This document discusses succession planning in family businesses. It notes that succession requires hard work and commitment to answer complex questions about transferring ownership and leadership to the next generation. Effective succession planning is a journey that starts well before the current leader leaves and requires flexibility, aligning the interests of generations, and addressing tax implications. The core ingredients of a successful succession plan include preparing the current leader to transition out, selecting the next leader, and planning the leadership handoff.
Few families are able to pass along their wealth successfully to the next generation. The barriers to keeping money in the family are much more formidable than the barriers to making money in the first place. Why should this be What pitfalls are most common How can families and their advisers increase the odds of a successful intergenerational transfer of wealth How can they preserve the family’s human and intellectual capital
Judy Martel, provides insightful answers to these questions and dozens more in this richly detailed book. The Dilemmas of Family Wealth takes a fresh look at the communications barriers, misunderstandings, and generational conflicts that can pull families apart and scatter their wealth in far less time than it took to build it. Martel identifies the dilemmas that families are likely to face and offers wise counsel for overcoming the challenges they pose. Her book includes advice and perspectives from top experts in the field and frank first-person experiences related by family members with whom they have worked.
Succession planning, regardless of the age of owners or management, is not an event, but an ongoing process that needs to begin now. Find out what are the are critical decisions that need to be addressed (but not necessarily resolved today)
Activities involved in succession process 3John Johari
This document discusses transferring management of a family-owned business from one generation to the next. It emphasizes the importance of planning to help ensure a successful transition. There are four key plans needed: a business strategic plan, family strategic plan, succession plan, and estate plan. These plans can help balance family and business goals, choose a successor, and transfer ownership while minimizing taxes. Advance planning is crucial as many family businesses fail to survive across generations due to a lack of planning.
The document discusses the unique strengths and challenges of family-run businesses. It outlines several advantages family-run businesses have over publicly owned companies, such as flexibility, long-term thinking, strong corporate culture and better labor relations. However, only 3% of family businesses survive into the fourth generation, as many struggle with succession planning and an inability to innovate and evolve with changing markets. The key challenge for long-term survival is preparing the business for continuous renewal and innovation beyond just running existing operations.
Family Business Course - Designing your family business ownership - No.2.pptxSilvan Mifsud
The document discusses different models of family business ownership, including sole owner, partnership, distributed, and concentrated. It explains that the type of ownership determines whether family business assets are integrated or separated, who can be an owner, and where control is placed. The implications of each type are explored. The key is for family business owners to understand the different options and choose the type of ownership that best fits their current family and business needs and situation. Ownership models may need to transition over time as circumstances change.
Ownership transition activity in the architecture and engineering (A/E) space is certainly on the upswing with the Baby Boomer generation looking to retire in increasing numbers. But, how ready are you for taking on the task of transitioning ownership of your firm? Have you primed the pump with a list of possible successors?
The document provides guidance on maintaining family harmony during the succession planning process for a family business. It emphasizes the importance of open communication between all family members, including those involved in management and those who are owners. It recommends establishing regular family meetings with set agendas to discuss both business and family matters in a transparent way. This allows different views on issues like reinvesting profits or transition plans to be heard from all sides. The examples show how both a daughter running the business and her non-involved brother feel there is a lack of discussion and transparency currently. The advisor recommends the family begin holding formal meetings to improve understanding and prevent disputes over the business.
Family Business Course - The Need to Survive Setting the Scene - No.1 - For P...Silvan Mifsud
The document discusses key aspects of family businesses, including:
- Family businesses are complex systems influenced by relationships between family members, business hierarchies, and owner power dynamics.
- They can either sustain across generations by prioritizing long-term decision making, or be destroyed by uncontrolled conflict between owners.
- Their success relies on understanding individuals' motivations, balancing competing interests through collaboration, and avoiding unintended consequences of interconnected decisions.
- Future sessions will address the powers family business owners wield to design, decide, value, inform, and transfer their business that can sustain or destroy it.
Few families are able to pass along their wealth successfully to the next generation. The barriers to keeping money in the family are much more formidable than the barriers to making money in the first place. Why should this be What pitfalls are most common How can families and their advisers increase the odds of a successful intergenerational transfer of wealth How can they preserve the family’s human and intellectual capital
Judy Martel, provides insightful answers to these questions and dozens more in this richly detailed book. The Dilemmas of Family Wealth takes a fresh look at the communications barriers, misunderstandings, and generational conflicts that can pull families apart and scatter their wealth in far less time than it took to build it. Martel identifies the dilemmas that families are likely to face and offers wise counsel for overcoming the challenges they pose. Her book includes advice and perspectives from top experts in the field and frank first-person experiences related by family members with whom they have worked.
Succession planning, regardless of the age of owners or management, is not an event, but an ongoing process that needs to begin now. Find out what are the are critical decisions that need to be addressed (but not necessarily resolved today)
Activities involved in succession process 3John Johari
This document discusses transferring management of a family-owned business from one generation to the next. It emphasizes the importance of planning to help ensure a successful transition. There are four key plans needed: a business strategic plan, family strategic plan, succession plan, and estate plan. These plans can help balance family and business goals, choose a successor, and transfer ownership while minimizing taxes. Advance planning is crucial as many family businesses fail to survive across generations due to a lack of planning.
