Reputational risk is a key concern for many family firms. Alistair Morgan explains some of the considerations as to how families can manage their reputations. Setting The Scene Many wealthy families “trade” on their reputation, which has often taken years, decades or even centuries to develop. However, thanks to social media and mobile technology, we now live in a world where reputations can be won or lost in a matter of seconds or minutes. Taking the middle ground – maintaining a reputation – is far from straightforward, and is an ever-evolving task. The reputation of a person or entity is, quite simply, an opinion which is often formed as a result of social evaluation by one part of a community or the public generally. A positive reputation can present opportunities; negative reputation on the other hand can be extremely damaging, and in the worst cases, highly disturbing. Managing reputation is a complex business on a number of different levels. The purpose of this article is to explore how wealthy families can manage their reputation, including the role of philanthropy. Central to these matters is the role of a wealthy family’s private office. Social Media, Mobile Technology And The Internet We have witnessed a cultural shift in recent years whereby the public demands more intrusive and intimate information about those in positions of power or celebrity. The private and financial affairs of wealthy individuals and families, entrepreneurs and well-known companies are ripe for public discussion and criticism, particularly if they touch on the controversy of the day. The structuring of wealthy families’ tax affairs is a notable example – more on this below. Malicious and intrusive publications, notably online, can cause significant and lasting reputational damage. Negative publications can be devastating and wreak havoc on personal and business relationships, profitability and investment opportunities. Once images and information have been publicised across different platforms, the task of completely removing it can be almost impossible to achieve. The old adage that “prevention is better than the cure” is particularly apt when advising wealthy families on how to manage their reputation. Challenges Faced By A Family And The Role Of The Family Office The structures that hold and administer a family’s wealth are often far from straightforward. Such families often have an array of trusts (both on and off-shore), companies (private and public), partnerships, charities and foundations. Each of these vehicles will inevitably have an ongoing, typically annual, compliance obligation which can take the form of tax returns, annual accounts and annual returns, to name but a few. It is common for families whose affairs involve such a degree of complexity to have their own private family office. A popular misconception about private family offices is that they are simply a private investment office with an administrative function attached to it. While these services often form a part of the overall service function for a wealthy family with complex wealth arrangements, a private family office should also seek to provide families with strategic advice about many different aspects of their private wealth arrangements, and ensure that such advice is implemented appropriately. Set out below is a number of issues that the private office of a wealthy family need to address in order to manage their reputation: Compliance (fiscal, regulatory, accounting) The work can either be undertaken in-house, in which case it will need to employ the appropriately qualified and experienced staff to do this, such as an in-house director of tax, head of compliance or chief financial officer. Alternatively, the work can be outsourced to a third party, but the family office should coordinate and drive the process. The “Smell Test” Some, or even all of the activities of a family’s wealth structure may not fall under the supervision of a regulatory body such as the Financial Conduct Authority, or have a statutory need to be audited. However, in the absence of statutory or regulatory obligations, a family may want to ensure that all of its private wealth arrangements are governed and operated in accordance with “best professional practice”. As a result, a private family office must aim to operate such that its policies and procedures conform to the standards required if it were under the supervision of a professional or regulatory body. One way to achieve this is for a private family office to establish an Audit and Risk Committee (ARC), which can also be used to monitor a family office’s obligations when it does fall under the supervision of a professional or regulatory body. Ideally the ARC should be chaired by an independent individual who is neither a family member, nor an employee, either within the family office itself or in a business owned by the family. Furthermore, families can elect to have their entities audited by a professional auditing firm in the event that there is no statutory audit requirement. For example, an offshore family trust structure may have greater complexity, quantum of wealth, and number of financial transactions each year than a company listed on the London Stock Exchange, and the latter would need to have a full statutory audit. The audit of a private trust structure can help to provide family members with an additional level of comfort that their affairs are being administered in a way which is unlikely to have an adverse impact on their reputation, with the full support of a professional firm’s report. Security Having a robust security plan is integral to maintaining a wealthy family’s privacy and reputation. Intrusion, for example through a breach of an IT system or as a result of an employment matter, can have a detrimental impact on a family’s reputation. A private family office can develop a coordinated strategy for them in order to