What does it take to build a successful multigenerational family business? Many of the world’s most enduring companies are family businesses. Coopers Brewery, Walmart, Samsung, and BMW all have a controlling family dynasty at their centre. But these successful family firms are a rarity; most family firms fail to survive multiple generations. The statistics are grim: only 30 per cent of family businesses survive the transition from first to second generation. Just 12 per cent reach the third generation. Why do so many successful family businesses fail after the founding generation? In my years of experience as a family business adviser, I have seen generational transitions fail for many business and family reasons, and I’ve seen several common threads connecting many failures. One major reason is a lack of financial education for children born into wealth. Heirs that are ill-prepared to manage money make poor decisions and squander their fortune. Perhaps the most famous example of dissipated wealth is that of the Vanderbilts, once one of the wealthiest families of the Gilded Age. During the mid-1800s, Cornelius Vanderbilt built the family’s fortune on railroads and shipping. At its height, his fortune totalled over $240 billion in today’s dollars, making him one of the wealthiest businessmen in history. While Cornelius was a self-made man, his descendants lived extravagantly, with little concern for preserving the family fortune. By the 1970s, there wasn’t a single Vanderbilt millionaire left. The Vanderbilts had also fallen prey to another common problem: the dispersion of wealth and control among many children, in-laws, and other relatives. This left the dynasty with too many decision-makers and not enough concentration of power to push through important decisions. Many families fail to nurture a sense of responsibility, history, and family values in the following generations, neglecting what we call the spiritual and family capital of the family business. Great wealth is a privilege and without a sense of stewardship and obligation, many rich descendants fall prey to ennui and boredom, failing to safeguard the family wealth or treat the business with respect. Many problems also happen at the intersection of family and business. One key issue that many fail to overcome is a culture of nepotism, which promotes unqualified relatives into positions of power simply because they are members of the founding family. Another issue is a lack of formal governance structures and succession plans that leave the business open to power struggles, family discord, and transition problems. A cautionary tale in this vein is that of the Anheuser-Busch company, which had been successfully run by five generations of the Busch family until it was bought in 2008 by InBev in a hostile takeover. The final years of the Busch family’s tenure were marked by family conflicts, power struggles, and financial mismanagement, dooming a 150-year-old company that had survived prohibitioners, world wars, and global competition. If you are the head of a successful family business, what can you do to ensure that your dynasty survives into the third, fourth, and fifth generations? A great deal. In my opinion, the most critical lesson is to take good care of the family side of the business and develop a long-term plan for your family’s future. Educate the next generations about wealth and responsible financial management as early as possible. Too many wealthy parents fail to teach their children how to responsibly manage their inheritance. Protect the family wealth by insisting on premarital agreements and separation of personal and family property. Cultivate a family culture around your family’s history and shared values. One way that many successful multigenerational families nurture a family legacy is by developing shared philanthropic ventures that help instil respect for family wealth and its future potential. Don’t make working in the business a requirement in the family; allow each member to find their own way in the world, within or without the business. Protect the business’ future by instituting formal governance and ownership structures that separate family control from the daily management of the business. These arrangements will make it easier for the firm to raise capital, bring in outside investors, and eventually navigate generational transitions. Professionalise the business by establishing employment standards for both family and non-family employees. Consider bringing in professional managers to run the business while retaining ownership stakes for your family. Most successful multigenerational family firms are largely run by professional non-family executives while members of the family focus on diversifying and managing their wealth. Begin planning for the eventual succession of your business. Whether you intend to train up an internal successor or bring in outside managers, proper succession planning takes years. Too many business leaders leave planning too late and put the business at risk of a sudden, unplanned transition. Family discord, power struggles, spendthrift grandchildren, and poorly qualified managers can all doom a family business. Ultimately, success requires many factors to align as well as a healthy dose of luck. Developing a successful multigenerational family business doesn’t happen overnight. It requires years of planning, careful management, and the cultivation of a family culture that prioritises stewardship and a family legacy of success. About David Harland - A leader in the family business consulting field and Executive Chairman of FINH, co-founding the company in 1994, David is an expert consultant to families in business. David has facilitated multi-generational meetings of family business stakeholders to guide families through complex and emotional family communication challenges. His objective is to empower those families to long-reaching and sustainable communication processes across both family and family business communication models. David has worked extensively with family businesses across Australia, New Zealand and South East Asia, many of whom have transitioned into and beyond their second generations. By providing a process for the succession journey, David has assisted families to achieve measurable and specific outcomes. David holds both Australian and International Accreditation in Family Business Advising with Family Business Australia and the Family Firm Institute.