The document discusses the unique strengths and challenges of family-run businesses. It outlines several advantages family-run businesses have over publicly owned companies, such as flexibility, long-term thinking, strong corporate culture and better labor relations. However, only 3% of family businesses survive into the fourth generation, as many struggle with succession planning and an inability to innovate and evolve with changing markets. The key challenge for long-term survival is preparing the business for continuous renewal and innovation beyond just running existing operations.
Family Business Course - Designing your family business ownership - No.2.pptxSilvan Mifsud
The document discusses different models of family business ownership, including sole owner, partnership, distributed, and concentrated. It explains that the type of ownership determines whether family business assets are integrated or separated, who can be an owner, and where control is placed. The implications of each type are explored. The key is for family business owners to understand the different options and choose the type of ownership that best fits their current family and business needs and situation. Ownership models may need to transition over time as circumstances change.
Ownership transition activity in the architecture and engineering (A/E) space is certainly on the upswing with the Baby Boomer generation looking to retire in increasing numbers. But, how ready are you for taking on the task of transitioning ownership of your firm? Have you primed the pump with a list of possible successors?
The document provides guidance on maintaining family harmony during the succession planning process for a family business. It emphasizes the importance of open communication between all family members, including those involved in management and those who are owners. It recommends establishing regular family meetings with set agendas to discuss both business and family matters in a transparent way. This allows different views on issues like reinvesting profits or transition plans to be heard from all sides. The examples show how both a daughter running the business and her non-involved brother feel there is a lack of discussion and transparency currently. The advisor recommends the family begin holding formal meetings to improve understanding and prevent disputes over the business.
Family Business Course - The Need to Survive Setting the Scene - No.1 - For P...Silvan Mifsud
The document discusses key aspects of family businesses, including:
- Family businesses are complex systems influenced by relationships between family members, business hierarchies, and owner power dynamics.
- They can either sustain across generations by prioritizing long-term decision making, or be destroyed by uncontrolled conflict between owners.
- Their success relies on understanding individuals' motivations, balancing competing interests through collaboration, and avoiding unintended consequences of interconnected decisions.
- Future sessions will address the powers family business owners wield to design, decide, value, inform, and transfer their business that can sustain or destroy it.
This document discusses strategies for business owners transitioning from being an entrepreneur to an investor. It covers the key decisions of who will own the business next, when to transfer ownership, and how to structure the transfer. Some important points discussed include assessing the family's financial goals, building an expert advisory team, using valuation discounts and trusts to efficiently transfer assets and reduce taxes, and preparing family members to manage wealth after the business is sold or transferred. The overall goal is to thoughtfully plan the transition well in advance to achieve the family's objectives and ensure financial security going forward.
The document summarizes key themes and issues to be discussed at a family business workshop, including:
1. Reviewing the founder's original vision and whether it remains valid as new generations become involved in the business.
2. Motivating potential successors and examining business processes to determine the best management structure for future growth.
3. Ensuring company values and the skills/ambitions of the next generation are aligned with the business's direction.
4. Discussing the founder's plans for partial retirement or exit and succession planning both within and outside the family to ensure continuity.
The document discusses the importance of succession planning for family businesses. It notes that few family businesses survive past the third generation due to a lack of planning. It outlines many common mistakes in family succession plans, such as not properly preparing successors, hanging on to control too long, and preferring blood relatives over more qualified managers. The document provides suggestions for doing succession planning well, such as having an open process, hiring experienced advisors, preparing the business and family, and putting the interests of the business and future generations first.
Les MUST of Family Businesses- HOT EXECUTIVE TOPS.pdfSalim Hajje
Planning, starting, operating and retiring from a family business can be difficult. Issues such as succession and pay, corporate governance and recruiting top talent pose special problems for these kinds of organizations. Rivalry among siblings who inherit a family firm is often the kiss of death for even the strongest family business. Nonfamily members, even those who are senior executives or directors, often feel that the family treats them unfairly or fails to listen to them.
In this guide, Dr. Salim Hajje analyzes and provides excellent advice about how to solve such seemingly intractable problems. His suggestions come out of his long experience successfully advising family-run businesses in the MENA region. We recommend this sage and savvy guide to family-business founders, successors, inheritors and nonfamily executives or directors.
In this guide you will learn:
- What makes family businesses special
- What kinds of problems they face?
- Why the issue of succession is a major challenge for these businesses
- Why family businesses should bring in outside directors to supply disinterested advice
Family Business Course - Governance Structures of Family Businesses - No.3.pptxSilvan Mifsud
This document discusses governance structures for family businesses using a "four room model". It describes the four key rooms as the Owner Room, Board Room, Management Room, and Family Room. Each room has distinct roles and members. The Owner Room focuses on ownership issues and long term goals. The Board Room oversees management and ensures goals are met. The Management Room handles daily operations. The Family Room builds unity and develops family members. The document stresses the importance of integrating the rooms through clear decision processes to balance control with effective management as a business grows.
This document provides an overview of succession planning strategies for family businesses. It discusses three key levels of succession planning: management, ownership, and taxes. Several components of an effective succession plan are outlined, including identifying target roles, assessing competencies, and ongoing training programs. A five-stage succession planning model is also described in detail. The document emphasizes that succession planning is critical for family businesses given the large generational shift currently taking place, and the low survival rates of such businesses across generations without proper planning.