help prevent, detect and respond to a breach of security. Public Profile For some wealthy families, having a public profile is inevitable and simply unavoidable. This may range from a family member being the CEO of a public company, to being the family of a well-known sporting celebrity. A private family office may need to engage a consultant who can advise them on how to manage their public profile, and by implication their reputation. Such a consultant will also be an integral part of any exercise that is required to manage an attack on that reputation, irrespective of whether there is any truth behind allegations made by an unscrupulous third party. Crisis Preparation How to react when disclosure is threatened or a breach of confidentiality occurs. The previous points all confirm the need for a family office to have a clear strategy and plan to deal with a “Crisis” before one actually occurs. This then needs to be integrated with a disaster recovery plan for the private family office in order to deal with events such as, inter-alia, the death of a key (and probably publicly well-known) member of the family, the broadcast of a story or event in the public press, or a transaction involving one of their business interests. The plan should also include a set of procedures to deal with a third party seeking to tarnish the reputation of a family. In advance of such an event taking place, the private family office will need to consult with them about their views on the extent to which they would want to trace and bring to account a perpetrator of an attack against their reputation. Attitudes To Tax Much has been discussed and written about attitudes to tax in recent times, both nationally and internationally. Popular themes and their respective drivers include: The national deficit – political pressure to generate sufficient revenue from taxation in order to pay for the cost of providing public services. The on-going search for someone to bear the responsibility for the 2007/08 financial crisis. Bankers have taken much of the pain, coupled with the perception that they were the main promoters and users of aggressive tax avoidance schemes that have cost the Treasury access to many billions of pounds of taxation revenue. The moral argument about tax avoidance and the blurring of the lines with tax evasion. A wealthy family’s approach to taxation is therefore a critical aspect of how they manage their reputation. As has been recently seen by the string of celebrities embroiled in suspected tax avoidance schemes, it is not possible (not least from a legal perspective) for wealthy families to simply leave it to their tax accountant “to get on with it”. Each family member has to take responsibility for the management of their tax affairs – to do so otherwise could have a serious detrimental impact on their reputation even if they were simply following the advice of their professional adviser. Failure to comply with these obligations could result in a public trial and prosecution, bringing with it the inevitable impact on the family’s reputation (irrespective of the eventual outcome). A private family office can assist with this by dealing with the following issues: Tax Compliance A private family office may be mandated to maintain all of the personal financial records of the members of the family. The office may also maintain the accounting records of the entities (corporations, trusts, partnerships, charities etc.) that exist within the family’s private wealth structure. Typically the data produced and maintained by the family office will be presented to their tax accountant to enable them to prepare and submit tax returns. The late or incorrect submission of a tax return can result in negative connotations for a family. While such a submission may not become public knowledge, a wealthy family’s relationships with taxation and regulatory bodies are critically important to the successful administration of their wealth. It is therefore imperative that a family’s private office is structured and managed in a way that will enable the tax compliance obligations to be met accurately and in a timely manner, working alongside the professional tax community where necessary and appropriate. Transactions A private family office is likely to be involved with the planning and implementation of transactions on behalf of the family and their wealth structures. It is highly likely that any such transaction will have a fiscal implication, and so the manner in which the process is driven and organised by the family office will potentially have an impact on its outcome. The senior family office executives need to work closely with the family and its professional advisers to identify the key tax issues and risks, to give them clear and definitive advice on the potential implications of the transaction. The Role Of Philanthropy Wealthy families engage in philanthropy for a variety of reasons, including a moral desire – people who may feel that they would like to contribute more may make philanthropic donations of their own choosing rather than contribute to the public purse. Or they may simply wish to continue their family’s history of philanthropy. One of the many advantages of being involved in philanthropy is the positive effect that it can have on a family’s reputation (whether such attention is desired or not). Executed well, philanthropy can present them with a favourable public image. However, get it wrong and the negative impact can be disastrous. It is therefore imperative that a wealthy family’s involvement with philanthropy is properly managed and administered, and their private family office should play an integral role in this by establishing the appropriate governance structure for their philanthropic interests. The private family office can also help to bring cohesion to this matter by delivering a consistent set of policies and procedures to the