurial instincts.

Tauck Tours created a model for escorted tours that has been a prototype for other tour operators to follow. The company was also important in laying the legal foundation for today's tour industry.

When tour operators were declared illegal by the Inter-state Commerce Commission because their businesses crossed state lines, Arthur Jr. took the case to the Supreme Court to establish the legal right for tour operators to function.

He joined with other tour operators to form the National Tour Brokers Association, which became today's National Tour Association. Tauck was also one of the earliest members of the U.S Tour Operators Association.

As Tauck Tours marked its 75th anniversary in 2000, the company made one of the biggest changes in its history, changing its name to Tauck World Discovery.

With the addition of Africa as a destination, Tauck rounded out its product line with its seventh continent. The firm continues to exceed its yearly revenue totals each year and continues innovating while maintaining its original principles.

Tauck aims to take clients 'beyond boundaries'

A company that moves 100,000 passengers a year is by definition a mass operation. But when your goal is to provide a "self-actualizing experience" for clients, you are dealing with the transcendent. How do you reconcile the two principles?

"Our goal is to figure out how we can stretch [clients] so they leave in a way that they are self-actualized," said Peter Tauck, co-president of Tauck World Discovery, who often speaks in the terms of Abraham Maslow's psychology of peak experiences.

"We want them to learn something about themselves that will impact them for the rest of their lives."

With programs structured to maximize human interaction, it is left to the tour directors to set up the experiences that will produce the desired result.

One tour director gave passengers a rose as they entered Auschwitz, Poland, for a tour of the death camp, saying, "Some time in the next hour you are going to feel compelled to put it down."

"At first they want to clutch it like Linus' blanket," said Tauck. "But each one will put it down, and for the rest of their lives they are going to remember where they put it down. You don't have to spend money to give people experiences," he added.

Tauck tells the story of a man in his 80s who felt he couldn't participate in a rafting trip that was part of a tour. But a 16-year-old on the trip persuaded him.

"He said, 'You gotta come along, I'll be with you,'" Tauck said. "He really got him in there. It was great. It meant a lot to that old guy. One of our objectives is to try to always take people over some boundary they have," he said.

Unfortunately, it doesn't always work. Tauck is subject to the liability exposures of all tour operators. Most times there is a lawsuit or two pending.

There was the time at a cowboy show when a performer shot a blank gun and a woman said it deafened her. And there was the 78-year-old man who wanted to ride a horse, then fell off and broke his hip.

One of the most difficult suits involved a blind woman who took one tour, but was not allowed to take a second because she required full-time assistance, which prevented the tour director from tending to the other passengers.

"She had made a case that she could enjoy the trip without monopolizing our tour guide's time or making other customers think they had to take care of her," Tauck said.

"But she just needed a caretaker with her. We said, 'We're happy to have you travel with us, but you have to be able to do it in such a way that our tour guide can do his job.'"

Dealing with an older demographic, handicaps are not uncommon. "We have always tried to do it whether people are deaf, blind, whatever," he said, "but in this case it just didn't work out. We gave it our best shot."

Tauck remembers the lawsuit not for its legal ramifications, but in a personal way.

"Given our philosophy of taking people beyond barriers, what better candidate than this woman?" he said. "The person we could have impacted the most was that woman."