To be an effective leader in a multicultural corporate environment requires understanding both the practical and emotional challenges of expatriate leadership. Leaders must prepare thoroughly to take on large roles in multinational companies which offer attractive career paths but also greater difficulty being away from family and familiar culture. Expatriate leaders have the responsibility to understand the personalities of many cultures including their own employees and must be able to quickly interpret cultural behaviors and differences, as diversity across the world poses the greatest challenge. Accepting and embracing change is essential for a controlling role abroad, as lifestyle, customs and motivated employees will differ. Leveraging uneasiness from change to drive innovation in leadership and thoroughly understanding how experience benefits the new organization are keys to success.
This presentation discusses a process of assisting family owned and closely-held businesses in developing transition plans and creating the strategy unique to each company to achieve the owners’ goals.
The core concept behind Dirty Little Secrets of Family Business is not a “dirty little secret” at all. In fact, it’s an obvious realization: Families and businesses are not the same. The problem (and this is where the “dirty little secret” comes in) is that most under-performing family businesses don’t realize this. Serious problems can occur when you mix family problems with the family business and vice versa. When family members don’t communicate, are under-prepared or overpaid, the family business is destroyed.
The way out of this little conundrum for family businesses is proper planning, but author Henry Hutcheson is focusing on more than a succession plan or family meeting. His goal is to tackle five “traps” that family businesses often fall into. These are problems in:
• Communication,
• Delegation,
• Financial Responsibility,
• Fair Compensation and
• Education.
By addressing these “traps” with policies and procedures, family businesses can steer clear of the majority of relationship-destroying behaviors that plague other businesses.
Happy Reading
This document provides advice from several executives on managing employee communication and culture during acquisitions. Key points include:
1) Reducing uncertainty for acquired employees by clearly outlining how the acquisition benefits customers and the employees' role. Engage employees in defining customer value.
2) Being transparent about changes, timelines, and how acquired employees fit into the new organization. Have contingency plans for employees who want to leave.
3) Preserving the best parts of both company cultures while exposing employees to the benefits of the new combined culture. Send employees from both companies on visits to understand each other.
4) Defining what will change and remain the same, communicating repeatedly, and establishing accountability to ensure new ways
This document discusses organization development in family-owned businesses. It begins by defining the family business system as consisting of the business, ownership, and family systems. It then outlines some critical issues facing family firms, such as conflicts during generational transitions of leadership and ownership. The document concludes by describing some typical organization development interventions that practitioners can use when working with a family business, such as facilitating family meetings, addressing both business and family systems issues, and building trust throughout the engagement.
The document discusses succession planning for family-owned construction businesses. It notes that only 20-33% of such businesses survive to the next generation due to lack of proper planning. The key aspects of succession planning discussed are choosing a successor, valuing the business accurately, protecting the owner's credit reputation, and structuring the transfer of ownership to minimize tax liability. It stresses the importance of training successors over time and strengthening the business before transitioning ownership.
Business transformation - Building the company to SellBrowne & Mohan
Small companies though faster and nimbler than larger companies and MNCs, do experience headwinds, hit a growth plateau and face uncertainties. Small companies are faster because of the founder mentality, which is a sense of mission and a passion for front line customers. They have a deep understanding of what their customers want. This is what makes them successful. However, smaller companies tend to be very dependent on a few customers. They find it difficult to sustain their effort in the long run. The owners of these companies usually depend on preferential access to clients, capital and talent to achieve initial success. Replicating this pattern in the long run is difficult. To be sustainable in the long term needs an ability to scale. At this stage, founders are faced with two options – grow and transform the company so that it can be sustainable. Or, they often think of exiting the business due to challenges in succession, lack of ability to invest etc. Even if they need to sell the business, there still is a runway to grow and transform the business for sale. Though the two options involve undergoing a transformation of sorts, the agenda and goals will be a different in each.
It is clear that companies, whether old economy or start-ups, need to work on a few areas before they sell out. All of these companies seem to be adding value somewhere which is what makes them attractive to buyers. Start ups in Israel take 4 years to sell out and on an average make 7 times their Return on Investment. In France they take 7 years to sell out and the ROI is less than 4. German companies too an average of 4 years to sell out, and their return was 2.5 times their initial investment. For most start ups, it is new technology which others think will be the next big thing. But there are lot of investors like Warren Buffet and large corporations, which make strategic investments to park their cash safely, especially given the uncertainty in the global economy. For them, old economy companies that can deliver regular dividends and has a self sustaining business will always remain attractive. Hence the question is what companies need to do to transform themselves to sell. Asian paints for example bought out the brand and entire front end sales of Ess Ess bathroom products, because of the capability Ess Ess had developed in this area. French company Lactalis acquired Tirumala Milk products for its niche products and infrastructure that it built over the years. Be it chemicals, pharma or engineering, M&A of small companies have been happening for various reasons like the people and skills possessed, functional competencies, benefits of integration to the buyer, regulatory clearances available or strong presence in the value chain.
