Ensuring the succcess of your family business


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This seminar looks at the advantages gained by family businesses and will help you to capitalise on these strengths. Presented by Tony Haffenden, it also looks at some of the key challenges and suggests ways that they can be turned into positives for business growth and success.

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Ensuring the succcess of your family business

  1. 1. Ensuring the success of your family business Tony Haffenden Family business and succession coach Helping senior business leaders exit or transfer their business and young business leaders create a new vision and a profitable way forward
  2. 2. Ensuring the success of your family business The economic importance of family businesses The real differences in running family businesses Family business leadership and transition Where will we (and our businesses) be in 2017 Using conflict to take the business forward Pass on, sell on, carry on or…………… Some real examples of family business transfer Communication and organisation solutions
  3. 3. Family businesses as a % of registered companies Portugal 70% United Kingdom 75% Spain 80% Switzerland 85% Sweden >90% Italy >95% Middle East >95% © Family Business Solutions
  4. 4. What every family business adviser should remember No family business is at exactly the same stage No family firm is static for very long Professionals must respect these differences No one professional has all the tools Working with a family business is a multi disciplinary undertaking It’s a privilege to work with each one © Dr Barbara Nunn
  5. 5. Today’s challenges for the Family Business Modern economy driven by: Globally expanding markets Technical innovation The environment Knowledge and Information Change (stress)
  6. 6. What does this mean? Greater opportunities More effective decisions/higher levels of risk Successful transition of the family through its life course and the family’s business through its organisational life course Consequences of mismatch are more critical to the well being of the family and the viability of the family business
  7. 7. Qualities of a family business leader Clarity, consistency and passion Excellent people Talk to staff and find out what’s going on in the business Purpose, price, costs and volume Brainstorming skills Strategy 5 years and 1 year in detail Guts, nous, vision Above all the ability to get on with people Sir Gerry Robinson
  8. 8. The next leader of your family business Inside outsider?
  9. 9. The family business system Family Business Family needs Business needs Emotional Facts/profits Inward Outward Little change Fast change Born into Contracted into This is where it gets interesting! © Family Business Solutions
  10. 10. Non family business- two circle model 1 2 Business 3 Ownership
  11. 11. Family business - three circle model Developed by Tagiuri & Davis, Harvard 1 3 2 Business Ownership 7 5 6 4 Family
  12. 12. © Family Business Institute
  13. 13. The model in practice
  14. 14. Move forward together with confidence What are your personal and business aspirations? Shared vision for the business and family in 2017? Where will you be in your biological life cycle? At what stage is your business life cycle? Where are you with your product life cycle/s? What innovations do we have in the pipeline? No need to wait for happiness and success?
  15. 15. Focus on the positive Working in a family business can be unique and rewarding in many ways Create enmeshed goals and implied trust among the various functional positions Have built-in teams, they often have a common philosophy of management, culture and ethics And no amount of time can replace the sense of familiarity that family members bring to the workplace Recognising and fostering these positives at times of conflict can result in easier resolution of issues
  16. 16. Unique benefits and some tricky challenges Key people are related to one another Unless family members understand and are committed to preserving these relationships, the business can destroy them. Yet the business also has to function profitably Women often use their experience in juggling activities, negotiating peaceful settlements among siblings, and acknowledging different needs to resolve conflict
  17. 17. Family Business Models (i) Family first Business first Business decisions favour Business decisions based on equality and unity as fair what’s best for the company Differences in contribution Professional principles for aren’t recognised (golf compensation, promotion course scenario) and recruitment are seen as fair A happy, united family is Principles are followed even good for the business if it leads to unequal treatment of family members
  18. 18. Family Business Models (ii) Active Passive Only family members working Ownership is open to in the business can own working and non-working shares (who is “family”?) and shareholders ownership control is in the hands of those who run the business Non active family members Non active family members lose their right to their family’s may continue to participate heritage in their family’s heritage Family wealth may be Family wealth may consolidated in a small group be diluted amongst of shareholders a large group of shareholders
  19. 19. Roles and responsibilities Conflict can arise from lack of clarity around responsibilities Casual, informal management, can cause problems as the business needs to change. Especially as the family business grows Solutions Using the disciplines that any well run company uses – managing workflow, job duties and responsibilities across functions – can help Each person understands their role and how he or she contributes to the organisation’s overall success. Problem solving is then focused on resolving the business issue rather than pointing fingers .
  20. 20. Using conflict to make business progress Set out the ground rules Establish everyone’s initial positions Confirm common interests and goals Proceed to brainstorming – everything is listed Present objective data/facts Explore benchmarks, best practice examples Reach agreement Write up and circulate the agreed action plan Clarify responsibilities and time table
  21. 21. Conflict resolution Team Good fighting Non judgemental Attack the problems Participation by all Productive Conflict Business Growth Leads to more professionally managed businesses
  22. 22. The Developmental Model Maturity Business Development Expansion/ formalisation Start-up Young Entering the Working Passing the business business together baton development Controlling owner Family Development Sibling partnership Ownership Cousin Development consortiums Developed by Gersick,Lansberg, Desjardins,Dunn Developed by Gersick,Lansberg, Desjardins,Dunn
  23. 23. Marc Isambard Brunel – April 1769 Son of a prosperous farmer in northern France Showed a talent for maths and drawing at an early age As an 11 year old, he earned his father’s displeasure by declaring a wish to become an engineer
  24. 24. Developing young family members Formal training (technical & financial) Special assignments – strategic/decisions Superior/subordinate interaction Job rotations (across functions/divisions) Goal setting and performance reviews Employee exchange Job redesign project Real challenges – stretched goals
