Embed Size (px)
Citation preview
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
1
The Strategic Development of Family Businesses and Business Families
Prof. Panikkos Poutziouris (BA Economics, MBA, PhD, University Nottingham)
Professor of Entrepreneurship and Family Business ; Rector, UCLan Cyprus Chair, Centre for Entrepreneurial Development-Alliance-Research (CEDAR)
Fellow, Circular Economy Centre, Judge Business School, University of CambridgeFellow , Family Firm Institute ( USA)
Structure of Presentation
• The role of the family business economy
• The development axis for the owner-managed family business
• Diagnostic tools for OMFB
• The complex set of sub-systems triggered challenges
• Governance Architecture for Family Business & Business Family
• 12 Commandments for Family in Business Continuity
• Questions and Answers
The Family Business Economy in Figures
▪ 85% of all enterprises
▪ 1:3 of quoted firms are family controlled
▪ 70% of private employment , GDP activity
▪ 60:30:10 distribution across generation
▪ 3.4% reach the G4 of family owner-managers
▪ 40% are in trans-generational transition
▪ Unplanned succession destroys value
▪ ‘The Good, the Bad & the Ugly’
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
2
4718 AD - 46TH genea
®
5
It’s a lifestyle,
family affair….
Source: Leach and Bogod, 1999
Definition: What is a family firm ?
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
3
The family business legacy
Pros• strong relations, trust & pride ▪ long-term thinking: "our future"▪ operational - strategic flexibility▪ familial talent, financial capital ▪ focused , brands , global niches ▪ offer customers quality +service▪ continuity , commitment▪ financial prudence▪ Loyalty of staff/clients
Cons▪ rigid- conservative▪ pseudo-communication▪ lack of professionalism ; HRM▪ emotional > business ; introvert ▪ ltd human and £$ capital▪ nepotism ▪ conflict and family feuds▪ succession crisis▪ Entrenchment, Misappropriation
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
4
The traditional family in business
▪ Paternalistic culture
▪ Clan based relationships
▪ Complex structure driven by family emotions
▪ Patriarchal/matriarchal family leader
▪ Royale or Greco-Democratic split of shares
▪ Rubber stamp Board , introvert governance
▪ Family Business Continuity in jeopardy after crisis shocks ▪external challenges: funding, regulation, market rivalry , transfer
taxation, [compliance especially if PLC]
▪ Internal challenges: divorce, death, feud , poor trust-weak communication, exodus of heirs, fragmentation of ownership, type II agency costs owners versus owners, unplanned succession
Back to the Future Strategy: Enterprising Families Tradition + Innovation + Best Practice
• Vital to align goals across family units and generations …4>12>27
• #Build a strong foundation of agreed values & principles for charting a compatible vision, strategy and 2-tier governance to support the transformation of the traditional family business into enterprising family
• #Craft parallel strategic succession + business planning: transition of leadership, management, ownership & ‘wealth’ across generations (πλήρης πλούτος) financial, human, social, legacy
• Its all about shaping the History of the Future
• Re-discover family values , unify goals, inter-connected strategic vision for transgenerational family business continuity ?
Business AxisMaturiry 3-
G Horizon
Expand
StartYoung
Family Entry Partnership Transfer
Controlling
Owner
Sibling Partnership
Family Axis
Fast Growth
OwnershipAxis
Survival
Board
Holding
Co A Co B Co C
Μaria
1942
ΤΟΝΥ
1940
Alex
1968
Anne
1970
Paul
1968
100%
100%100% 80%
Cousin Consortium
The Development axis of the Owner-Managed Family Business
1:10
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
5
New Ideas business ?
• Food Processing Venture
• Hybrid franchising Kiosks
• Home delivery
• Organics
New Business Models (units or departments) ▪ Delicatesen
▪ Bakery, Grill house unit
▪ Green grocery unit
▪ Fishery unit
Building Operational Efficiency-Core Business
• Restructuring of stores
• Chain of 2+3?