The document discusses how family businesses differ from other businesses in their approach to long-term strategy and innovation. It notes that family businesses are focused on multi-generational continuity rather than short-term gains, allowing them to plan decades and centuries into the future. Key factors that enable family businesses to innovate include their dynastic will to pass the business down through generations, mission statements tied to family values, leaders with longer tenure for strategic planning, and strong lasting relationships with stakeholders. The document argues that these same principles of long-term thinking, valuing tradition, and relationship-building could benefit non-family businesses as well.
Family Business Course - Session 7 .pptxSilvan Mifsud
This document discusses various challenges that family businesses face with employing family members. It addresses several key issues:
1) Deciding whether to have entry rules for family employees and what type of rules (e.g. no family allowed, glass ceiling, level playing field). The most successful policies encourage interested, committed family members while avoiding nepotism.
2) Developing career paths for family employees, such as having undefined paths, following the company's standard path, or having a custom family path. Common mistakes are providing too little guidance or placing family in roles beyond their competence.
3) Ensuring family employees receive honest, constructive feedback and development throughout their employment, instead of being ignored or coddled
Family Business - Entrepreneurship Developmentdamleaj
This document provides an overview of family businesses. It begins by defining a family business and explaining their importance. It then discusses the different types of family businesses and family business owners. The document outlines the responsibilities and rights of family business shareholders. It also covers succession in family businesses, including the importance of planning and some strategies to ease the transition process. The document discusses some common pitfalls of family businesses and provides strategies to improve their capabilities and performance. Finally, it lists some rules that can help family businesses succeed across generations.
Business succession planning involves selecting and preparing successors for a company's current managers and owners to allow the business to continue operating if a key individual departs unexpectedly. Succession planning is especially important for family-owned businesses to address issues like different family members' roles and compensation. A well-drafted succession plan and buy-sell agreement outlines what happens to an owner's equity if they retire, die, or become disabled, ensuring the departing owner or their estate is compensated and the business can continue smoothly under new ownership. Buy-sell agreements should specify valuation methods, funding sources like life insurance, and restrictions on transferring ownership to unwanted third parties. Seeking an attorney's help in drafting these agreements can anticipate issues and ensure all
What do a single-owner business, a sibling partnership and a multi-shareholder “ Cousin consortium” have in common? They all are led by people who must have a Guiding Dream –in case of multiple owners, a Shared Vision of where they want to go.
Yet they are fundamentally different systems of guidance. As a successful firms evolve over several generations , they require radically new communication routines , more formality & documentation and face different issues in the process of preparing & selecting new leaders.
The author defines healthy family business as “ Having fun making money together”. Combined with his assumption that ownership is the most useful frame of reference for understanding a family business, “ Making money together” must come to include appropriate involvement in ownership and governance, not just a lifetime job. And the most important factor in the successful sharing of ownership is the SHARED DREAM.
The 3 principles of this book :
• The key to understanding where true power lies… is ownership.
• Succession is a journey.. determined by the family’s shared dream.
• Continuity- depends on instilling a sense of ownership in every generation.
The document discusses family businesses, including definitions, stages of development, common issues, and characteristics of healthy vs unhealthy family businesses. A family business is defined as a business with significant ownership and commitment from family members. Family businesses typically go through entrepreneurial, specialized, process-driven, and market-driven stages. Common issues include leadership succession, liquidity, non-family executives, and compensation. Healthy family businesses manage conflicts, respect boundaries, and make decisions to benefit both family and business.
20230201_Business Reality Check - FINAL.pptxSilvan Mifsud
This document outlines the sections of a business reality check report: economic and industry analysis, strategic direction, governance, management, track record and financial analysis, company valuation, and environment and sustainability. Each section is described in terms of the analysis it includes and the benefits the business can obtain from understanding that section, such as identifying opportunities and threats, assessing strengths and weaknesses, ensuring effective management, and improving financial oversight, valuation, and sustainability practices. The overall goal is for businesses to use this report to better understand their position and make informed decisions to improve performance and long-term success.
Family Business Survey - Presentation.pptxSilvan Mifsud
The document summarizes key findings from a survey of family businesses in Malta. It finds that 50% of businesses with a board of directors lack a written strategic plan. 95% of businesses without a board also lack such a plan. Businesses without strategic or succession plans prioritize retaining staff and finances over adaptation. Those with plans emphasize training, technology, and succession. The insights suggest governance structures influence business priorities and succession planning.
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Similar to Family Business Course - Succession Planning in Family Businesses - Session 6.pptx
This document discusses strategies for business owners transitioning from being an entrepreneur to an investor. It covers the key decisions of who will own the business next, when to transfer ownership, and how to structure the transfer. Some important points discussed include assessing the family's financial goals, building an expert advisory team, using valuation discounts and trusts to efficiently transfer assets and reduce taxes, and preparing family members to manage wealth after the business is sold or transferred. The overall goal is to thoughtfully plan the transition well in advance to achieve the family's objectives and ensure financial security going forward.
The document summarizes key themes and issues to be discussed at a family business workshop, including:
1. Reviewing the founder's original vision and whether it remains valid as new generations become involved in the business.
2. Motivating potential successors and examining business processes to determine the best management structure for future growth.
3. Ensuring company values and the skills/ambitions of the next generation are aligned with the business's direction.
4. Discussing the founder's plans for partial retirement or exit and succession planning both within and outside the family to ensure continuity.