  25. 25. Seek help in traditional ways Women who become leaders in their businesses generally know that they do not need to face these obstacles alone. Consultants who understand family businesses can help immeasurably in moving businesses to more structured, traditional management methods. Setting goals and planning implementation can bring family businesses greater benefits. And mentors and peer-to-peer networking can help family members learn of other models that work. © May 2000, Women's Business, all rights reserved. Reprinted with the permission of Women's Business.
  26. 26. Business Family Communication Solution - Family Council A separate time and place for discussing family matters that affect the business and business matters that affect the family. A forum for discussion of difficult issues, eg: Continuity and succession Hiring and firing relatives Preservation and communication of the family’s core values Without a supportive and nurturing family there can be no family business
  27. 27. What is a family business constitution? “A statement – gained by consensus – of the family’s shared values and policies in relation to the family and the ownership and management of the business. It serves to balance the best interests of the business and the well being of the family”
  28. 28. Why a family business constitution? Avoids emotionally agonising predicaments Creates “fitter” families, not just problem averters De-personalises and anticipates issues Minimises damaging behaviour patterns: “leaving issues in the air”
  29. 29. The Content Shared values and vision Family Assembly? or Sunday lunch Family employment and compensation Ownership policies Board best practice Family philanthropy Regular review intervals for the constitution Other matters that the family feel are important
  30. 30. Key considerations with example answers Q Should all family members get a job in the business? A Probably not – unless low number Q Should the business only employ the best for the job, whether or not they are family? A Yes, if the skills are not in the family Q Should family members have any relevant outside experience and/or a relevant academic qualification? A Yes, unless they are an inside/outsider or when low skills are required
  31. 31. Continued… Q Who recruits and appraises family members? A CEO or line manager Q Should the board / partners be comprised only of family members A Non Execs can be valuable. Also think of an Advisory Board Q How do you discipline family employees? A CEO or line manager
  32. 32. What do family business boards do (and senior management teams) Everything a non-family business board does and then… Help to create family business policies - ownership transfer - liquidity (capital and dividends) - employment of family members - management training - remuneration © gwe
  33. 33. What is a family assembly? “A separate time and place for discussing family matters that affect the business, and business matters that affect the family”
  34. 34. Family assemblies Forum for family discussion relating to business / social function Communication link with board and owners Initiating policies / family position papers Approving major decisions Appoint family director / observer
  35. 35. Business transfer failure in the UK 82% of SMEs facing transfer decisions do not transfer for lack of a suitable successor 6,000 avoidable business failures each year in the Business Link target market Due to lack of planning, family tensions, unsuitable successor, didn’t seek support © gwe
  36. 36. Business Link and the 10 to 30s Around 2,000 avoidable business transfer failures each year with turnover of $4bn and 35,000 employees 1,300 family businesses Helping businesses through transfer is complex Addition of family element gives rise to different and additional and often complex support needs to non family businesses Assisting a family business through transfer must consider the family element © gwe
  37. 37. Where transition can go wrong Transitional Periods Cousin Consortium 3rd 3rd 10% 2nd 2nd 30% 1st 1st 100% Sibling Partnership Controlling Owner
  38. 38. Recognise the triggers for need to transfer Retirement or new challenges Ill health Desire to turn parts of the business into cash Extreme downturn in business Stress/role change Disputes/divorce Biological process
  39. 39. Succession chaos or proven benchmarks? Capitalisation Estate of Business Plan Wills Tax Plan Business Plan Ownership Business Succession Leadership Retirement Development Family Quality of Life Career Development © Family Business Solutions
  40. 40. Family business transition planning 4. COMMITMENT Jumping to commitment is tempting - we’re off! 2. EXPLORE – where to next? Communication Involve everyone who is affected 3. CHOICE by the outcome Consensus about the Identifying key issues “best possible Exploring and testing the options outcome” (as many as possible) Letting go of the Coping old way EXPLORE Resistance TIMESCALE Doubts Size of business Fears Size of family Denial Personalities Good process helps 1. DISENGAGE – we’re on the move All “Key players” realise that the “old way” will no longer work – things have got to change © Family Business Solutions
  41. 41. Some succession paradigms Traditional Conventional Not on my shift Liquidate Only at end of career Mission goals focus Come in as managers Come in as employee Only directly involved Extended family Family matters are Encompasses secondary extended family Haste to join External employment Cornell University
  42. 42. Putting these concepts to use Recognising you are in or approaching transition Recognising the ownership, family and business leadership requirements to get through the transition Managing the inevitable anxiety and uncertainty Knowing when the transition needs to end Dr Barbara Nunn
  43. 43. Options – Business Link review – broker service? Pass on to family member/s - Valuation Trade sale – begin early, get flirting Management buy-out – accountant will help Form a cooperative – Plunkett Foundation? Close down – Insolvency Company Retain property/land sell business Sell land etc for building
  44. 44. Other real life example What do you really want? MD of engineering software company aged 51,with health problems Wife and son in the business One non family Director and shareholder Profitable business worth around £1million What happens next?
  45. 45. Recent real life example What do you really, really want? MD of Direct Marketing, family business wants to retire and move to the coast. Successful business employing 40 people, well established Wife in business One other non family director in business Daughter living in Hong Kong not interested What happens next?
  46. 46. Another real life example What do you really want? MD/Head Teacher of specialist private schools wants to retire in 4 years time Wife in business – children very young MD is highly talented in specialist field and still middle age. Very successful, four properties with large mortgages What happens next?
  47. 47. Owners 1st stage in grooming process Understand current situation & future prospects Identify, priorities, goals & timescales Evaluate all possible exit routes and tax issues Select preferred exit route, process & timing Agree optimal shape of business to achieve exit Identify obstacles, conflicts that may delay exit Agree big picture action plan
  48. 48. My very best wishes for the success of your family businesses and those you work with. Thanks for coming tonight. I hope it has been useful to you all