• Economies of scale
• Logistics – Mas brand, import Co for members
Value
Time
Phase 1
Phase 2
Phase 3
Three growth horizons, EMAS Stores of Arades
15
Family
Ownership Business
Management
1 7 2
3
6 5 4
Support
Harmony
Opportunities
Dividends
Governance
Connection
Co value
Returns
Governance ExitReward,
Promotion
Power
Succession
Based on Tagiuri et al
Diagnostics : Family Owner-Managed Business Dynamics
FOMD
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
6
Family in Business-stakeholders Lank’s 15 roles
Roles1. Just Management / Employees2. Just Owner3. Just Board of Directors4. Just Family5. Family - Owner6. Family – Management/Employee7. Family – Board of Directors8. Family – Management– Board of Directors9. Family – Board of Directors – Owner10. Family – Owner – Management/Employee11. Owner – Management/Employee12. Owner – Board of Directors13. Owner – Management/Employee – Board of Directors14. Management/Employee – Board of Directors15. Family – Owner – Management/Employee – Board of Directors
8
5
13
4.
Family
3. Board of
Directors
7
6
1.
2. Owner
Management/
Employees
“The Business”
1112
159
10
14
The dilemma F-OMDs Overshadowing growth agenda
• Growth Challenge
• Models
• Markets
• Management
• Money
• My –EGO(s)
• Family Challenges, 5Ms plus …
• Culture-values
• Control
• Conflicting sub-systems
• Continuity
• Commitment
• Congruence of goals
• Communication
• Capital for growth ($, HR)
• Cash for love (passive owners)
• Community of loyals, ROOTs
• Credo – Constitution Protocol
The Systemic Conflict
Familial System-emotional Business System, KPI
Despots-Patriarchs reigns CEO - hierarchy
Participation – birth rights Professional ladder
Nepotism - Succession Meritocratia
Reward – family needs Incentives schemes
Promotion – people ends People –means
Financial autonomy Capital options
Dividend – personal needs Business needs
Growth – on family terms Market tuned
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
7
Tiers of Conflict
▪ Intrapersonal
▪ Interpersonal
▪ Systemic
Conflict Existswhen two
or more people have
incompatible goalsand one or both believe that the
behavior of the other
prevents theirown goal attainment
Is Governance Evolving : The case of G123
Shareholders: 11
Board: 11+
PrivateCo
Overlapping rolesBUT….
Is Governance Effective?How about 3rd generation?
Next Growth Phase ?Owner-Managers
Executives 11
PrivateCo
Private Co
Other Projects JVs?
The Westons in Business
Garfiefd Weston Foundation
Wittington Investment Ltd
80%20%
Weston Family
54%+5%
Real Estate Property Markets:Grand Hotel BrightonRichmond Hill HotelPrivate Markets: Equity
100% 100%69%Galen Weston
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
8
RewardsIncentivesM-SuccessionBusiness Model Growth Professionalism NEDs
O-SuccessionGovernanceDividendsValuationBuy-sellTax-InvestExit
L-SuccessionLiquidityEducationLegalsRoles, PhilanthropyFamily Office
Family
Ownership
Management
BOARDTALENT & CAPABILITYDEVELOPMENT PLAN
FAMILY COUNCILUnity
Communication
SUCCESSIONPLANNING
PROTOCOL
SHAREHOLDERS COUNCIL
Responsible Ownership
Co-evolutionary
Family and Business
Growth
Governance for the Enterprising Family
Private
Co
Private
Co
[Un]- quoted
PLC
Family
Office Family
Foundation VC
Governance for NISOS , 50 years FiB
BoD
2G1+2G2+3
Holding
Co A Co B PLC
FSC (4+1)Family Senate : 13
FSC (4+1)4xG2+4XG3
Shareholders
4x25%
Business Governance Family Governance
PhilanthropyFamily Office Investment
Education
Co B
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
9
Governance
The Clarks in Business
The ClarksG6+G7
350 shareholders
FSC (17)
Forum for
Family Agenda
Family Constitution
BoD (3: 9)
Business
Financial
Strategy
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
10
FOMDValuesGoals
Family Council Family Plan
BoDBusiness Planning
GROUP
DISCUSSIONTECHNOCRATIC
ADVICE
Strategic Business Succession Planning
DIAGNOSISEvaluation?