The document discusses the importance of succession planning for family businesses. It notes that few family businesses survive past the third generation due to a lack of planning. It outlines many common mistakes in family succession plans, such as not properly preparing successors, hanging on to control too long, and preferring blood relatives over more qualified managers. The document provides suggestions for doing succession planning well, such as having an open process, hiring experienced advisors, preparing the business and family, and putting the interests of the business and future generations first.
Les MUST of Family Businesses- HOT EXECUTIVE TOPS.pdfSalim Hajje
Planning, starting, operating and retiring from a family business can be difficult. Issues such as succession and pay, corporate governance and recruiting top talent pose special problems for these kinds of organizations. Rivalry among siblings who inherit a family firm is often the kiss of death for even the strongest family business. Nonfamily members, even those who are senior executives or directors, often feel that the family treats them unfairly or fails to listen to them.
In this guide, Dr. Salim Hajje analyzes and provides excellent advice about how to solve such seemingly intractable problems. His suggestions come out of his long experience successfully advising family-run businesses in the MENA region. We recommend this sage and savvy guide to family-business founders, successors, inheritors and nonfamily executives or directors.
In this guide you will learn:
- What makes family businesses special
- What kinds of problems they face?
- Why the issue of succession is a major challenge for these businesses
- Why family businesses should bring in outside directors to supply disinterested advice
Family Business Course - Governance Structures of Family Businesses - No.3.pptxSilvan Mifsud
This document discusses governance structures for family businesses using a "four room model". It describes the four key rooms as the Owner Room, Board Room, Management Room, and Family Room. Each room has distinct roles and members. The Owner Room focuses on ownership issues and long term goals. The Board Room oversees management and ensures goals are met. The Management Room handles daily operations. The Family Room builds unity and develops family members. The document stresses the importance of integrating the rooms through clear decision processes to balance control with effective management as a business grows.
This document provides an overview of succession planning strategies for family businesses. It discusses three key levels of succession planning: management, ownership, and taxes. Several components of an effective succession plan are outlined, including identifying target roles, assessing competencies, and ongoing training programs. A five-stage succession planning model is also described in detail. The document emphasizes that succession planning is critical for family businesses given the large generational shift currently taking place, and the low survival rates of such businesses across generations without proper planning.
To be an effective leader in a multicultural corporate environment requires understanding both the practical and emotional challenges of expatriate leadership. Leaders must prepare thoroughly to take on large roles in multinational companies which offer attractive career paths but also greater difficulty being away from family and familiar culture. Expatriate leaders have the responsibility to understand the personalities of many cultures including their own employees and must be able to quickly interpret cultural behaviors and differences, as diversity across the world poses the greatest challenge. Accepting and embracing change is essential for a controlling role abroad, as lifestyle, customs and motivated employees will differ. Leveraging uneasiness from change to drive innovation in leadership and thoroughly understanding how experience benefits the new organization are keys to success.
This presentation discusses a process of assisting family owned and closely-held businesses in developing transition plans and creating the strategy unique to each company to achieve the owners’ goals.
The core concept behind Dirty Little Secrets of Family Business is not a “dirty little secret” at all. In fact, it’s an obvious realization: Families and businesses are not the same. The problem (and this is where the “dirty little secret” comes in) is that most under-performing family businesses don’t realize this. Serious problems can occur when you mix family problems with the family business and vice versa. When family members don’t communicate, are under-prepared or overpaid, the family business is destroyed.
The way out of this little conundrum for family businesses is proper planning, but author Henry Hutcheson is focusing on more than a succession plan or family meeting. His goal is to tackle five “traps” that family businesses often fall into. These are problems in:
• Communication,
• Delegation,
• Financial Responsibility,
• Fair Compensation and
• Education.
By addressing these “traps” with policies and procedures, family businesses can steer clear of the majority of relationship-destroying behaviors that plague other businesses.
Happy Reading
This document provides advice from several executives on managing employee communication and culture during acquisitions. Key points include:
1) Reducing uncertainty for acquired employees by clearly outlining how the acquisition benefits customers and the employees' role. Engage employees in defining customer value.
2) Being transparent about changes, timelines, and how acquired employees fit into the new organization. Have contingency plans for employees who want to leave.
3) Preserving the best parts of both company cultures while exposing employees to the benefits of the new combined culture. Send employees from both companies on visits to understand each other.
4) Defining what will change and remain the same, communicating repeatedly, and establishing accountability to ensure new ways
This document discusses organization development in family-owned businesses. It begins by defining the family business system as consisting of the business, ownership, and family systems. It then outlines some critical issues facing family firms, such as conflicts during generational transitions of leadership and ownership. The document concludes by describing some typical organization development interventions that practitioners can use when working with a family business, such as facilitating family meetings, addressing both business and family systems issues, and building trust throughout the engagement.
The document discusses succession planning for family-owned construction businesses. It notes that only 20-33% of such businesses survive to the next generation due to lack of proper planning. The key aspects of succession planning discussed are choosing a successor, valuing the business accurately, protecting the owner's credit reputation, and structuring the transfer of ownership to minimize tax liability. It stresses the importance of training successors over time and strengthening the business before transitioning ownership.
