This document discusses issues facing the multi-generational family business Paddy's Italia. The business was founded as a pub by Paddy and is now a successful chain of restaurants led by his son Stephen as CEO. Stephen wants to pass management responsibilities to his son Dominic, but is reluctant to fully let go. Other issues discussed include how to divide business assets between children involved in the business and those not, balancing experience and education between generations, and ensuring fair compensation. The document provides perspectives on effectively addressing these challenges to help facilitate a smooth transition of the business to the next generation.

1. The Family Business:
preserving and
transferring wealth
19th November 2014

2. The Legacy Series
The Family
Business:
Preserving &
transferring
wealth
Event Partner:
Supporters:
Quinn Family
Foundation

3. Workshop Business Overview
‘Paddy’s Italia’ is a 3rd generation family run chain of restaurants.
Originally set up as a pub today ‘Paddy Italia ’ has 5 restaurants and
a franchise branch and employs 65 people.
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4. Paddy, the founder The original pub ‘Paddy’s’
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5. Quinn Family
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Stephen,
current CEO
‘Paddy’s Italia’ restaurant
Dominic,
next generation

6. Quinn Family
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Paddy
Founder, long retired
Stephen
Current CEO, Paddy’s Son
Dominic
Group
Manager
Emilo
Part Time
Coordinator
Rachel
Looking to
join the
business
Philip
Doesn’t
work in the
business
Sofia
Doesn’t
work in the
business

7. Issue:
Trust & reluctance to
‘let go’
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8. Quinn Family
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Situation
Mr. Stephen O’Hare is the current CEO and sole shareholder of Paddy’s
Italia, a successful family run chain of restaurants. He is in his early 60s
and he and his wife have five children, two of whom are involved in the
business.
Stephen’s son, Dominic, is eager to take over management responsibilities
from his father; however, Stephen is finding it difficult to step back.
Stephen’s perception is that his son is not yet capable or experienced
enough to manage the business—an outlook that is causing frustration
for his sons, especially Dominic, the eldest. This is impacting negatively on
both the family and the business.

9. Audience participation:
• This scenario demonstrates a need for communication and clarity of roles and responsibilities.
• It calls for a greater handling of power issues and struggles.
• The issue arises from the cultural difference between generations. The older generation is the
entrepreneur while the next generation represents the more professionalised approach.
• Respect needs to be shown for both incoming and outgoing generations.
• Stephen should work on trusting his judgment in appointing his successor and he should develop
his trust in others to lead the business.
• Stephen should still be kept in the loop. This may be in the form of a debriefing following the
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meeting.
• Unemotionally discuss issues. By separating business issues and family issues you can survey the
business in a more objective manner.

10. Other points to consider:
Family businesses are typically not good at planning the succession process, simply because they do not do it very
often. The typical tenure of a leader of a family owned business is 20 years, whereas, in public companies, CEOs are
in their position for usually less than 7 years.
In order to successfully transfer the business to his successor, Stephen needs to not only prepare his son, but he
also needs to prepare himself to ‘let the firm go’.
Preparing to let go is more than putting a succession plan in place and identifying a successor. For the transfer to be
successful, and to enhance the probability of success, successors need to be developed and nurtured over time.
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11. Other points to consider (continued):
A critical element in being able to ‘let go’ is investing in the process of knowledge transfer for the nominated
successor. Firms with formal succession plans require successors to: (1) ‘learn business’ through formal education
and working outside the business; (2) ‘learn the family business’ in particular the family network and network
management skills; (3) ‘learn to lead the family business’ by codifying knowledge and learning the tacit knowledge,
training in operational and financial management, and thinking strategically in the business. The most successful
multi-generational firms are those who are more adept at managing these factors.
Below are three useful and practical steps that can be used to ensure a smooth transition:
Define a timeline.
Develop a defined timeline for retirement. The timetable works better if the founder has developed it and done so
early.
Create management development systems.
Valuing and creating management development systems is part of all three earlier learning phases (4Ls), and is
important to support ‘a clear line of succession’.
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Stick to the plan.

12. Issue:
Dividing assets
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13. Quinn Family
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Situation
Stephen and his wife have five children, two of whom are currently
involved in the family business. His other three children work elsewhere,
and hold little connection to the business.
Stephen is unclear about ownership succession planning, specifically in
terms of allocating the assets amongst his children. Should he only divide
the assets between the two children that are working in the business or
should he also include his other three children?
This issue is causing tension between Stephen and his eldest son Dominic,
who believes he should inherit the entire business.

14. Audience participation:
• This issue developed from a lack of communication.
• This problem can manifest when family members feel a sense of entitlement to the business.
• It may be necessary to separate business assets from heritance assets.
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15. Other points to consider:
U.S. evidence suggests that 70% of wealth transitions fail (Williams and Preisser, 2003). Typically, the failure in
transition is attributed to a breakdown in communication and trust in the family unit, and a lack of preparation of
the next generation. Successful transition requires soft skills such as communication, knowledge transfer and
learning, in addition to building industry, network, and entrepreneurial skills.
The biggest hurdle family business owners must jump is the mindset of treating children equally. In dividing family
business assets there is rarely fairness in the equal division of assets. Instead, owners must consider being fair and
equitable. These goals can be mutually achievable.
One option would be to use a ‘buy-sell agreement’ that equally divides shares of the business among all of the
siblings. The agreement, however, could give the eldest son (Dominic) the first right to buy the shares owned by his
siblings. The younger siblings would benefit from the sale of those shares, while Dominic would retain ownership of
the family business.
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16. Issue:
Experience vs.
education
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17. Quinn Family
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Situation
With a strong entrepreneurial spirit, but no formal education, Stephen
took over his father’s pub/restaurant business at the age of 21. He
worked hard for the next forty years and grew the business into a very
successful company, experiencing firsthand the ups and downs, successes
and failures of the business. The sacrifices he made and fear of scarcity
along the way help him manage the reality of having significant wealth.
Stephen’s children, on the other hand, have all received a formal
education, two of them with Masters degrees. The issue of experience vs.
education is now posing a problem between Stephen and his son Dominic,
who both view their ‘past’ as providing them with the authority to make
the best decisions for business.