SUCCESSION PLAN
HARD ISSUES
£
SOFT ISSUES
REVIEW
Personal
R-Factors
Familia(s)
Branching
Commitment
G1,G2,G3
(C-Factors)
Wealth
Estate
Business
Management
Governance
Structures
Strategy
Financing
(M-Factors)
Trans-Generational Continuity Planning is multidimensional complex affair
FAMILY
STRATEGY
VALUES
CULTURE
VISION
BUSINESS
STRATEGY
HUMAN
CAPITAL
INVESTMENT
FINANCIAL
CAPITAL
INVESTMENT
BUSINESS
GOVERNANCE
FAMILY
GOVERNANCE FINANCIAL
HUMAN
SOCIAL
WEALTH
CAPITAL
Family Council
Supervisory
Boards
Family Council
Family Office
Family Charter
BoDSub-committees
CEO
Executive
Management
Business Plan
Business Values:
Respect, Trust
Ethical, Quality,
Service,
Innovation
Sustainability
Family Values:
Respect, Trust
Fairness, Ethos
Independence
Integrity,
Philanthropy
Family First Business First Enterprising Family
Membership Open toBloodline
Market basedRules, Criteria
Market basedFamily Office to offer project based employment , guidance
Compensation Equal Pay is determined byRole and performance.
Market Based Family Office-Funds to support family
Leadership Bestowed birth-right (birth-line)
Criteria based Leadership
HybridCEO-Non-Family, deputy=FamilyChair; Family
Resources To meet family needs .
Tuned to business plan
Family Office for solidarity Business stewardship, FVC new ventures
Training In the familybusiness
Outside businessexperience
Family Office to engineer Mentoring , Internships, Exchange, CPD, Ep
Governance Informal Introvert clan
BoD NED, C-Experience Sub-committees
2 tier BoD,Family Shareholders Council
Ownership In family hands, equal split
Open outsiders, VCs , Hierarchy
Classes of Shares, Holding in a Trust
Growth Family tuned Open strategic Portfolio with start ups, SMEs and JV
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
11
The Family ConstitutionRules for Living, Working, Responsible Ownership
1. Synthesis of Family - Shareholders Council
2. Values & Vision of Founder(s) – FOMD Goals
3. LR business plan: familial legacy, exit, PLC ?
4. Governance structures, BoD ; NEDs
5. Employment rules -Family Plan for Family Involvement
6. Ownership rules : Shareholders Agreements (Ords A,B)
7. Family Governance , FC, FSC
8. Financial policy (capital, dividend policy, de-investment )
9. Management-Leadership Succession Process
10. HRM Practices , non-family management
11. Philanthropy - Communication, Harmony
12. Family office , VFO, SFO
13.Respect, Trust, Unity, Communication, Professionalisation
Family Business Succession PlanningManaging The Family Component
Processes Activities Desired Outcomes
Management Succession
Ownership Succession
Family Communications
•Family Business Meetings
•Family Council Meetings
•Family Business Rules
Grooming Successors
Management Processes
Family Governance
Shareholder AgreementLegal structures
Trust / Foundation
• Integrated Family Members
•Assessed Options
• Informed Decision Making
•Comfort Levels
• Continuity
• Legacy
KPMG’s Centre for Family Business
Succession Planning Process
FEASIBLE ?
COMPATIBLE?
Founder –FOMDWANTS ?
CONSENSUS ?
REVISE
PRELIMINARY
MODEL
Consultations with Founders, all FOMDs,
Evaluation of all 4 perspectives
Personal, Family Units, Estate, Business
FOMD £ Needs across generations ; Type
of Leadership, Business Model, Funding ,
Management team, Continuity options ?
