Succession & the Transfer of Power
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Succession & the Transfer of Power

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Succession the transfer of power in family-owned businesses

Succession the transfer of power in family-owned businesses

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Succession & the Transfer of Power Succession & the Transfer of Power Presentation Transcript

  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Succession & Transfer of Power What Happens When The Founder Leaves
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLEDHTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Review of Last Few Weeks  Over the past few weeks, we have set the stage for helping you to understand how family based businesses operated  We have discussed the impact of different organizational structures  We have discussed the difference between different types of management structures  In the last lecture, we set the stage for how family influence impacts business  In this week’s lecture, we are going to look at the impact of succession on a family business and the different roles that we can expect to emerge
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED But first… The Course Project
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED As you all know, the first submission was due on the 8th of November...
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Many of you missed the submission
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED If I don’t have your project submission by midnight Thursday – that’s 12 am Thursday – you lose half the points for the submission.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED If I don’t have it by midnight Saturday – 12 am Saturday – you lose all the points for the first submission and I will not consider your project throughout the semester
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED So in essence, you will fail the entire course project if you miss this submission on Saturday midnight
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Questions?
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Succession & the Transfer of Power This Week’s Lecture
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED A CEO has a mandate to drive the success of a business – that is first and foremost.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They also have the responsibility of keeping the family company competitive.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED But in family businesses, they have the problem (or challenge) to fulfill the long- term mandate of institutionalizing the enterprise
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED What does that mean – institutionalizing the enterprise?
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED It means building great companies that will thrive from generation to generation.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED CEO as Governance
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED The blurred boundaries that we discussed in lectures 2 and 3 are the biggest reason for the need to build institutions to govern the relationships between family, ownership and management.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED If family rules become business rules, conflict is avoided, but problem solving is diminished and costs are incurred
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED If the pattern continues, no amount of succession can ensure the continuation of the business for the next generation.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Do you understand what I just said?
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Business is not about family rules. It’s about developing systems that work in good times and bad times.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Sadly, this is the one thing that most CEOs don’t focus on – the building of institutions of governance
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Family CEOs perceive the business in a significantly more positive light than do other family members
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They are also more interested in business/succession planning, communication, growth strategies, career opportunities and effectiveness in boards
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED But when everything is going well, they are not interested in building the institution that the business should become just in case they are gone tomorrow
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED CEOs believe that there is clarity and understanding among family members of succession requirements and the manner that it will be transferred
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED The Transfer of Power
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED CEOs preparing to transfer power do not, single-handedly, have to make succession happen
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They may also not be one of those who want it to happen
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Studies show that CEOs in family- controlled enterprises are prone to long tenures and even entrenchment
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED By not making way for the future generations, these CEOs tend to seriously weaken the company’s ability to continue across generations
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED But we have to understand that the transfer of power is not easy in any setting – whether corporate or family
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED For many, the drive for power is as much a life force as the needs to achieve and to be loved
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED In a family business, transfer of power is further complicated by the demands of family relationships and the sheer potency of ownership
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED So in a family business, it’s not just passing the management to the next generation, it’s also a matter of passing on the family leadership and ownership control
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED I’ll take you back to the example I gave you with the Louisville Courier-Journal and the Binghams
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Barry Bingham Jr had been appointed President of the Louisville Courier- Journal, but his father Barry Bingham Sr still retained majority control
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED He had voted his daughters on the board and decided to sell the company without consulting Barry Jr.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED In other cases, significant ownership stakes have been passed on to the next generation without passing on any real voting power or control
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED When this happens – controlling ownership and top management posts being kept by the previous generation – make a mockery of the transfers of power
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Also, since future generations are not trained or prepared for company leadership many problems can occur
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED My reason for telling you all of this…
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED The transfer of power needs to be uniquely designed for each family and business in such a way that family leadership, ownership control and company management are part of it
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED CEO as an Architect of Succession
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED CEOs who have developed a winning succession in a business do not fit the profile of the hero portrayed in Hollywood movies
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Instead, they are modest, substantive entrepreneurs or serious professionals with a mission
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They care more about doing the right thing for the company and its continuity that about promoting their own egos or agendas
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED CEOs of family businesses are building companies to last, so they can’t afford to be narcissistic, spotlight-hungry performers
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They are stewards of a legacy that has a life of its own with a value beyond that of the individual CEO
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They typically take the role of an architect as they transfer their vision into reality
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They must enlist the right people and then execute the right strategies to ensure both sustainability and continuity
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Samuel Curtis Johnson III, the 4th generation CEO of SC Johnson, came into the realization that he had to be the architect of the transition
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Herbert Fisk Johnson, the 2nd generation President of SC Johnson, died suddenly in 1928 without leaving a will
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED A battle started between siblings ultimately gave 60-40 majority control to Herbert Fisk Johnson Jr, Samuel Curtis’s father
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Samuel III still remembers the 10 long years that it took his father to settle his grandfather’s estate
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED As a result, his father vowed not to do that to his son, and Samuel Curtis vowed not to do that to his sons and daughters either
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Once the right people were in place, the strategies for the various divisions were working and the institutions for governing the relationship between business and family were in place
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Samuel Curtis Johnson III decided it was time to retire
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED CEO Exit Styles and the Transfer of Power
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED There are 6 styles that are most common when a CEO exits a company
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They are: The Monarch, The General, The Ambassador, The Governor, The Inventor and The Transitional Czar
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED The Monarch
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Kings and queens rule for life – they have no retirement provision in the law
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They have no expectation of early departure to compensate them for years and years of presiding over wars, social unrest and leading visible and demanding socio-political lives
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Since succession can not take place while the Monarch is alive, palace revolts and death by poisoning are common
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Monarch operate with the assumption that they will die with their crowns on
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Many business owners are guided by the same principle. Years after the retirement age of 65, they show up daily at work to read the mail, make calls and…
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED To reverse decisions made over the past 24 hours they disagree with
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Effectively, they rule the company during a 3 – 4 hour workday
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED Monarchs hire and fire a whole series of aspiring general managers, presidents and Chief Operating Officers
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED The better they are, the faster they go because monarchs don’t imagine anyone could ever replace them.
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They definitely don’t talk about succession, nor do they set a date for departure or a deadline for change in responsibility
  • HTTP://EMAGINE-GROUP.COM BRAND FOCUSED, SOCIALLY ACTIVE, DIGITALLY ENABLED They genuinely seem to believe that illness and death are things that happen only to others