governance of the family’s interests generally. Typically, a wealthy family’s involvement in philanthropy will take the form of a charity that is specifically incorporated to pursue their philanthropic interests, which I will refer to as a “Family’s Private Charity” (as opposed to a “public” charity, such as the Charities Aid Foundation. The issues that a wealthy family need to be mindful of when involving themselves in philanthropy include: The public perception as being an ineffective funder if a grant made by the Family’s Private Charity is misused or the charity folds. Grantees could perceive the Family’s Private Charity as being an inefficient funder if it rejects requests for subsequent grants, or withdraws a commitment before full payment is made (for whatever reason). Conflicts of interest need to be handled appropriately, particularly where a family has many diverse interests aside from their philanthropic pursuits. For example, difficulties can arise if a business that is owned and operated by one family member appears to pursue activities that are contrary to a Family’s Private Charity which is run by another member or branch of the same family. Compliance with charitable legislation and regulations appropriate to the charity’s activities, such as those issued by the Charity Commission. Internal financial controls – if a Family’s Private Charity is managed ineffectively, it will reflect badly upon the family, particularly if one or more of the family members are involved in a commercial enterprise (“they should know better” syndrome). Conclusions Managing the reputation for a wealthy family is far from straightforward. There are many pitfalls, but there also a number of proactive steps that can be taken to mitigate these risks. A well-organised private family office, which operates with clear policies and procedures, is a good method of enabling them to be strategically advised on these issues. Philanthropy is an integral part of managing a wealthy family’s reputation. However, a family’s interest in philanthropy should be led by their philanthropic interests and objectives, rather than a means of managing their reputation. About the Author - Alistair Morgan is CEO of Mayfair Private. This article was first published by Familia, the official magazine of the Family Office Council and has been reproduced with their permission.

As the first non-family CEO of Charles Wells, Justin Phillimore looks back on his first year in the job and to the future challenges and opportunities. It has been almost half a decade since Pub & Bar first ventured to Bedfordshire to visit Charles Wells and talk to then managing director Peter Wells. Back then he spoke about the importance of retaining tenants and lessees through a bespoke system of support and investment within an estate segmented four ways. Five years later and we’re back, talking to new CEO Justin Phillimore. Last January, Phillimore took over as CEO, becoming the first chief executive of the company not to be ‘one of the family’. While he acknowledges the custodial implications of looking after a family business for generations to come and the inevitable influence that comes from outgoing CEO Paul Wells still being chairman, Phillimore is making his own decisions on how to shape the business. To that end, he has looked to develop investment and training for tenants further and wider. “The key development we’ve been pushing has been support for our tenants, from marketing through social media, and that realisation that they need training,” he explains. “It isn’t just that big five-day burst that we give to start with where we cram people with tons of information. It’s how we deliver that ongoing development for them in a way that is manageable.” Phillimore wants a more hands-on approach to his estate. While he understands the importance of letting people run their own business, he doesn’t want to simply leave them to it without a few nudges and helping hands. The management to tenant ratio, with each regional development manager (RDM) looking after 33 pubs, means they are able to get around to each regularly, assessing progress and offering guidance within each venue. “In the past, we would have said: ‘You’ve got a plan, great. Let’s go,’ and then never come back to it,” he explains. “Whereas now I think it’s about: ‘That was your plan, what worked, what didn’t work? What’s your plan for the coming year and how can we form that plan? What do you need from a development and training perspective to enable you to do it?’ It’s their business and we just want to help them make the greatest success of it that they can. And there are areas of the business that we know we can support. We’re much more proactive than we’ve ever been because the world’s a more difficult place than it’s ever been.” In addition, Charles Wells has a service desk behind the RDMs, with experts in subjects like property, insurance, legal and maintenance. It appointed an in-house training manager in 2016, who visits pubs and develops the skills of licensees and staff without them having to take time and money out of their business going to a training day in Bedford. For Phillimore, the key change in the last year has been that RDMs no longer just score highly on getting around and visiting the pubs. There has been a determined focus now on making sure that they are adding value to every business they visit. “We were probably ahead of the game in terms of our support and service a year or so ago, and we rested on our laurels to a certain degree,” admits Phillimore. “But now the competition has caught up, so we are stepping on the gas and ratcheting it up again.” Managing Managed However, while Phillimore sees the leased and tenanted estate, within which Charles Wells has almost 200 pubs in the UK, as a core part of the business, it has been the managed sector that has seen considerable focus in 2016. One of Phillimore’s