Business transformation - Building the company to SellBrowne & Mohan
Small companies though faster and nimbler than larger companies and MNCs, do experience headwinds, hit a growth plateau and face uncertainties. Small companies are faster because of the founder mentality, which is a sense of mission and a passion for front line customers. They have a deep understanding of what their customers want. This is what makes them successful. However, smaller companies tend to be very dependent on a few customers. They find it difficult to sustain their effort in the long run. The owners of these companies usually depend on preferential access to clients, capital and talent to achieve initial success. Replicating this pattern in the long run is difficult. To be sustainable in the long term needs an ability to scale. At this stage, founders are faced with two options – grow and transform the company so that it can be sustainable. Or, they often think of exiting the business due to challenges in succession, lack of ability to invest etc. Even if they need to sell the business, there still is a runway to grow and transform the business for sale. Though the two options involve undergoing a transformation of sorts, the agenda and goals will be a different in each.
It is clear that companies, whether old economy or start-ups, need to work on a few areas before they sell out. All of these companies seem to be adding value somewhere which is what makes them attractive to buyers. Start ups in Israel take 4 years to sell out and on an average make 7 times their Return on Investment. In France they take 7 years to sell out and the ROI is less than 4. German companies too an average of 4 years to sell out, and their return was 2.5 times their initial investment. For most start ups, it is new technology which others think will be the next big thing. But there are lot of investors like Warren Buffet and large corporations, which make strategic investments to park their cash safely, especially given the uncertainty in the global economy. For them, old economy companies that can deliver regular dividends and has a self sustaining business will always remain attractive. Hence the question is what companies need to do to transform themselves to sell. Asian paints for example bought out the brand and entire front end sales of Ess Ess bathroom products, because of the capability Ess Ess had developed in this area. French company Lactalis acquired Tirumala Milk products for its niche products and infrastructure that it built over the years. Be it chemicals, pharma or engineering, M&A of small companies have been happening for various reasons like the people and skills possessed, functional competencies, benefits of integration to the buyer, regulatory clearances available or strong presence in the value chain.
The document discusses how family businesses differ from other businesses in their approach to long-term strategy and innovation. It notes that family businesses are focused on multi-generational continuity rather than short-term gains, allowing them to plan decades and centuries into the future. Key factors that enable family businesses to innovate include their dynastic will to pass the business down through generations, mission statements tied to family values, leaders with longer tenure for strategic planning, and strong lasting relationships with stakeholders. The document argues that these same principles of long-term thinking, valuing tradition, and relationship-building could benefit non-family businesses as well.
Family Business Course - Session 7 .pptxSilvan Mifsud
This document discusses various challenges that family businesses face with employing family members. It addresses several key issues:
1) Deciding whether to have entry rules for family employees and what type of rules (e.g. no family allowed, glass ceiling, level playing field). The most successful policies encourage interested, committed family members while avoiding nepotism.
2) Developing career paths for family employees, such as having undefined paths, following the company's standard path, or having a custom family path. Common mistakes are providing too little guidance or placing family in roles beyond their competence.
3) Ensuring family employees receive honest, constructive feedback and development throughout their employment, instead of being ignored or coddled
Family Business - Entrepreneurship Developmentdamleaj
This document provides an overview of family businesses. It begins by defining a family business and explaining their importance. It then discusses the different types of family businesses and family business owners. The document outlines the responsibilities and rights of family business shareholders. It also covers succession in family businesses, including the importance of planning and some strategies to ease the transition process. The document discusses some common pitfalls of family businesses and provides strategies to improve their capabilities and performance. Finally, it lists some rules that can help family businesses succeed across generations.
Business succession planning involves selecting and preparing successors for a company's current managers and owners to allow the business to continue operating if a key individual departs unexpectedly. Succession planning is especially important for family-owned businesses to address issues like different family members' roles and compensation. A well-drafted succession plan and buy-sell agreement outlines what happens to an owner's equity if they retire, die, or become disabled, ensuring the departing owner or their estate is compensated and the business can continue smoothly under new ownership. Buy-sell agreements should specify valuation methods, funding sources like life insurance, and restrictions on transferring ownership to unwanted third parties. Seeking an attorney's help in drafting these agreements can anticipate issues and ensure all
What do a single-owner business, a sibling partnership and a multi-shareholder “ Cousin consortium” have in common? They all are led by people who must have a Guiding Dream –in case of multiple owners, a Shared Vision of where they want to go.
Yet they are fundamentally different systems of guidance. As a successful firms evolve over several generations , they require radically new communication routines , more formality & documentation and face different issues in the process of preparing & selecting new leaders.
The author defines healthy family business as “ Having fun making money together”. Combined with his assumption that ownership is the most useful frame of reference for understanding a family business, “ Making money together” must come to include appropriate involvement in ownership and governance, not just a lifetime job. And the most important factor in the successful sharing of ownership is the SHARED DREAM.
The 3 principles of this book :
• The key to understanding where true power lies… is ownership.
• Succession is a journey.. determined by the family’s shared dream.
• Continuity- depends on instilling a sense of ownership in every generation.
