The challenges and dynamics of change and succession in a family - - PowerPoint PPT Presentation

The challenges and dynamics of change and succession in a family owned business.

• W. (Bill) McArthur

Grandad did you fire dad? Grandad, did you fire dad?

Extra variables in a family owned

business.

A system of values must be inculcated

early and consistently early and consistently.

Benevolent dictator or autocrat?

Grandad you fired Dad! Grandad – you fired Dad!

F il t l th i ht t th

Family not always the right answer to the

business question. Th t f il d i l id ith th

The extra family dynamic overlaid with the

work dynamic can be dynamite. Diffi lt i ti d i i i t “f il ”

Difficult in separating decisions into “family”

and “business” It b l i d d t di t

It became clear an independent director

was needed. S t d d i ti

Son tendered resignation New CEO appointed

The CEO Perspective The CEO Perspective

D i i t ll t f id l

Decision to sell part of a wider plan Governance/Board essential in the sale

process.

Overall main issues were:

Poor performance of some Board Members Significant different agendas for buyer and

g g y seller

Impact of confidentiality on the process. Emotional impact as a family owned

business.

Poor Performance of some of the Board Members

Attendance at Board Meetings is

essential.

Even the best pedigree doesn’t

guarantee a great fit guarantee a great fit.

The culture has to be open, fair, and

honest honest.

Board Members – Lessons learned

All Board Members should be

remunerated

Commitment to attendance, being

prepared and participation is essential prepared and participation is essential

Board members need to be comfortable

challenging the o ner and the CEO challenging the owner and the CEO

A great pedigree and great references

are no guarantee of successful directors.

CEO Perspective: Different agendas of the Buyer and Seller

First offer fell over at the 11th hour Second (successful) offer from outside

( ) the metal industry

Sale based on 2008 figures buyer Sale based on 2008 figures, buyer

bought based on YTD 2009

Weak Due Diligence – buyer wanted the

business ASAP

Agenda of Buyer and Seller – Lessons Learned

Senior Management and owners need

challenging by their advisors and board.

Choosing advisors and board is the

single biggest (and hardest) job for the single biggest (and hardest) job for the

• wner.

Poor decision making on the part of the Poor decision making on the part of the

buyer has huge impact on the seller and th i i b i d i i their ongoing business decisions.

CEO Perspective: Impact of Confidentiality

Metal fabrication in Hamilton is very

porous

Knowledge of the sale would have had

serious consequences serious consequences

External participants didn’t all have great

s stems to manage confidentialit systems to manage confidentiality

Internal confidentiality and timing was a

significant issue.

Impact of Confidentiality – Lessons Learned

Cl t ti f fid ti lit f

Clear expectations for confidentiality for

ALL participants must be communicated d i t i d th h t th and maintained throughout the process.

Have your business ready for sale

internally to minimise this issue.

Plan in advance how to manage staff if

g they become difficult (assume they will)

As CEO ensure the guidelines and

g boundaries from the Chair are clear and documented.

CEO Perspective: Emotional Impact as a family business

Staff attachment to the owner was far

greater than understood

Succession and selection of Directors

had family and personal influence had family and personal influence

A sale process is a bad time to have to

deal ith go ernance iss es deal with governance issues

The choices the buyer makes for

advisors/directors will impact the seller

Emotional Impact – Lessons Learned Learned

Governance doesn’t have to be big, but

it is essential that Board composition is right.

Not all governance decisions are made Not all governance decisions are made

with a wide enough view to future requirements requirements.

Owners must not be afraid to be

h ll d b th B d t b challenged by the Board – must be brave.

Conclusion Conclusion

In porous family businesses the

workable governance model is difficult to achieve.

Governance cannot address all the Governance cannot address all the

issues of a family business, but it is an essential part of success and essential part of success and succession. Th h d l f i

The whanau model for governance is

where the future lies.

Four Principles Four Principles

Kaitiakitanga – Stewardship and

protection.

Tau utuutu – reciprocity. Taunga tuku iho

Recovering and

Taunga tuku iho – Recovering and

holding on to the treasures and kno ledge knowledge.

Pakeha tanga – financial literacy.