first decisions upon becoming CEO was to invest £3m improving the brewery and a further £4m on the pub estate, of which over £3.7m has already been spent. Around £1.5m is being spent on the company’s leased and tenanted estate, the rest went into buying and refurbishing managed houses in France and the UK. The Apostrophe brand, which currently consists of three pubs, is not something that can be easily rolled out, given the scale of these sites. The first of them – d’Parys in the heart of Bedford – won the Bedfordshire Pub of the Year in the National Pub & Bar Awards and is Charles Wells’ flagship site, with food, drink and accommodation on offer. So Phillimore started looking for smaller, simpler offers with which to build a managed estate. Thus Pizzas, Pots and Pints (PPP) was born in The Salisbury Arms in Cambridge. “The big managed establishments are getting harder and harder to find,” he explains. “If we’ve got the ambition to grow that sector of the business we’re going to be stuck looking for those large places. These smaller, simpler pub operations enable us to use creativity. We get that right then it’s a much more straightforward operation to roll out, providing you get it in the right place. It doesn’t have the complexity of big food operations at a time when everybody is struggling for chefs.” There will be more Apostrophes appearing, with two new openings – in Olney and Harpenden – in the pipeline, but the PPP concept has the greater potential in Phillimore’s eyes, with its smaller footprint offering more opportunities for acquisition and two income streams bringing in profit. The company has even taken out a few leases to expand the brand more quickly without the capital cost. It is in managed houses that Charles Wells will grow its business and its estate. However, while Phillimore considers the opportunity for growth to be in the managed sector, he has no intentions of doing so at the expense of the leased and tenanted estate. “We’re not wanting to dip in and pick out all the great pubs from our estate and turn them into managed houses,” assures Phillimore. “A vibrant and viable tenanted estate has to have those good houses that attract good tenants and give our other tenants somewhere to move up into. There will be one or two that we’ll take out, but we won’t be raiding the leased and tenanted estate for our managed estate growth.” International Flavour For a company set right in the heart of England and a beer that screams St George in Bombardier, Charles Wells is perhaps one of the most international regional breweries. With its oversized brewery needing to be filled, it has taken on brewing responsibilities for companies around the world, as well as exporting its beer to around 40 countries. While it has five managed houses in the UK, over the English Channel, its estate in France currently stands at 13, and Phillimore knows there is room for growth. “We’re starting to think about going beyond France, but there’s still lots of room in it,” he says. “There’s no reason why we couldn’t have a fourth or even fifth pub in Bordeaux and there’s no doubt that we could do 10 or 12 in Paris quite easily. There are at least 10 or 12 cities we haven’t been to yet that could do at least a couple of pubs.” The French estate is clustered around five cities – Bordeaux, Paris, Lyon, Toulouse and Montpellier – and this clustering is important not just from an operational and economical perspective. In a foreign city, the more venues in one place, the more one can learn about that place. The customer base is predominantly French and in a relatively uncrowded market the style is modelled on the ‘French idea of an English pub’, a style which occasionally needs to be reinforced by the executive team that runs them. “If we leave them for too long, saucissons and steak tartare start creeping onto the menu,” he says. “We’re then saying: ‘Non non, get back to sausages and pies’. It’s important to get that French idea of Englishness because that is its USP.” Talking about France leads us seamlessly into a conversation about the biggest thing to happen during Phillimore’s first year at the top: Brexit. With a business earning Euros in France and one of the largest export businesses in the UK drinks trade, Charles Wells is relatively well placed. However, the uncertainty surrounding the market, coupled with cost increases, is a concern that Phillimore sees as a challenge in an increasingly competitive market. But it is also an opportunity. “There is no doubt that whatever happens there will be massive uncertainty for a considerable length of time,” says Phillimore. “There are so many forces that are pushing up prices and competition that we’ll see a few people struggle in the next couple of years, which is hopefully a great opportunity for us.” The Years Ahead Phillimore has been at Charles Wells for nine years and in his opinion more has happened within the industry in that time than in the last 500. For example, while the four-way split of the Charles Wells estate – Traditional Community, Destination Community, Town Centre and Destination Food – remains, the place of the community wet-led pub has been challenged. In the last decade, Charles Wells has disposed of around 35% of its pubs, most of which were small, rural venues that were no longer viable for the company. The smoking ban, drink driving, the growing cost of beer – all have contributed to difficulties in the traditional wet-led pub, but there are ways for these pubs to thrive. “There is clearly a place for community wet-led pubs, but the economics of that are changing,” he explains. “The wet-led boozer will disappear and replacing that is going to be something with a broader appeal. It will need to be flexible. That means coffee in the morning, becoming that community space that people use throughout the day. Then it becomes a question of size and scale really.” The brewery