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Family Business Course - Succession Planning in Family Businesses - Session 6.pptx
1. Succession Planning in Family Businesses
Silvan Mifsud, Chairperson Family Business Committee
THE MALTA CHAMBER
OF COMMERCE, ENTERPRISE
AND INDUSTRY
2. Succession needs hard work…..
Many family business owners seem
to have this “idealistic & romantic”
idea in mind, as they consider
exercising their right to transfer their
ownership to the next generation,
similar to the transfer of Power to
Simba in the epic animation film “The
Lion King”.
The idea is that one clear successor
will head the business, and the family
and other stakeholders will defer
unquestionably to the heir; and
respect across the generations and
family branches will be freely given.
It rarely if every works that way –
Putting yourhomeinorder- Helpingfamilybusinessesreachnewheights:
3. Succession is a journey…..
……that needs a lot of work and commitment to give solid answers to the following
complex and difficult questions:-
- What do you want to do with the assets and business you worked so hard to
build?
- How do you plan to REALLY let go?
- What roles should the next generation play now and in the future?
- How should you develop the members of the next generation into those roles?
- Are the relationships between yourself and the next generation and the
relationships amongst the next generation, strong enough to work through
succession related decisions together?
So as I said Succession PLANNING is a journey….it is hardly a journey or hardly any planning
has been done if succession is tackled when the family business leader is on his way out.
Putting yourhomeinorder- Helpingfamilybusinessesreachnewheights:
4. Transferringthe Business….WhatOptions?
In general there are three options for transferring the family business : sell the business, divide it, or
transition it as a whole to the next generation. The importance of this decision continues well beyond
the founder. Actions taken by each generation shape the family and business for decades.
Putting your home in order - Helping family businesses reach new heights:
Sell to an outsider
You may have good reasons to sell. Perhaps your firm’s
competitive position makes the future look bleak as a
stand-alone business. You may have received a once-in-a-
lifetime offer that’s too good to refuse. You may have too
much conflict in the owner group. Your next generation
may have no interest in owning the business together.
One word of advice. Some sale transfers fail to happen. So
in the process you should continue running the business as
if you will always own it. Keep your sales discussions
restricted to the Owner and Board Rooms and don’t
distract the management team unnecessarily. You want the
business to stay healthy in the process of a sale, especially
if it ends up falling through.
Be ready to live with whatever the buyer does with the
business or transforms it in.
Divide among next-generation members
The second form of transfer is to divide the business
itself among the members of the next generation.
There are many ways to do this. But however you
do it, dividing ownership among your children
ensures that there is no shared family business to
pass down. Instead, each branch charts its own
course.
Partitioning a business can be a good way to
minimise conflict, but it is not without downsides.
For one, the effort and resources expended to split
the business could otherwise be used to grow the
company. Additionally, this approach is hard to
replicate when ownership changes.
5. Transferringthe Business….WhatOptions?
In general there are three options for transferring the family business : sell the business, divide it, or
transition it as a whole to the next generation. The importance of this decision continues well beyond
the founder. Actions taken by each generation shape the family and business for decades.
Putting your home in order - Helping family businesses reach new heights:
Transfer the entire business
The last option is to transfer the entire business down to the next generation.
As the present family business owner you need to plan and decide to make this transition
as a matter of course, but the decision should be deliberate, taking the alternatives into
account. As an owner, you control not only the decision whether to transfer (and to
whom) but also the process. Most obviously, you choose where the assets go, what
vehicles are used (trusts etc), and when they are passed down. Ownership also brings with
it the power to select the leadership of the Four Rooms (directly or indirectly), you also can
shape how various roles are handed off.
6. Common Problems with Transferringa Business
There are certain approaches to succession planning and transferring of a business that are likely to
fail. Here are some examples.
Putting your home in order - Helping family businesses reach new heights:
A Present Leader that can’t let GO!
Family Business leaders that can’t let go,
that rule all aspects of their family business
with an iron fist. Their micromanagement
and tough behaviour, which led to family
business so far, is applied to the next
generation, which finds it impossible to
thrive under an iron-fisted senior leader.
Because of this oppressive behaviour, the
members of the next generation are
incapable of leading the business or are so
hurt by their previous experiences that they
have no interest in continuing the business.
Often, after a domineering family business
leadership – the next generation are likely
to they sell the family business.
No flexibility!
While Governance, structures, roles and
processes are important, it does not mean that if
these worked worked brilliantly well in one
generation, they cannot be modified for the next
generation.
With no level of flexibility, even when this is so
with good intentions, the senior generation can
set the younger generation up for failure by
maintaining rigid leadership roles without
allowing the younger group to consider their
own approach to leadership. Each generation
brings different interests and skills to
leadership—and the business itself may need
different leadership skills. It’s a mistake to
assume that what worked for one generation
7. When things get Stuck………
A family business and the eventual transfer of its ownership can become
stuck when owners disagree and therefore can’t prepare for a
generational transition.
A stuck family business becomes like a perpetual tug-of-war with equal
strength on both sides of the rope—nothing moves.
When a family business seems set or stuck, the only really way forward is
to shift it with the agreement of all owners. You need to find common
ground through conversations.
Putting your home in order - Helping family businesses reach new heights:
8. Successful transfer of Business…..Aligning Interests
Owners can divide up their assets among their children according to the recipients’ degree of interest in the
business, with some children inheriting shares and others receiving outside assets. The same approach can
be applied to the business ownership: you can base how you divide ownership of the company on the
different interests of the next generation.