Royal Agio Cigars has been in the cigar business for over a century. In four generations it’s built a prosperous and premium business, ranking 4th globally and is continuing to evolve. But tobacco is a sector with limited growth opportunities, and the family who run Royal Agio has faced up to that challenge and used the most advanced modern technology to find a way forward. In this year’s PwC Global Family Business Survey, 54% of the respondents said they expect to be establishing new entrepreneurial ventures in the next five years. Royal Agio is a great example of how to do it. It started, as Jonas Wintermans explains, with a strategic review of all the possible options: “We are a very stable company with a solid balance sheet, so we had the resources to invest in diversification. My father and brother Boris, who is Agio’s CEO, started by looking at industries parallel to our own in fast-moving consumer goods. Chocolate, for example, or tea and coffee. The raw materials for those products come from the same countries as for cigars, and the sales and marketing channels are not that different. We looked at it in great depth but we realised the barriers to entry were relatively low, and competition fierce.” But high-tech and in particular 3D printing is worlds away from cigars – it seems a very unlikely choice. “Actually, it’s not as incongruous as it seems,” says Jonas. “About 30 years ago we founded ATD Machinery, now market leader in machinery for the cigar industry. So we were already familiar with developing and making very technical machinery. That’s what led us eventually to move into high-tech by acquiring NTS-Group, a tier-one supplier to optical and mechatronic machine builders. In that same year Additive Industries was founded, together with a non-family member co-founder Daan Kersten. Additive Industries has developed a modular 3D printing system to make metal parts for industry. Both the ideas and the opportunities were there; my next task was to convince my father and brother.” This is a challenge many next gens face, especially when the new idea is very different from the company’s previous activities. As Jonas says, “Differences in management style between generations can generate more ideas and it’s important for both generations to acknowledge each other’s style. For example, my father is somebody who thoroughly looks at new ideas from every angle, while I like discussing possibilities and brainstorming different options. So when I was developing the 3D printing proposal it was important for me to be well prepared before I talked to him about it. And when I showed him my idea, he asked a lot of questions, just as I expected, but I was well prepared and had all the answers ready. Then we looked each other in the eyes and he said: ‘if you can answer all these questions, it’s probably a good idea’.” One of the phases in executing the plans was to secure the funding. “That was where being a family business was a real advantage – because the funds were there. Just like most other family businesses, we had reserves on the balance sheet for these type of opportunities. And that made it easier in the early stages of Additive Industries too – we had much less stress than the average startup company, who typically spend 40-50% if their time looking for funding. That meant we could focus on the business all the time. We also benefited from the credibility that our association with Royal Agio gave us – a ‘halo effect’, if you like.” Three years on, and NTS-Group and Additive Industries are bringing a new value creation to the family firm, and giving Jonas the chance to grow a business of his own and make his mark. “The older I’ve got the more interested I’ve become in what my brother, my father, grandfather and great-grandfather have built. I wanted to find a way I could add something special of my own. I think I’ve found it.” This feature forms part of the PwC Global Family Business Survey 2016. It has been reproduced with permission of PwC.

Check out the latest research into the dynamics and relationships in family firms in Malaysia. Entitled ‘The Family & The Business,’ this nationwide survey was conducted by Grant Thornton Malaysia in collaboration with renowned national management organisation, the Malaysian Institute of Management (MIM). In conducting this survey, they set out to explore the present scenario of family businesses in Malaysia, to further understand the characteristics of these companies and assess the management concerns, attitudes over the involvement of family members and their development plans amidst globalisation. Download and read the full report below:

An important segment of family businesses is spouses in business together or copreneurs. Copreneurs share the ownership and management of a business and represent an evolving area within family business. Setting up a business together as a couple requires planning, constant communication and a great deal of hard work. The business must be formalised and this includes deciding on start-up funds, creating a team (even if only made up of two people) and dividing roles and responsibilities. The result of a well-thought business plan can be emotionally and financially rewarding. Spousal support is a source of competitive advantage in this type of family business. Couples may decide to start a business venture together for a myriad of reasons. The drain on quality time at home and the lack of stability in a shifting global economy may be some of the drives. Other reasons for setting up are the ‘glass ceiling effect’ that stops women from reaching managerial positions, downsizing, redundancy, extended working hours and travel demands in the business world. Joint ventures offer the couple the freedom to run an enterprise and the flexibility to do so on their own terms. Couples running a business together can be one of the greatest tests of a marriage. Copreneurs have their own unique set of challenges as they attempt to combine loving, intimate lives and business lives focused on the bottom line. When not addressed, these dual relationships negatively effect the marriage and business. Keys to success are equality, independence, trust,commitment, compromise, confidence in each other’s work ethic, managing working and family conflict, role priorities and role clarity. The issue of equality within the couple business venture has drawn the interest of researchers. Females in copreneurships have equal needs for achievement as their partners; they bring drive to the business and also manage the household. Some research suggests that the sharing of tasks and responsibilities between spouses in this kind of firm is not necessary equal. It was found that women, apart from their central role within the business,also assume the traditional role of household manager, while men are mainly engaged in the firm and are responsible for the decision making process. A family business of this type cannot afford to overlook half of its potential talent. One cannot make generalisations about all spousal ventures,however, research has shown that there are scenarios where the venture works most smoothly when the wife takes a behind-the-scene role. When considering starting up a copreneurship the basic recommendation is to communicate at length and listen to each other’s concerns. This decision may be approached similarly to any new job and entails careful consideration of the pros and cons. Couples will need to decide if their marriage can bear the added physical and emotional load of running a business together. Trying to anticipate the critical issues helps as couples working together have a greater potential for tension and conflict. An adaptive response to this complex reality is to have specific and clearly defined roles. Planning for the future is an important consideration and task for the couple in business. It is never too early to plan for succession and think about one’s retirement as a couple.Children of copreneurs are exposed to the business at a very young age and are well-informed prior to deciding whether or not to enter the family business. This decision effects plans for the future of the business. Copreneurs reap the benefits of early succession planning ensuring the continuity of the business with minimal disruptions. An eventuality couples may not be prepared for is the disability or death of one of the owners. Preparing for this dreaded circumstance is emotionally a very difficult thing to do, however if the time comes to put the plan into practice, the surviving spouse will be in a better position to cope with the personal crisis without having to address a business crisis as well. Another reality for some couples in business is separation or divorce. The impact of divorce is complicated, difficult and painful with the assumption that the business will be divided or sold. Divorce may end a marriage but does not necessarily end a business or lead to a family dissolution. The ability of the couple to resolve differences and heal the pain of separation or divorce has both an immediate and a long-term impact on the health and prosperity of their business and the well-being of their family. Notwithstanding all the difficulties and emotional hardship there exist couples who continue to work together even after the termination of their marriage. The potential for success in post-divorce business relationships increases when there are elements of trust in the business rapport, ability to compartmentalise, synergy, commitment to the business and positive gender issues interact. Strategies for helping family businesses survive a divorce include specific legal contracts such as prenuptial agreements. The practical recommendations made by couples who own and run a business together are to clearly define each person’s duties and decide who will make the final decision in critical areas, as well as to invest in and find time to communicate as a couple with dignity and respect. Finally, the benefits of working together are to be enjoyed and valued. About the Author - Roberta Fenech - The author is an Occupational Psychologist currently reading for a PhD at the University of London.