remains Charles Wells’ primary challenge for the future, but its difficulties can serve as a metaphor for the on-trade itself. Both operate in an increasingly congested and competitive market, with new entrants challenging the status quo. But just as brewers are starting to look to more sessionable beers rather than extremes, so too is the on-trade seeking ways to retain fickle customers in their venues, whether that’s through the offer of food and accommodation, or through good value, choice and quality. And while choice remains a key point of difference for many operators and customers, for Phillimore, it is the quality of the offer that will determine whether people will return, whether that’s coming from the cellar or the kitchen. To this end, he has sought to grow the managed estate, produce more premium beers that appeal to the younger market and maintain and improve standards within his tenanted and leased estate. In his first year, he has prepared for that and laid the groundwork. “Now it’s execution time,” concludes Phillimore. “It’s about the task rather than the strategy – the detail rather than the big brush strokes.” Having set out plans for his tenancies, leaseholds and managed pubs that will give customers the choice they want, his primary role now is to ensure that they are consistently delivering on that more intangible but more valuable desire – a quality experience. This article was first published on Pub & Bar Magazine. It has been reproduced with the permission of their editor Tristan O'Hara. For more information, visit the website here

Yaşar Holding is a great example: born out of a trading concern in the 1920’s, it evolved into the country’s leading paint business in the ‘50s, and is now a diversified group in its fourth generation. Turkey is one of the most vibrant markets in the world, with a young and tech-savvy population, an enviable position at the crossroads of Europe and Asia, and an entrepreneurial culture. There have been many political upheavals in the last thirty years, and the region still faces significant challenges, but when it comes to emerging economies, Turkey is still putting the ‘T’ in MINT. Around 95% of Turkey’s businesses are family-owned, and these firms are an absolutely vital part of the country’s economy, driving growth, prosperity, and innovation. Yaşar Holding is a great example: born out of a trading concern in the 1920’s, it evolved into the country’s leading paint business in the ‘50s, and is now a diversified group in its fourth generation with nearly 80% of its interests in food production. And while the majority of its US$1.5 billion of annual sales are within Turkey, Yaşar Holding remains true to its trading roots and exports successfully to the Middle East, Europe, and the former Soviet economies. “When I became chairman,” says Selim Yaşar, “I said ‘we want to grow. How can we do that?’ Part of it was about maximising our production, but we also looked more laterally – at growing our brand, and diversifying our revenue streams. The key to everything was flexibility: being flexible in how we utilised our manufacturing capacity, and being prepared to utilise our distribution systems to distribute other companies’ products.” “That was our strategy. And it has worked. And we have never stopped investing in innovation. You have to do that, if you are in the FMCG industry. Every year, we spend around US$100 million on new machinery, better packaging, and more efficient processing. And we keep up with trends in food too – we have organic farms, and we make a whole range of healthy products, and we are expanding our private label business, which is a growing segment and very exciting for us. We also offer easy-to-cook meals, designed for the increasing numbers of people in Turkey who are working outside their homes and do not have time to create meals from scratch.” Yaşar Holding has fully embraced the potential of digital: “We capture a huge amount of data and can access it on a PC or mobile device. Information such as the location of our transportation vehicles, for example. And our monthly reports are available eight days after the end of the month. That means I can see what is going on in all our companies very quickly, which makes us more agile, and allows us to take very fast decisions.” In fact, the Group has got so good at running ERP systems that it is making such expertise available to other businesses as a service. Having established a business which leads in sectors as diverse as industrial paint and children’s dairy products, Selim has strong views about leadership from a family business standpoint. “We are experts in it. We have centralised finance and HR functions, and we have professional managers at senior levels. However, there is a limit to their commitment. We have brought in external managers many times, but some of them only stayed a few years, then they quit. But the family members do not quit. We are born to it. So you can have professionals working for you in areas like accounting, finance, marketing, and R&D, and they are really valuable. But sometimes for real leadership and taking risk, you need the family.” One area where Yaşar Holding offers a valuable model for other family firms is in its approach to its Board, which includes three people from the family and three professional executives: “In my opinion, family members should work outside the business for a couple of years and then work for the company. And after twenty years of doing that they should become Board members. In each of our companies we have professional executives who have no relation to our company, because it is important to have outside views on a Board. And every year we change Board members – we remove directors who do not contribute and find other people who will. So being on one of our Boards is a challenging position. But that is what we want. That is what will help us grow.”