Fair Succession ? Wealth and Power Split
More Shares for active, Estate for passive
Leadership Renewal supported with Governance
Family Council to Connect all Generations
Implementation –Action Plan,
Unity-Commitment-Professionalization
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
12
Succession Planning Rules !
1. Training , discussion forum on options , rules 2. Get heirs to work outside family firm 3. Test candidates for top job with projects
▪ Its nature and nurture4. Declare next leader, develop for hot seat5. Let go and allow next CEO to lead 6. Empower, give mandate, voting shares7. Develop advisory to support family in business 8. Its all about equity not equality
▪ Offer voting shares to leaders ▪ Offer non voting shares to other active OMFB ▪ Offer family assets to other family members
9. Balance business growth and family development10. Balance tax and funding implications
CEO
ExecutiveManagement Team
BODOperating
Co 1
HoldingBoD
Family Shareholders
Council
Trust(Trustee)
IndividualFamily
Branches
Family Council
Other Partners
Family OfficeFoundation
Management
Structures
Governance
Structures
Corporate
Governance
Ownership
Governance
Family
Governance
Social
Governance
Other Investment
Vehicles
Complex Structures… Ownership
Governance
Legal
structure
Corporate
structure
Family Business Continuity Planning – Trusts and foundations
Trust / Foundation
Trustee / Foundation Council
HoldingCompany
• Family members• Professionals• Independent vs bank trustee• Private trust company
Protectors / Appointors
Shareholders’ agreementsShare classes
Segregation per asset /Segregation per family branch
Operating Companies
Assets
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
13
12 Commandments1. Define values shaping vision, goals 2. Craft an open strategic business plan 3. Develop evolving structures 4. Build communication-reconnected thinking 5. Establish governance for Business of the Business BoD6. Establish Gamily Governance , Family Shareholders Council 7. Define succession planning process8. Balance 3Cs: capital growth, control, cash for harmony9. Develop rule book for O-M-F-B continuity, family protocol, 10. Set Family office to support Investment-wealth management11. Develop Network- Family Business Exchange , FBN Greece 12. Establish neo-entrepreneurial platforms (VC)
Delphi - Ethical Virtues of Ancient Greeks
▪ Παίσ’ ων κόσμιος γίνου - As kids be smart
▪ Ηβών εγκρατής - As young be disciplined
▪ Μέσος Δίκαιος – As middle aged be fair
▪ Πρεσβύτης εύβουλος - As seniors be wise
▪ Τελευτών άλυπος - When you go, have no regrets
Strategic Developmentof Enterprising Families
Executive MBAAthens University of Economics & Business
© Professor Panikkos Poutziouris FFI Fellow, CEDAR, UCLan Cyprus
14
• Rector - Professor of Entrepreneurship and Family Business at UCLAN University in Cyprus .
• Professor Panikkos Poutziouris is a Fellow at Circular Economics Centre, Judge Business School, University of Cambridge
• He has been on the faculty of Manchester Business School-UK for almost two decades , as Fellow in SME Management , Senior Lecturer in Entrepreneurship and as visiting Associate Professor in Family Business , where he has led a number of initiatives for SMEs and entrepreneurial family firms.
• He lectures, researches, publishes and consults internationally on entrepreneurial management and strategic financial developments for families in business.
• Prof. Poutziouris has consulted with the European Commission and OECD and cooperates with many prestigious institutions including UBS Wealth Management, Tilney Fund Management, KPMG, NatWest Bank, Sand Aire Private Equity , Grant Thornton, Stoy Hayward, PwC, Coop Bank, Coutts, FBN-I etc. He is the past -president of IFERA - International Family Enterprise Research Academy, and previously served on the advisory board of IFB (UK) and as a board member-trustee of the UK - Institute for Small Business Entrepreneurship (ISBE).
• In 2011, he has been honored by the USA based Family Firm Institute – with the FFI International Award for exhibiting leadership in promoting family business themes across commercial, academic and social frontiers