Trust, communication and identity are values that need to be considered when selecting a successor. Research confirms that only about one-third of family businesses survive the transition from founders to second generation of Owner/Managing Director (OMD) and only around a tenth of those survive beyond the second to third generation. According to a recent BDO survey, in Northern Ireland alone, it is estimated that 75% of privately held firms are family controlled, forming the backbone of the country’s economy. It is unsurprising, given the aforementioned attrition rates, that a lot of family firm research and practice continues to be dominated by the succession landscape and an important aspect of planning for succession, must include evaluating the values in a successor. Ian Smyth, an academic based at the University of Ulster shares his thoughts on the topic. Maintaining Your Social Capital Some family firm theorists argue that in a family-firm context, it is the ability to successfully realize and reshape the family’s social interactions that is most effective in ensuring family-firm success. What does this mean? Simply put, positive relationships are important in terms of generating and managing valuable resources for your firm – this includes relationships within the family, within the firm, within the community and with key customers, suppliers and contacts. While planning for succession then, it is vital that MD’s consider the characteristics in a family successor that will enable them to build on the family firm name and take these relationships further. Considering the qualities of a family member or indeed sibling can be a fraught process, but one that can and needs to be done, albeit with sensitivity. Yong Wang suggested that “respect, understanding, and complementary behaviour between the two generations are critical to an effective succession” and maintaining this, particularly when considering more than one sibling, can help smooth this difficult path. What then should be considered when the family’s Social Capital is at stake? The reality is that while successors may be very similar to their incumbents in terms of ideals, beliefs etc, they may well exhibit natural differences in terms of experiences in life, education and training, not to mention personality. That is not to say that differences may not be unwelcome – the successor may bring a raft of their own ideas and training that while different to the norm thus far, may be what the business needs in order to grow. Nonetheless, three key behavioural aspects of a Family’s Social Capital must be maintained namely – trust, communication and identity. These qualities must all be intentionally developed in a successor, built up and forged over a period of time and it is important that the family lays the foundation for them. Trust In any relationship, trust is garnered when confidence is developed around another individual or group’s commitment to the relationship. Evidence shows that positive early Parent-Child relationships and the nature of the emotional ties that exist within those relationships, will lead to positive outcomes in later behaviour which help to strengthen trust in family relationships. Given the stability that can occur around a positive family identity, trust involves less risk in the family firm context, hence family ties can facilitate this process. As relationships within a family endure, growing inter-reliance amongst family members can produce greater levels of trust and exchange. Nonetheless of vital importance to reinforcing this trust are the early communications around expectations and values, with successor participation in a two-way communication process vital. Consider the trust value a successor holds and eschew the ‘trust no-one’ argument in order to foster a successor that places high value on relationships built around trust. Communication Getting communication right is vital to making change happen inside organisations, yet poor communication can easily sabotage any change. More time spent communicating in an organisational context is shown to have a positive correlation with important employee-based factors such as level of effort, job satisfaction and organisational commitment. Close lines of communication in a family firm setting can be an important tool in surviving turbulent economic times and family firms with effective and transparent communication strategies will feed into strengthening the firm’s voice in both internal and external networks. All family firms will undoubtedly hold different values, but nonetheless, shared perspective, identity and the symbolically significant experiences found within a family has a basis for effective dialogue, which in turn, has meaningful implications in the business context. Communication plays a vital part in effective succession. Given that importance, the ability of both generations to be effective communicators is the second vital aspect in building Family Social Capital. Identity The hostile acquisition of Cadbury in 2009 led many academics, organisational commentators and consumers to contemplate upon the impact that the Kraft organisation would have on an organisation which, although no longer a family controlled firm by definition, still held true to the identity of the Cadbury family and still had family members as part of its board. Such an identity was based on the firm’s history, its reputation, its brands, the ability of the personnel (both family and non-family) who worked for the organisation and indeed, the family’s Quaker heritage. In a letter issued in national media by two Cadbury brothers, and former chairmen of the firm, they appealed to Kraft by saying “We, who have spent our working lives in the great enterprise founded by our family, would look to them to live up to that responsibility”. While fears existed over job cuts and brand dissolution, it was the potential erosion of the identity of the Cadbury firm that caused the most concern among commentators and consumers alike. Organisational identity provides a sense of continuity and distinctiveness to the organisation, as it describes the collective behaviour and identity of the organisation that is rooted in the organisation’s history and values. Each family firm will have their own distinct culture (i.e. set of characteristics and values), but it is the commitment to a shared identity that will lead to a greater sense of ownership from successive family members in the firm and beliefs as to exactly what the family represents, will impact upon how they relate to their social business community in terms of support, community involvement and long term commitment. Getting the blend of these three value bases in a successor is only part of the succession process, but ensuring they are considered will integrate them into the conversation with potential successors and help safeguard a family firm legacy for years to come.

For the next generation, having a family enterprise changes everything – from your tax status to power dynamics in the family. The financial decisions once made single-handedly in the business must now be shared. Josh Baron, Rob Lachenauer & Diane Coutu from BanyanGlobal explain more. Imagine you — as an extraordinarily successful business founder — have just joined the exclusive ranks of the 200,000 people around the world with a net worth over $30 million. Your laser-like focus on the business is about to give way to what we call a Second Act. A successful Second Act often poses an existential crisis because it requires a very different approach than the First Act did. The First Act involved an intense drive to build the business. Your Second Act is probably going to involve the creation of some sort of family enterprise, meaning that there will be some collective family decision-making over shared assets such as a foundation, a portfolio of investments, perhaps some businesses and, likely, family properties. Having a family enterprise changes everything–from your tax status to power dynamics in the family. The financial decisions you once made single-handedly in the business must now be shared. This territory is familiar to successful family business owners, who have long organised themselves into enterprises as the best way of collaborating and holding their families and fortunes together. Your family enterprise, however, is best described as accidental because you never intended to work together with your family; it’s a by-product of having accumulated so much wealth that will outlast you. Think of two icons of American capitalism, Standard Oil and Microsoft. Standard Oil wasn’t, and Microsoft isn’t, a family business–unlike the Rockefeller Foundation and The Bill & Melinda Gates Foundation, which are. (John D. Rockefeller, Sr. started his foundation with his son, and Bill Gates’s wife and father are co-chairs of his foundation.) In both cases, these business icons brought family members into the fold to create family enterprises to help manage their massive wealth. As family business advisers, we have seen firsthand the challenges and rewards involved in creating and running family enterprises. Engaging with your family entails a radical shift in mindset, and conversations that you’ve never had before with family members, from “What are our family values and priorities?” to “Whose money is it anyway?” Answering these questions together with your spouse and adult children is also to engage them as business partners. Even with carefully orchestrated meetings and conversations, however, things heat up by nature of the fact that if the Second Act is to be successful, you must give up some control over the money that you worked so hard to earn. The mantle of authority that you had in the corner office will be challenged. You can no longer run the show; your spouse and children can disengage from your plans at any time. This is why governance becomes essential. Without structured decision processes, it’s too easy for one generation or the other to disengage. It’s by sharing the responsibilities for the wealth with your adult children that they can learn from your experience, and also learn to be in business together. You may either be unable or unwilling to make this transition; you may try to keep a tight fist on your assets, even attempting to control them from the grave. There are, after all, many tempting tax structures that encourage wealthy people to do just this. But even more commonly, in our experience, you may want to keep control of your money because you are deeply anxious that a massive fortune can be toxic for your children and grandchildren. What if they fail to develop your work ethic – or worse? But the antidote to indulgence and entitlement is engagement, not control. By getting stuck in the control mode, you miss a great opportunity to challenge and mentor your children and to help them develop their full potential. For some of you, this may be your last chance to become the parent that you had always hoped that you might be. Consider what happened to one very wealthy business family that we know well. The owners feared the downside of wealth so greatly that they waited until family members were in their mid-30’s before telling them their true worth. “And then we dropped the bomb on them that they are incredibly rich,” one owner told us. “Dropping the bomb” is the perfect metaphor. The news shattered many of the adult children who were not prepared to deal with a massive fortune. What happened next is not at all unusual in our experience. A number of the siblings became totally disengaged from the family and were only interested in the dividends. When you don’t educate your children and grandchildren about how to live with money, then, paradoxically, life can become about nothing but money. Engaging and educating the younger generations in the Second Act, though, isn’t only about what’s best for them. It’s also in your self-interest to involve your heirs in your legacy plans, which will more likely go awry after your death unless you get your spouse and children interested. We know of one hugely successful businessman who has built up a superb portfolio of companies that he is managing in the Second Act – but without the buy-in of his adult children. They are just waiting for him to die so that they can sell off the businesses and cash in. Your philanthropic legacy could also be jeopardised by the wishes of your children. We are working with a matriarch who is deeply involved in reinvigorating medical care in the inner city. It is a 15-year project, and if her sons and daughter don’t engage in it, their mother’s work will wither or be dismantled. That would be a missed opportunity both for the community and for the family. Even when multiple generations work together to script a different Second Act, family members often feel uncomfortable in the beginning. Sometimes this distress is almost visceral, as it was in the case of a founder who sincerely wanted to pass on the family business to his sons. He would sit on his hands in meetings, trying to force himself to be patient. His natural inclination was to take control and be the decision maker. Sharing power is really, really hard. The irony is that his adult children were satisfied to have their dad continue to play the role of decision maker. It has taken them several years to step into a more equal role, to engage eye-to-eye with their parents. For a Second Act to be as successful as the First Act, the relationships have to change in both directions. In this instance, the owner ended up bringing each of his adult children into the business even though none was an expert in the field. The father supported and guided the siblings throughout the project, and collaborating closely, the brothers invested in a multi-million dollar deal that almost doubled the family’s wealth. Their father is now easing into retirement knowing that he has positioned his children for a successful future together. There is no guarantee that every Second Act will work as well as this one did. But treating the Second Act as another start-up will almost certainly destroy the wealth that you’ve created, and it is also likely to alienate your family. Of course, you can continue to be a one-person show as you move into the Second Act. But in reality, control is no longer a viable solution if you want the legacy of your hard work to outlast you. The curtain has fallen. The First Act is over. This article was first published on the Harvard Business Review & is reproduced with the permission of the authors.

Social intelligence, a slippery concept that is nevertheless crucial to family business success. Your reputation is your biggest asset. Imagine going to work at a family business and seeing the founder’s three adult children who, though they have mid-level management positions, seem to be able to come in later and leave earlier than their peers. How would that behaviour affect your perception of these three? Of the family? You would probably think a little less of them; their reputation would erode in your eyes and probably in the eyes of other employees as well. Why is this so? Because the only thing people in business can use to assess our character is our behaviour. Your reputation is created by this perception, whether or not it is an accurate portrayal of your character. Therefore, it is important to realise that the way others treat you is according to their perception or interpretation of you and your behaviour. So if this is true, how do you protect the value of your biggest asset – your reputation? A Lifelong Challenge The first of the challenges that face the next generation coming from a family business is developing their social intelligence. This challenge is lifelong. Social intelligence may be a new concept and, though it is not intellectually difficult to grasp, it is very subtle and takes time to fully integrate into your life. Let’s define social intelligence as aligning your character with your reputation. If your reputation is how others see you based on your behaviour, then your character is the true you. Narrowing that gap between the two is the practice of social intelligence. Social intelligence is important for anyone, but there are two very big reasons it is even more important for the members of the next generation from a family business. First, families are closed systems, which means they are less likely to be open to outside feedback. Families value harmony, and as such they are more hesitant to confront behaviour. For example, if the boss’s son was hired with a CV so poor that no other company would have ever considered hiring him, then those who know about the nepotism will certainly change their perception of this young man. The second reason that makes social intelligence important for the next generation is that the next generation must understand how to juggle all of their roles. In family businesses, members of the next generation may be new to managing multiple roles: family member, employee, and even owner. For example, leaving work early to play golf with dad might be a kind thing for a daughter to do, but not a professional thing for a mid-level manager to do. Bad Education Developing social intelligence isn’t always an easy task. The problem may be caused in part because of education; school and college typically send us the wrong message. They implicitly tell us that if we are technically competent we will succeed in our lives and our careers. Remember in school, if you got the top score on the exam you got the top grade, regardless of whether you were offensive, rude, or just socially awkward. I knew a student years ago who had practically perfect grades yet he received no job offers after several interviews. He was shocked. Perhaps he felt he had upheld his end of the bargain: he had earned good grades and now he was entitled to a correspondingly good job. Buying into this mindset is a set-up for disappointment, frustration, and failure. Being technically competent is important but it is only the ticket to get into the game, not the path to winning it. Social intelligence deals with how we do things; it encompasses everything beyond our technical competence, including our appearance, communication style, ethics, manners, conflict management, and time management. Technical competence places more emphasis on the what – the content of things – and can often focus too much on who is right. Consider how much perception is driven by the relationships and emotions, and you will realise that being right is often not what creates a positive reputation. Stop for a minute and think about the people you have known who have been let go from jobs. Has it been for their lack of technical competence or for their lack of social intelligence? Reputation = Reality My estimate is that once you enter the business world your level of social intelligence determines 80 per cent of your success. If you realise that your behaviour creates a perception in others, therefore developing your reputation, then the next step is to realise that your reputation impacts how others treat you. In a nutshell, their perception creates your reality. The following is a six step process to help you get beyond merely defending your behaviour and to work on aligning your character and reputation: Consider which role you are acting in: family member, employee, and/or owner. It might be a combination of more than one. Pick a trait or other behaviour to consider; it can be one that is troublesome (e.g. poor time management) or one that is more neutral (e.g. a strong extrovert). Step back and analyse the perception this trait could create in others. Be careful not to defend your behaviour; you need to try to step into a stranger’s shoes and see what they might see. In the examples above, others may see you as dismissing the importance of their time, or see you as dominating conversations. See if that perception is conveying your true character to others. Is your reputation aligned with your character? It is to be hoped that neither of the perceptions mentioned above aligns with your character, therefore you want to develop a plan to change this perception. Understand how the perception of others can “create your reality.” How might others treat you differently based on that perception (your reputation)? If others perceive that you are dismissing of their time they may evaluate you poorly, be less prone to value your time, or may lessen their opinion of you. If others perceive your strong extroversion as dominating, even rude, they may avoid trying to convey their ideas or opinions, and may avoid communicating with you altogether. Decide what adjustments you want to make, and then begin making them. With either of the traits mentioned above, sometimes merely telling people that time management or talking too much are issues you struggle with can go a long way toward showing others you are self-aware. If you are perpetually late, calling ahead of time if you are going to be late can help occasionally. One friend I have realised after some reflection that he was late when he thought he could get away with it. So some soul searching can often help here. If you are an overbearing extrovert think about talking less. For example, if you are having a conversation with just one person, talk for less than 50 per cent of the conversation. If you are in a group, make sure that everyone talks at least once before you jump in again. This is just a brief introduction to the subtle practice of being mindful of your behaviour. Consider how your actions and behaviour affects other people’s perception of you, and in turn how it affects your business reputation. People can only assess us based on our reputation, so our charge is to make certain that we align our true character with our reputation. That is not only good for business, it is great for our family and personal lives as well. About the Author - Greg McCann is a full professor and both the founder and director (1998-2006) of Stetson University’s Family Enterprise Centre. He is also founder of the family enterprise consulting firm of McCann & Associates which helps families in transition, with a focus on the next generation.

Christian Weber is the CEO of Karslberg Brauerei in Germany and shares an insight into taking the helm, although there was a time when it looked like he may have taken a very different course. Karlsberg Brauerei is a successful German brewing company with 1,400 employees and annual revenues of around 400 million euros. Christian Weber is the CEO and shared with us the journey that he has been on. Christian was educated in the UK, and started his career at major multinationals like Nestle and Heineken, where his time included spells working abroad. He was open-minded about returning to the family business, but equally open to other possibilities. Then, in 2009, everything changed. A major transformation of Karlsberg turned it back into a ‘pure’ family business by dissolving a joint venture and cross-shareholding. “Suddenly, a career at Karlsberg looked a lot more attractive, and I started having discussions with my father about what it might look like.” The result was a two-page paper in which Christian set out his plans in detail, setting out why he thought it would be better if he joined as successor in a role with overall responsibility, rather than taking charge of a division. His father agreed, and over the next few months Christian established himself in the business, and his father gradually took a less active role. “I worked hard to learn the business, and establish productive relationships within the company. Our ethos at Karlsberg is to ‘lead by sharing responsibility,’ and I made a point of not second-guessing experienced managers. It was a good time to join as we were making a lot of operational changes after the transformation, so everyone was receptive to new ideas and new ways of doing things. Within a year my father was coming into the office much less, which was a good way of signalling to people that they needed to talk to me about everyday decision-making.” Christian’s father still has a strong presence in the business, all the same: “He is my most trusted and most valued sparring partner, and I can talk to him about everything from strategy to HR issues. So he still has a huge influence on the company, but indirectly, rather than by running it himself.” The wider family has an important indirect influence too. There are four family members on the seven-post board, and 25 family shareholders. “When we hold our shareholders meetings the families, the children, and the next generation – everyone comes. The board updates them on what’s happening in the company, providing information and context, and allowing space for discussion. Governance mechanisms like this are an important anchor for family businesses.” Christian’s arrival has also coincided with changes in the brewing industry that have led to a change in the company’s management style: “In the past, whoever was quickest won. Making fast decisions and implementing them quickly was the key to success. Today, anyone can be fast, but the real differentiator is good ideas. My job is to nurture those ideas, and create a culture where innovation can flourish. That’s about having the right people in the right roles.” Christian is also aware of the potential for digital disruption in the brewing industry. “For us, the most important areas will probably be communication on the one hand and planning on the other. How will we supply the restaurateurs of the future before they even place an order?” A family business can have real advantages in this brave new world: “We are as professional and ambitious as any other company, but we are also value-driven, which means we can communicate to both employees and consumers in an emotional way without it sounding artificial. That’s because our culture stems from our family rather than anonymous owners no-one knows. That builds loyalty inside the firm, and is very attractive to talented people outside. That’s a huge advantage.” This insight was part of The Next Generation of Family Business Leaders published by PwC. It has been reproduced with their permission.

Conflict happens in any enterprise. However, when your co-workers are also your family, conflict can take on new levels of complication and affect both familial and business operations. There are many common sources of conflict in a family business: Everyday spats over business operations, conflicts between older and younger generations over succession or the future of the business, or resentment stemming from feelings that certain family members are being compensated in excess of their productivity can all lead to conflict. Often, working and non-working family shareholders have different opinions about the distribution of business profits or compensation, causing friction that can lead to power struggles that damage business operations. Even garden-variety family drama can blossom into full-blown family crises if they aren’t adequately addressed. We’ve seen many situations where in-laws or partners of family members attempt to exert influence or otherwise involve themselves in the business. The hazy line between business time and family time can mean that family issues are dragged into work and business issues can contaminate family time. Rivalries between siblings or others members of the family can turn ugly when there’s money or authority at stake. Whatever its source, resentment and frustration can eat away at business and family harmony. Many (if not most) family businesses struggle to confront sensitive issues because they want to avoid conflict. The problem is that conflict can never be avoided – only prolonged. The end result is often that small ‘kerfuffles’ turn into major family crises because there was no early intervention. The vast majority of family conflicts can only be resolved through early, direct conversation and a commitment to honest dialogue. In my opinion, successful long-term family businesses: Anticipate conflict and can have productive conversations when they arise. Clearly communicate their values and expectations to each other. Use formal councils or family meetings to address grievances in a structured way. Are willing to actively work at their communication skills and invest in training and guidance. Fortunately, there are a lot of ways to build healthy communication into your family business. First of all, start early and speak often. Sometimes, spotting trouble early and addressing it before the problem grows is enough. Other times, even large problems can be addressed through a series of conversations that tackle small aspects of the problem, rather than trying to solve a big issue all in one go. In my opinion as a family advisor, one of the best places to hash out major issues is at a formal family meeting. This might sound unnecessarily complicated, particularly if family members see each other regularly. However, while your family might be great at discussing everyday business and family matters, it’s very common for families to feel unable to tackle the big issues – the elephant in the room. A formal structure can help families set policies, open lines of communication, and give members permission to bring up big issues. An effective communication structure can also help avoid major conflicts by giving the family space to manage the inevitable issues that will arise in a family business. Mediated discussions can help when a thorny issue simply cannot be resolved internally. Oftentimes, issues have become so large and the relevant parties so entrenched that constructive dialogue is no longer possible. In these situations, an objective outsider who is trained to resolve disputes and negotiate tricky emotional territory can help cut through the drama and focus on the issues at hand. We have found that many clients achieve more in a few hours than they have in the last decade. Family retreats offer the opportunity to get away from the everyday and come together as a family business team while doing something fun and constructive. Retreats can involve all family members, just those who are active in the business, or may include spouses and young adults. What’s important is that you focus on building family ties and strengthening communications. Family retreats are not just events – they should be the start of your commitment to better communication and healthy conflict resolution. Bottom line: Conflicts happen in a family business. Resolving them takes time, honesty, and good communication skills. Ignoring problems never works because if you ignore them long enough they turn into crises that can damage the business and cause your family to suffer. If you’re concerned about conflicts in your business or your ability to resolve them, reach out to an expert. It’s time well spent.

Respect is the cornerstone for all work with families. Each family has its own culture and each part of the world has its own culture. We can all learn so much from each other. Barbara Hauser shares her insight. My own work includes frequent trips to Saudi Arabia (and the surrounding GCC region) where I continue to learn from families about their own important traditions. The beauty of focusing the advisory work on “process” and not on “products” or even “solutions” is that the local traditions and local family culture will surface on their own, and will add the meaning and content that is most important for that family. In the Gulf region, the two strongest traditions I see are the importance of Islam and the importance of families. Coming in as a Westerner, I believe it is critical to have genuine respect for these related values. Looking at Islam, one distinction from other religions is that Islam permeates daily life, it is not a separate religion as much as it is a way of living in the world and with each other. In Saudi Arabia, the law of the land is the law of Islam (Shariah law)—it would be impossible to separate Church and State. The church is the state, and the religious law comes ahead of all other law. Rich traditions include the call to prayer that is observed five times a day. Our meetings are fit around prayer times, and breaks are taken for prayer times, in the board room and in the home. Many investment categories are forbidden in Islam, including making money by way of “usury” (which seems to have been recently confused with “interest”). Islam includes a duty to give to the poor. The Shariah law obligation of “zakat” is regulated by the Ministry of Finance in Saudi, which is responsible for “ the collection of “Zakat” from individuals and companies holding Saudi citizenship at a rate of 2.5 percent [each year, based approximately on total net worth], in accordance with Islamic Jurisprudence.” (In practice, I am told that individuals make their own Zakat calculations and their own direct payments to the poor.) Many of the gender separations are based on religious law (although many are not, and vary according to the culture of a particular family, such as whether the hair and the face of females need to be covered, and when.) This is a rapidly changing area, and is one in which an attentive and respectful learning attitude is extremely valuable. The issues are often more complicated than are presented in world news media. What I have learned the most about the Islamic culture is how much there is that I do not know. Families love to explain their views and their customs, and I am always learning how different they can be, family to family. The second strong value is the importance of the family and the bonds among family members. More than once a patriarch has explained that if the wealth will cause conflicts among the family members, he would give away the wealth. The family is more important. The desire to keep the family strong motivates all the members to support each other. This is especially important because under Shariah inheritance laws all of the children will probably become joint owners of the business. Key features of the importance of the family include the tremendous respect for elders. Following are just a few of my personal observations over the last ten years. I have often been in a home where the conversations among 10-20 family members completely stop, because the patriarch has entered the room. All of the family members stand up, and seem to follow an order in approaching to greet the patriarch, with a kiss on the top of his head. (This needs to be remembered when working on projects like a family constitution: it might be important to include specific exceptions, so that some of the rules will simply not apply to the patriarch or his wife.) The family name identifies all of the family members, and must keep a good reputation. This means that, for example, one faulty bank loan by one family member was likely to be paid in full by other family members, to keep the good name. In recent times this is changing somewhat. Family trees (literal tree designs) are often on proud display in the home or office. A traditional preference is to marry within the same group and to live in a family compound. (One little girl was changed to a private international school and commented “But they are not family, who will I play with?”) Respect for the family includes patience and time invested in knowing more about them. Rushing in to do business will usually backfire. The relationships need to be established first. Those often become relationships that will last much longer than any particular project. This strong family bond makes it even more important to family businesses to be as proactive as possible to break the “three generations of failure” pattern. The key success factor is often the closeness, cooperation and participation by the third generation. The whole family is part of the business and that business is part of their family. They all very much want both to succeed, for many generations. In closing, respect, for traditions, cultures and families, is the key, as I think it is everywhere.

Châteraisé Holdings produces and sells Japanese confectionery as well as Western-style cakes and pastries, which it produces in its own factories using local ingredients from the Yamanashi area. The business was founded by Hiroshi Saito in 1954 when he was 20 years old. They started with one tiny confectionery store selling local specialities, but have now grown into one of the largest companies in the sector in Japan. It now has 3,000 employees and annual turnover of 63 billion yen. The business has also diversified as it’s grown, and now includes wineries, resort hotels, and golf courses across Japan, and Hiroshi is now looking overseas to achieve further growth, and positioning the company for expansion in the Netherlands and Asia. Today, Châteraisé is a big success story, with big ambitions. But it hasn’t always been an easy ride. The company has had to adapt and reinvent itself several times over, in everything from what it makes to how it sells. Early on, for example, it struggled to compete with the selling-power of the major brands on ice cream, but fought back with a sensationally popular range of 10-yen choux puffs. Getting distribution right was challenging, too, and after several unsuccessful attempts to use existing retail channels, Châteraisé developed its own highly effective franchise sales system, which circumvents the wholesalers and allows the company to get maximum leverage from its own capital. The real turning point came in 1984, when the company marked its 30th anniversary. Annual sales had stagnated at around 4.8 billion yen, and Hiroshi took the bold step of investing 5 billion yen to re-locate the main factory. There were still some significant setbacks, including a fire at the existing factory, but the company’s strong culture stood it in good stead, and it has since built a powerful brand based on the use of fresh ingredients, which is the foundation for its international expansion plans. It’s using milk from Brittany to make cakes in the Netherlands, and has opened stores in Singapore, Taiwan, Malaysia, and China, with more planned in Dubai, Korea, Indonesia, and Hong Kong. “Looking ahead, we cannot rely solely on the Japanese market, where confectionery consumption is falling as the birth rate declines and the population ages,” says Saito. “In the future I would like to increase the proportion of our sales made overseas.” Overseas sales currently account for less than 10% of the total, but Saito’s aim is to increase this to around 50% in five years’ time. Saito believes that the secret of Châteraisé’s success has been its dedication to its three-fold founding principle: to manage the company in a way that brings joy to customers, business partners, and employees. It’s a philosophy he learned from his parents, and has passed on to the next generation – Saito’s daughter and younger sister are Executive Director and Managing Director respectively, and his nephew Makoto manages operations in the Netherlands. Saito may be 82 years old, but he is still looking to the future, with a new 30-year plan: “I want to see through our plans for global expansion, but I’ll be 110 by the time we accomplish them,” he laughs. This feature forms part of the PwC Global Family Business Survey 2016. It has been reproduced with permission of PwC.

With increasing competition for jobs and an apparent ever-rising need to achieve the best grades, does education actually deliver potential leaders of the future? Sandy Loder looks at the challenges associated with selecting the right school. Talk to any parent and the need to give their kids the best chances in life is something that most recognise and strive to achieve, within their means, and education and schooling is more often than not top of the list. But there are some serious questions that come to the fore when discussing the suitability of schooling, not to mention the grades delivered, the topics covered on the syllabus and the level of preparedness that individuals have for the competitive jobs market that they are ultimately going to end up in. Society is looking at the need to deliver grades and the competition for places is tougher than ever. As Sandy Loder explains, “it is not uncommon to hear of children as young as three and four receiving tutoring to prepare them for the tests to get into their chosen pre-schools,” something that may seem difficult to comprehend for some, but a necessity for wealthy parents who are trying to secure a place for their kids in their preferred schools. Schools inevitably have a reputation and they are under enormous pressure to continue to receive great reports from bodies such as OFSTED, not to mention the need to continue to deliver exemplary results too. As Sandy continues, “there is undeniably pressure on schools to perform, but the bigger picture has to be the need to deliver results that put the UK economy on the right footing in terms of the skills needed in future generations to drive the UK to the fore when it comes to dealing with the competition for talent.” Whilst there is competition for places, there also needs to be a more strategic consideration, which in many cases falls by the wayside. What is the best school to provide the holistic education and life experiences for the selected child. All schools have to deliver the core syllabus whilst offering other benefits too, access to sports, cultural studies, music, technology and never forget the networking potential and connections that can be made simply by being in the same school as peers who have parents who have already demonstrated an ability to deliver great results in their own careers too. Sandy is aware that good schools deliver good results but he is prepared to question some of the syllabus, and as he puts it, “should we be spending hours teaching the history of Britain and World Wars when more could be done with leadership and technology to prepare them for the commercial world. Ultimately, history has shaped our nation and should not be forgotten but there needs to be balance, to make sure that the future generations deliver the best skills in people from the UK.” The competition for grades is important and hence the desire to go to what have been long recognised as the ‘best schools.’ In fact, the names speak for themselves, and grades or not, people have aspired to go to schools such as Harrow, Eton, Wellington and Millfield, and then to secure places at Universities such as Oxford and Cambridge for generations and this is unlikely to change in the near future. But, as Sandy continues, it is not just about grades. Serious questions need to be considered such as whether you want your children to board, and if so from what age? Do you consider the need to learn Chinese essential to prepare for the business world of the future? Is technology key to education for your children? There are others of course but there is a growing competitiveness amongst schools, and amongst parents seeking to gain access to the desired school for their children too. And don’t forget the international element. More and more children from India, China and the rest of the world are coming to the UK to obtain what is, in their eyes, an exemplary education, and this places more pressure on the UK system. These individuals are coming to the UK because of the schools and the reputation that these establishments have where they come from and this is important. These children graduate and return home with the name of the establishment firmly contained within their CV and that stands for a lot. So, clearly, it is not always about the grades, and a lot rests with the reputation of the establishment itself. As a parent of two, Sandy appreciates the need to consider the education of ones children carefully. However, as he points out, “life is something of a game and we all do our best to prepare our children to achieve their full potential. However, one must never lose sight of the fact that each and every child is different and what will work for one child in terms of a school, may not be right for another. As parents, there is a need for honesty when it comes to each and every child, to make the right decisions for them and help them to find the right environment in which to learn and flourish. This is turn should help them get the best our of their education, get the best grades possible and then put them firmly on a career path for life.” So as for grades, they are important to a degree, but in reality, the choice of school can actually open doors too through the alumni and ‘old boys’ networks, and if the best teachers are at the best schools and get the best results, there is a strong correlation which leads us full circle in terms of actually understanding why parents strive to send their children to the ‘best schools.’ Furthermore, if the education system prepared the future generation with the skills required, there would be no need for further courses and programmes to deliver the training and tools to become leaders. There are a growing number of MBA’s and other programmes coming to the fore to help plug some of the skills gaps from the general education system too. Grades from school are one thing and help to meet minimum criterion when applying for jobs but there are also other ways that individuals can stand out such as volunteering, summer programmes, work experience and this can enhance the employability of an individual immensely. Clearly, many of the best leaders and bastions of industry have not been to what are courted as the best schools and have done very well for themselves, but parents being parents will always try and push their children to achieve more. Hence it is easy to understand why there is competition for the best schools, but as Sandy concludes, “Parents need to make the right choice for their children and not be afraid to challenge the system at any stage too. It is not just about the grades!”