The German firm, Carl Kühne GmbH & Co. KG is an outstanding example of how a family business can not just survive but thrive for over 300 years and is now in the tenth generation. Only a tiny percentage ever make it to the tenth generation so how have they done it? We asked Stefan Leitz, the current chairman of the management board. What’s The Secret Of Kühne’s Success? There’s no one single answer. Part of it is about having a strong brand, recognised all over Germany, but we’ve also always been good at understanding the trends in our market and the needs of consumers and customers. The business was built on vinegar; as early as 1900 Kühne was making mustard, mayonnaise, sauerkraut, pickles, and preserves. Since then, Kühne gained a market-leading position by a combination of smart acquisitions, and continuous product development in related categories. By the time I became chairman in 2013, our customer base was ageing, and we weren’t developing enough new products to appeal to younger consumers. My challenge was obvious: to rejuvenate the Kühne brand without neglecting the master brand. So What Did You Do? We focused on new product development and renewing our working culture. So one of the first things I did was to introduce the informal way of communicating and a culture of giving and receiving feedback across all levels of the company. The management now also focuses much more on results rather than processes. This was a major change for us – we were quite traditional in the way we worked together. But it was significant as a way of signalling that things were going to change. We added other similar changes, like a more casual dress code, and various Kühne events for our employees, like regular barbecues, and an Ice Bucket Challenge to foster participation and teamwork. It was the start of a whole new ‘Kühne Kultur+’. Now we are redecorating and modernising our offices as well. The heart of this new culture is our mission of being ‘KUEHN’, which means ‘bold’ in German. Each of those letters stands for some aspect of that central idea: Konsequent (consequent), Unabhängig (independent), Erfolgshungrig (hungry for success), Herzlich (heartfelt), and Nachhaltig (sustainable). And the new culture is underpinned by our equally bold vision we created: ‘Kühne in every kitchen’. What’s Changed Since Then? We’ve been a lot bolder! You can even see it in the names of our new products: we used to have names like Gipsy (Zigeuner) Sauce or Curry Sauce; now it’s Firestarter and Sweet Angel. And the mix has changed too: we’ve developed a new sub range called Kühne Enjoy, targeted at younger consumers, and included vegan salad dressings and a new line of barbecue sauces named ‘Made for Meat’, as well as vegetable chips. All these were developed from the start with the international market in mind. We want to move from being a German company with a large international presence to an international company with German roots. Furthermore, we automated the production process in a single quantum leap, we foster internationalisation, and we are considering acquisitions. And There Is More To Come… We love our heritage and we take pride in it. Although we’ve had a successful track record for over 300 years, to be successful in the 21st century we need to think more like a start-up. That’s what we’re doing now. The proof is in the results: we’ve had record sales, growth in profitability and market share three years in a row. This feature forms part of the PwC Global Family Business Survey 2016. It has been reproduced with permission of PwC.