Putting your home in order - Helping family businesses reach new heights:
Many owners want to maintain power until
late in life, but there are benefits to
distributing the economic value of your assets
before you formally hand over the reins. You
might start this distribution to begin engaging
the next generation in ownership. One way to
initiate this distribution is to pass down
economic interests to the next generation
while still retaining voting control. Some
family businesses split their ownership into
voting and nonvoting shares, then pass down
to the next generation more of the financial
benefits of ownership (via nonvoting shares)
while keeping control in the current
Others take the opposite approach. When
the current owners are ready to pass the risk
and equity appreciation down to the next
generation but want to maintain a source of
income to fund retirement, ensure a spouse is
taken care of, or donate to charity, you can
adopt a “cash up, equity down,” approach.
The current owners structure the transfer so
that they receive money over time while
passing down ownership. The transfer is
accomplished in a variety of ways, such as
pulling out the real estate from the company,
arranging directors’ fees for being on the
board, or having preferred shares behave
9. Tax Planning………
The details of tax planning lie outside the scope of these training sessions.
However for a successful transfer of assets, you will need to understand the
full suite of transfer tools and Tax implications of each.
Taxes are, of course, a significant issue for all businesses, but the role that
taxes play in a transfer cannot be under estimated.
Putting your home in order - Helping family businesses reach new heights:
10. Core Ingredients of a SuccessfulSuccession Plan……
A good succession is often described as the passing of the baton in a relay race. This
helpful metaphor points to three aspects of the process—preparing the person currently
holding the baton, selecting who will take it and planning the handoff.
Putting your home in order - Helping family businesses reach new heights:
Preparing the current leader
Gracefully shifting your powerful roles is a profound act of leadership, but the transition isn’t easy.
As a current-generation leader, you may know that the transition to the next generation is the
right thing to do, but you just can’t seem to let go. You wonder how to let go and how your
identity is (too) closely tied to the business. You may be feeling pushed by an impatient younger
generation. But you can handle a transition with grace if it’s thoughtfully planned and supported.
Well-prepared leaders create a glide path, a five- to ten-year plan to move away from the
business. Don’t expect to execute your glide path on your own. This is a major life change. You will
need the support of peers such as an advisory board, a single trusted adviser, or a coach. Your
spouse’s involvement and encouragement are essential.
11. Core Ingredients of a SuccessfulSuccession Plan……
Putting your home in order - Helping family businesses reach new heights:
Selecting the Successor/s
One of the most challenging, and potentially contentious, aspects of a leadership
transition is deciding who is most qualified to take the reins. Choosing your
successor—without damaging the family—may be even more difficult than
planning your own transition.
•Make them earn it.
•Establish a clear and transparent process.
•Ensure alignment with your Owner Strategy.
•Avoid the temptation to clone.
•Consider outside board and business leadership if no family member is qualified.
12. Core Ingredients of a SuccessfulSuccession Plan……
Putting your home in order - Helping family businesses reach new heights:
Train & Build Capabilities of the Successor/s
Shape the next generation of leadership with an early effort to engage them and
prepare them for their future roles in all Four Rooms.
• Get them trained in: Business ownership skills and concepts (e.g., financial statements, legal
structures), Family business principles and practices (e.g., Governance), Knowledge of the
family assets (e.g., shareholder agreements, key managers, business strategy, industry
dynamics), Family history and values (e.g., family constitution), Personal leadership
competencies (e.g., conflict management, team management).
• Teach them to Collaborate: In addition to building their skills as individuals, members of the
next generation need to develop their ability to work with each other. These im-portant
relationships should not be left to chance. Create spaces where they practice making decisions
together early on and with lower stakes.
13. …and finally thecommon pitfall….leaving
Succession planning alwayson the back burner…
Putting your home in order - Helping family businesses reach new heights:
• Realise that this is not just about the current ownership. You need buy-in from the
next generation.
• Put it on the agenda with a deadline. Discussions about continuity planning will
usually get delayed unless they have dedicated time.
• Consider working backward to overcome the initial stumbling blocks. Many current
owners are comfortable with the existing setup and are resistant to change. If that’s
the case, it could be valuable to avoid making immediate changes. Instead, start by
asking members of the next generation to define how they will work together when
it’s their turn. That way, they are preparing themselves to work together without
immediately changing (or threatening) the status quo. They should discuss how will
they make decisions, structure the business, define success, and so on. If nothing else,
doing so creates clarity for what will happen in the future. In parallel, ask the senior
generation how they envision the future, say, fifteen years out, when they have
stepped back. Then work backward to think through what needs to happen to get
there. This approach can make the transition seem less threatening than would
14. Succession is a process not an event…..
No succession works in a linear way.
There will be good days and bad
days. Days you will you have moved
2 steps forward and days you feel
you moved 1 step back.
As the plan unfolds, you should look
for concrete markers of progress,
such as a revised shareholder
agreement or a new governance
structure and adapt to the changes
around you.
A healthy transition is much more
comprehensive than a Simba
succession plan. It takes a lot of work
to make a thoughtful and successful
Putting yourhomeinorder- Helpingfamilybusinessesreachnewheights: