family business legacy workshop - 25th sept

The Legacy Series The Family Business: Moving from mine, to ours, to theirs

Event Partner:

Supporters:

Quinn Family Foundation

The Family Business: Moving from mine, to ours, to theirs


PART 1

Country Crest Family Business StoryMr Michael Hoey

The Elephant in the roomDr Justin Craig

Grooming for success and learning to let goMr Niall Glynn

PART 2

Workshop & Discussions

Dr Justin Craig

The Elephant in the room


D’Amore-McKim School of Business

Family BusinessBusiness Family

Families in Businesses


Elephant in the RoomElephants in the RoomElephants in the Rooms

MineOurs Theirs


Meet…The Elephant in the Room

AKA “Itsinevitable”



Elephant in the RoomElephants in the Room

MineOurs


Families IN Businesses

Elephants in the Rooms

Theirs

“Elephant(s)”• The “Elephant” is linked to Tension• Tension is linked to…CHANGE• Change in…

– Ownership– Management– Strategy– Innovation– Industry– Technology– Demographic– Societal


…Bank Manager…Government…Regulation…Interest Rates…Overdraft…Climate…Supplier…Major customer…Mother in law…Daughter in law…Son in law

Mine - Ours - Theirs

• G1: “Elephant”/Tension/Change (ETC) = Succession…4Ls


G1 - Moores & Barrett’s 4Ls

Strategic

Operational

Emotional

Technical

Micro

Macro

Theoretical

PracticalL1

Learn Business

L2

Learn Our Family Business

L4

Learn to Let Go

L3

Learn to Lead

IN ON

STEW

ARD

SHIPAPPREN

TICESHIP

Paradox = Inside-OutsidePriority = Proficiency

Pathways = Go Outside

Paradox = Continuing DifferentlyPriority = Perpetuating Values

Pathways = Keep philosophies, not details; Learn market value of family values

Paradox = Leading by LeavingPriority = Prescience (Foresight)Pathways = Develop timeline for retirement. Create development management systems. Stick to the plan.

Paradox = Informal FormalityPriority = Perspicacity (Insight)Pathways = No simple pathways

LEADERSHIP




• G2: Es/T/C = Succession and Roles…4Rs

G2 - The Dennis Family 4R MATRIX

ROLES REQUIREMENT RESPONSIBILITY REMUNERATION

Shareholder Family member • Dividend Policy• Strategic Invest

Policy• Appoint

Directors

Dividend

Board Member Skills/Expertise Knowledge

Fiduciary Market Set Board Fees

Executive/Employee Qualifications Position Description

Market set Salary




• G3: Es/T/C = Succession and Roles and Exit…4Cs

• When you trim the tree and move to building the ‘forever company’

G3- Miller & Le Breton’s 4Cs

• Discovered that there were four driving priorities or passions behind great family businesses and their leaders:

• Continuity…to pursuing the dream: a substantive mission – to do something important exceptionally well

• Community…to unite the tribe: build a cohesive, clan like team…embrace strong values that rally people around what is important.

• Connection…good neighbors: cherish enduring, open-ended, mutually beneficial relationships with business partners, customers, and the larger society.

• Command…act and adapt with freedom: the discretion to act independently – quickly and in original ways - often to renew or adapt the firm. They typically work with an empowered top team whose members are similarly free to communicate openly and make decisions.



Families in Businesses


Elephant in the RoomElephants in the RoomElephants in the Rooms

MineOurs Theirs


Some things are inevitable …it is inevitable that roles,

requirements, responsibilities, and remuneration are sources

of tension (one of the elephants in maybe more than one of your

rooms)…consider your own version of the 4R Matrix

The Dennis Family 4R MATRIX

ROLES REQUIREMENT RESPONSIBILITY REMUNERATION

Shareholder Family member • Dividend Policy• Strategic Invest

Policy• Appoint

Directors

Dividend

Board Member Skills/Expertise Knowledge

Fiduciary Market set board fees

Executive/Employee Qualifications Position Description

Market set salary



“Itsinevitable”

Learning to let go

Mr Niall Glynn


Letting Go

Niall Glynn

© 2014 Deloitte Global Services Limited 22 Planning for Family Business Succession

Observations

1. Obstacles

2. Types of clients we see

3. Conflict – inadequate communication and changing goal posts

4. Lack of professionalism

5. Letting go - ownership level- management level


What's holding you back?

• Emotional tie to the business

• Need for security - organisational security- family security- personal financial security- psychological security

• Letting go really means relinquishing control

• If unable to let go – still need a contingency plan


Problems with holding on

Anger/frustration felt by children

Boredom – children not challenged enough

Business stagnates – lack of fresh leadership

Your business skills/stamina wanes

Capable family members leave

Lack of knowledge sharing

Children approach retirement


Role of others – its not all about the founder

→ Children: ExpectationsAcceptance

→ Spouses: CEO considering spouseSpouse considering CEO

→ Non Family


Considerations

- Having an overall succession plan

- Having a retirement policy

- Having a transition plan

- Post CEO roles

- Having a plan for retirement

© 2014 Deloitte Global Services Limited 27

Key Themes

1. Communication

2. Preparation of successors

3. Management

4. Leadership/CEO – control

5. Appropriate structures

6. Start early

Planning for Family Business Succession

© Deloitte LLP: The seminar and these accompanying handouts have been written in general terms and therefore cannot be relied on to cover specific situations;

furthermore, responses given in the seminar to questions are based on only an outline understanding of the facts and circumstances of the cases and therefore do not

form a substitute for considered specific advice tailored to your circumstances. Applications of the principles set out will depend on the particular circumstances involved

and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this seminar and these accompanying handouts.

Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this handout to their specific circumstances. Please feel free to contact any

partner. We would be pleased to advise you on the application of the principles demonstrated at the seminar to your specific circumstances but in the absence of such

specific advice cannot be responsible or liable to you for the content of our presentation.

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London

EC4A 3BZ, United Kingdom. Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu ('DTT'), whose member firms are legally separate and

independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTT and its member firms

© 2014 Deloitte LLP. All rights reserved.

Member of Deloitte Touche Tohmatsu Limited

28


Workshop Case:

The Cousins Tournament


Executive Summary“At the Blanchard family’s 1993 New Year’s Eve party, Al Blanchard talks for the first time about retiring as president of Grandview Industries. Al, 67, is standing on the back porch of his rambling Southern California home, sharing brandy and cigars with his younger brother, Morris, with whom he has worked for 27 years. ‘I only want to do this for one more year, Morris,’ he confides. ‘I’ve had enough.’ Then he asks: ‘Do you want to run the company, or should we turn it over to one of the kids?’”

Grandview is a $200 million company with 2,000 employees. George Blanchard, Al and Morris’s father, founded Grandview Industries in 1934. The original company made small motors for windshield wipers and other automobile components. Under Al’s leadership, the company has grown into a diversified manufacturer of a variety of electrical systems for vehicles and small aircraft, with five divisions in California as well as distribution outlets abroad.

Morris often expressed impatience and frustration with Al’s conservative leadership, privately. But he and Al had separate responsibilities, and conflicts were seldom evident.

In more recent years, the two brothers had developed a greater appreciation of each other’s contributions and roles; they had become closer. Morris is vice president of marketing. Al respects his brother’s opinions but remains the undisputed leader.


Executive Summary (cont.)Their New Year’s Eve conversation stirred up a lot of old feelings. George Blanchard died at age 73. The founder left equal amounts of Grandview stock to the five children. By then, Al was already running the company.

Al saw himself as the guardian of the family’s wealth and legacy. Al was determined to protect dividends and follow George Blanchard’s advice that this was the ultimate recipe for success. Still, the company reinvested and grew solidly. Al had brought four outsiders onto the board, which originally consisted of all five siblings and the company’s banker.

In the early 1980s, he took the company public but kept family control by creating different classes of stock and a holding company. The strategy worked. The company continued to grow while providing a good income to family members. The five siblings retained equal voting control of the holding company, in keeping with the wishes of the parents.

In the spring of 1993, at an engagement party for Sarah’s daughter (Sarah is one of Al’s sisters), Al announced to the family his decision to retire. Al’s announcement raised concerns about the future. Arnold, the other brother, argued that Al should remain the CEO for another 8 or 10 years. Germaine, the other sister, joked about calling her lawyer and selling her stock before morning.


Executive Summary (cont.)Al decided to create a succession committee to lay out a plan for selecting the next CEO. Peter Franklin, the owner of a large freight shipping company, and the first non-family member added to the Grandview board in 1980, agreed to serve. Peter knew Grandview was way behind in preparing the next generation for leadership. Peter figured that two family members stood out as contenders for the top job: Al’s oldest son, Joe, 42, was the oldest member of the third generation. An engineer by training, Joe worked in production for most of his career at Grandview. Morris’s oldest son, Bill, 41, worked in Europe and turned around one of Grandview’s subsidiaries. The other cousins in the company were either too young or had not yet demonstrated their ability for the top job. The cousin he admired most, Edward Chafee, 40, Sarah’s oldest son, wasn’t in the company. Using the stock he had received as a young man, Ed built a very successful electronic hardware business in Silicon Valley.

At the first meeting of the succession committee, the members agreed that no one individual stood out as the obvious choice. But Al did not want to continue as president after the end of the year. Therefore, Morris agreed to take over the CEO role for an interim period. But the committee was very troubled by this scenario and wanted Al to stay on the job. At the next meetings of the committee, the members could not agree on a plan or a list of candidates.

A short time later, Peter talked with Ed Chafee. Ed Chafee appeared to be willing to be considered for the job, if it was offered. He asked Peter to keep the conversation going.


Grandview Industries Manufacturer of electrical systems.

$200 million company.

2,000 employees.

Company CEO is Al Blanchard (67).


Company Growth

Original Company - Grandview Electrics.

George Blanchard founded Grandview Industries.

Second generation - diversified manufacturer.

Variety of electrical systems for vehicles and small aircrafts.


George

Al

Joe

Fred

Morris

Bill

Chris

Mary

Sarah

Edward

Andy

Jennifer

Germaine

John

Arnold

Stephen

Molly

Denotes that family members had/have previous or current involvement in the business


Finding the Successor Al is ready to retire. No succession plan.

Succession committee established to find the next CEO.

Committee Chairman: Non-family member (Peter).

Third-generation family members (Mary and Andy).


Succession Committee

Each Blanchard sibling will push his/her offspring as successor.

Main contenders for the job are Joe and Bill.

No obvious choice of successor.


Rising Tensions

Morris appointed interim CEO - tensions rise.

Cousin, Edward Chafee does not work in the company, however, he has demonstrated strong leadership skills. Initially he does not show interest in joining.

Edward shows interest in CEO position.


Questions for Discussion

What would you recommend to the Blanchard family?

o What should the process for choosing the next leader be?

o Should the committee be changed? Should Al and Morris be involved?

o Should only cousins with experience in the company be considered?

o Does the interim CEO plan, with Morris serving until the new leader ischosen, make sense?

The Legacy Series The Family Business: Moving from mine, to ours, to theirs

Event Partner:

Supporters:


Our Supporters


Event Partner

DCU Centre for Family Business

www.dcu.ie/centreforfamilybusiness

Email: [email protected]

Phone: +353 1 700 6921

Linked In: DCU Centre for Family Business


family business legacy workshop - 25th sept

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