18. Audience participation:
• This issue requires acceptance and compromise from both generations, with the new generation
accepting traditional elements of the business and the outgoing generation embracing new
techniques.
• The ideal is to marry together tacit knowledge with education.
• Respect should be shown to both parties as both have worked for their place in the business.
• This situation calls for more open discussion among family members.
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19. Other points to consider:
Both men need to understand that the experience and tacit knowledge held by Stephen, and the formal education
of Dominic, are both equally important going forward and to make decisions for the business.
A key element in preparing to let go of the business, and thus the implementation of a successful transfer of
wealth, is the process of knowledge transfer. One of the most valuable assets in a business is the ‘know-how’; this
is a core intangible asset of the business.
Moores and Barret (2010) suggest the ‘inside-outside’ paradox for acquiring and transferring business knowledge.
‘Going outside’ the family business to obtain formal education and work in other companies provides vital learning
opportunities to develop new skills and broader perspectives not readily available within the family business. It also
allows the family member to prove themselves worthy of career progression and promotion into senior
management roles, an important pathway in order to ‘return inside’ the family firm where they will learn the
unique aspects of the family business. Family business leaders hold specific knowledge, often based on tradition,
and part of ‘the way we do things around here’. It is important to capture theses traditions in order to explain why
‘we do things the way we do’ and what is unique to the firm. The successor needs to spend time with the
incumbent when he/she ‘returns inside’ in order to ensure this transfer of this ‘tacit’ knowledge takes place.
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20. Other potential issues to consider
Compensation &
equality
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21. Quinn Family
Foundation
Situation
Throughout his time in the business, Stephen has always held a modest
salary. Often, in order to attract experienced professionals in areas where
he lacked expertise, Stephen would offer a higher rate of compensation
than his own. However, the 3rd generation have earned significant
salaries and have owned luxury company cars since they first joined the
company. This is causing tension amongst the non-family employees. As
Stephen is now approaching his mid-60s he is becoming increasingly
conscious that he has failed to adequately plan for his retirement. After all
his years of hard work in the business he would now like to provide
financial security for his wife and himself. He suggests a “pay-out” upon
retirement, but his son Dominic is not too keen on the idea…

22. Points to consider:
Any family firm has three choices of orientation: family-first, ownership-first or management-first. In family-first
businesses, employment in the family business is a birthright. Family members are encouraged to work in the
business, and remuneration and dividends depend on family needs. In ownership-first family businesses, time
horizons for investments and perceived risk are the most important issues. Management-first family businesses
require work experience outside the family firm as a prerequisite for employment of family members. Family firms
need to be aware of their main orientation, as this will guide their strategic decisions.
In the case of Paddy’s Italia, it looks as though the business has moved from an ownership-first or management-first
family business, to a family-first business. It needs to be decided which orientation the family firm will take into
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the future.

23. Other potential issues to consider
In law involvement
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24. Quinn Family
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Situation
Stephen’s son, Dominic, is married with children. His wife comes from a
different family background to the O’Hare’s, with different values and
ways of communicating. She is very straight to the point, whereas in the
O’Hare family they tend to hint and beat about the bush a little bit. She
doesn’t get on with Stephen and is always pushing for Dominic to take his
Father’s position as MD of the business.

25. Points to consider:
Approaches to this issue vary, and there are interesting cultural differences around the world. At one extreme
(common in some Mediterranean countries and in Latin America), in-laws are fully accepted and enjoy family
member status in relation to the business. At the other extreme (expecially in the U.S.), in-laws are often excluded,
not just from share ownership, but also from any involvement in the business or its family governance architecture.
One of our ‘case companies’ has take a middle course. They have adopted a formal entry process to the family
business covering both young family members and their prospective spouses. They are invited to annual meetings
(before which they sign confidentiality agreements) at which they receive a detailed briefing from family leaders on
financial and trust arrangements in place, along with the opportunities and roles available for new family members.
The main aim of the briefings is to ensure that each new family member finds out what their new family can expect
and what is expected of them. With benefits balanced by obligations, the positive message is clear – that new
members are welcomed into the family, but they are required to respect rules and traditions that have developed
across generations.
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26. Other potential issues to consider
Brothers vs. sisters –
women in business
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27. Quinn Family
Foundation
Situation
Emilio and Dominic are brothers, both work within the family business.
Dominic is older than Emilio and has been in the Business since he
graduated…Emilio has gone onto college but has always worked summers
and Holidays in the Family Business and now works part time.
Emilio has discovered that their Father has decided to make their sister
Rachel who is recent masters graduate an HR Director…Dominic thinks
this is a great idea, whereas Emilio is freaking and saying that it just
cannot happen….

28. Points to consider:
In May 2014, the Irish Independent published an impressive list of businesswomen entitled, “The 50 most
influential and powerful women in business.” Such a list would have been unimaginable even 30 years ago, and it
stands as a testament to the tenacity, ability and ambition of women in business. Among those 50 were Margaret
Heffernan and Sharon McMahon of Dunnes Stores, Caroline Keeling of Keelings Fruit and Marion O’Gorman of the
Kilkenny Group
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29. Event Partner
Our Supporters
Quinn Family Foundation

30. DCU Centre for Family Business
www.dcu.ie/centreforfamilybusiness
Email: familybusiness@dcu.ie
Phone: +353 1 700 6921
Linked In: DCU Centre for Family Business
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