Mother Parkers is one of the largest coffee and tea suppliers in North America and can trace its roots back to 1912. With Paul and Michael Higgins at the helm of the family business, they have recently sought to professionalise the organisation by bringing in a President from outside the family. “We’ve been Co-CEOs since 1992,” says Paul, “and in that time the business has achieved great growth. We’ve also made some significant progress in areas like Research & Development (R&D) and the use of IT. But for the last few years we’ve been thinking very seriously about what the next phase looks like. The next generation isn’t old enough to take over for a while yet, and we really felt we needed an injection of new blood and a different set of professional skills, insights and experience to help us to the next level. So we made the decision to hire a President, Fred Schaeffer, from outside.” “But we didn’t make a decision like that lightly,” says Michael. “We talked to our advisory board, we talked to the kids, and we talked to other family businesses who’ve done something similar. Because we’d heard some horror stories, where the owners had hired people to come and run the business, but the owners weren’t prepared to let go and it turned into a complete mess. That’s the last thing we wanted, so we talked to other firms about what pitfalls we might encounter, and how the process worked. We quickly came to the conclusion that the best time to do it is when the company is in a strong and steady state, and there’s plenty of time to embed the new person, without the pressure of a looming retirement date.” Supporting the next generation is a key part of Fred’s role. “I wanted a mentor for my kids,” says Paul, “to help them get a broader view of the industry and the global market than I can give them. Fred has worked for big consumer brands around the world – that’s going to be invaluable, both as a manager and a mentor.” It’s clear that mentoring isn’t just about management skills, either. As Michael says, “We’d love it if the kids were the right people to lead the business forward, but there’s no culture of entitlement here. You have to work as hard as any other employee, and you don’t get any favours just because your name is Higgins. And however things turn out, we want to make sure the next generation will be good owners, even if someone outside the family is CEO. And that’s a tough role – being a good steward. That’s how Paul and I see our role here: we’re stewards of this. We didn’t start it. We didn’t create what our father developed. We were fortunate enough to have the opportunity to take what he did and build on that, so we’d like to instil the same sense of responsibility with the next generation. Their job will be to build it, make it bigger and better, more successful. Having the support of a professional CEO at this stage in their careers is part of that.” Thus far, at least, the decision seems to have paid off: “We were really impressed at the calibre of applications we received,” says Paul, “and a few months into the role, Fred has impressed just about everyone, both inside and outside. Relationships with customers are particularly important, given how much of our turnover is B2B. These days it’s much more of a partnership than a sales relationship. We don’t just sell product, we sit down and work out what new blends or tastes might be successful, how best to manage the supply chain, how to build in recyclability – key issues like that. And looking ahead even further, the next big thing in our sector might not be a new beverage at all, but a new way of delivering it. We’re already selling to all the most important parts of the market – the Big Box stores, the really large grocery chains, food service, fast food. You name it – we’re there. So, they know us. They trust us. And that means if we can come up with something new that’s really spectacular, the opportunity could be significant.” This feature was part of the PwC Global Family Business Survey 2016. It has been reproduced with the permission of PwC.

It’s a long way from a town in southern Poland to the bright lights of Broadway and the catwalks of Fashion Week, but one family firm has not just gone the distance, but done it in style. Inglot Cosmetics was founded 33 years ago by Wojciech Inglot, supported by his sister Elżbieta. They were later joined by a second brother, Zbigniew. The company is at the forefront of the science of beauty, exploiting an in-depth knowledge of chemistry, physics and pigmentation to create its huge range of intense and vibrant shades, which have made it the darling of the fashion and entertainment business. There are over 1,500 different colours to choose from across eyes, lips, face and nails, and Inglot’s signature ‘Freedom System’ allows customers to pick their own special palette of tones. These days, you can find Inglot at all the glitziest show biz events, from the sets of film and TV studios to backstage on Broadway, but the company has never lost touch with its roots, and still prides itself on its Przemyśl presence. Even the huge advertising billboard they have on New York’s Times Square is actually managed from the head office in Poland. As Zbigniew says, “We belong here, and we’re a big employer here. That’s a huge responsibility. And we’re committed to making our make-up here, too – 95% of it is manufactured at our site.” The next big step at Przemyśl will be extending the R&D facility. True to its roots, Inglot devotes huge resources to the scientific development of new products, often in collaboration with universities. The state-of-the-art O2M breathable nail polish was developed by Wojciech Inglot and tested in cooperation with the AGH University of Science and Technology. The revolutionary breathable formula, which was created specifically for health reasons, has quickly become a global success and coincidentally helped the company get a foothold in to the lucrative luxury malls in the Middle East. With the second generation now joining the management team, the roles within the team continue to be clearly defined: Elżbieta focuses on operations and new product development, and after the sudden death of Wojciech in 2013, Zbigniew has taken over full responsibility for strategy, investment, and international expansion. Since the first store opened in Canada in 2006, the company has established, owned or franchised Inglot outlets in nearly 80 countries, including 650 boutiques in some of the world’s smartest locations. They’ve also opened concessions in department stores like Macy’s in the USA, Edgars in South Africa, and Falabella in Chile, Peru and Columbia. Right now, they’re opening up to two new stores a week, all over the world. “We could grow quicker, but we can’t afford mistakes. And getting each new store right takes a lot of thought – it’s not ‘one size fits all’. We actually manufacture the fittings and furniture ourselves and employees from Przemyśl go out and install them.” E-commerce isn’t as fully developed as yet, but it’s coming: “We initially thought we wouldn’t need to sell online, especially in Poland, given we have such a big retail presence, but we know now that was a mistake, and we’re catching up. We’re lucky that cosmetics is a hugely active category online, and the items are small and easily shipped.” In fact, according to PwC’s 2016 Total Retail survey, 65% of the people who buy cosmetics products bought at least some of them online in the previous twelve months. So what does the future hold? “Product-wise, we’re looking at moving into face creams, lotions – what we call ‘white cosmetics’. That could be an amazing category for us. As for the brand, my dream is to make it the most recognised Polish retail brand in the world.” Given that one beauty website calls Inglot “the makeup-lover’s ultimate dream brand”, it looks like they’re well on the way. This feature forms part of the PwC Global Family Business Survey 2016 It has been reproduced with permission of PwC.

There are plenty of benefits of having the next generation work outside of the family business for part of their career progression. Australia’s next generation of family business owners should consider working in another company, and maybe even another field, before returning to the family brand. Each offspring, no matter how strong the bond with the family, should build on their formal education and test their skills in the open market, work for a new boss or two, and establish a threshold of responsibility to implement their own ideas. Outside experience is healthy for individuals and the business. The specifics of the outside job are probably less important than the journey away from home. Of course, professional positions in sales, production, marketing, human resources, research or other operational fields can be very constructive. Young workers need to understand the value of uncertainty and meritocracy, both of which might be lacking when your surname is written on the company building. If the new job is in the same industry, the future successor can develop his/her own personal network and learn crucial skills — maybe even gain first-hand knowledge of useful ideas from competitors. A job outside the same industry as the family business can be equally useful, especially if the next genner has always wondered what life outside the family industry is like. An added bonus: young people get the chance to be young and possibly foolish away from the eyes and ears of their future colleagues or employees. Most children share certain passions with their parents, but most have different interests, too. Much like a university experience, the next generation worker will benefit from being around those who share their interests and passions. They may even find someone of similar mind and talent to incorporate into the family business down the road. The larger the family business, the more important it is for future leaders to have a sense of working for someone you aren’t related to. No matter how objective and fair-minded the parent, a child won’t get a true sense of that independence and perspective while shaded by the family umbrella. In numerous surveys, Family Business Australia and KPMG have found that successful family businesses tend to have children who are more educated and worldly than the general population. “More than 75 per cent of respondents had completed some vocational or tertiary training after leaving school,” one survey found. “These figures are significantly higher than those of the population at large.” One participant said that businesses don’t just benefit in the long run when the next generation initially leaves the business. The short run benefits can be felt in the current staff. “It’s also good for the other staff in the business, who can see a clear prerequisite for family members to join the business,” said the unnamed participant. “In turn, it’s better for the culture of the business.” There are obvious benefits whenever the next generation eventually return to the business. “If a role is created just for you,” said another participant, “instead of a real business need, then it makes it more difficult to build respect with other staff.” Another study found “group participants agreed that entry rules regarding education and experience should be encouraged and even written up formally for future generations.” Stories Of Success Ross Brown, third son of John Charles and Patricia Brown, has known the wine trade his entire life. His family business, Brown Brothers Winery, has been an institution in northeast Victoria since 1889. Ross served as CEO for ten years before moving to executive director in 2011, and he stresses the importance of long-term planning — for business and for family. “In our business we plant a vine to make wine in five or six years’ time,” Ross said in an interview, explaining why family members must work a minimum of four years at another organisation before moving returning to the Brown family business. In a separate interview with Drinks Trade Insight, Ross reaffirmed his belief in the outside work requirement. “It has the potential to continue to bring outside skills and knowledge back into the business.” The Brown Brothers family formalised an outside work requirement into a non-negotiable clause, and it keeps their family values codified for each generation to share and keeps the next generation from becoming complacent. Sheree Sullivan, director and manager of Udder Delights in South Australia, said outside work was critical for the business’ early survival. Her father and mother, Trevor and Estelle Dunford, started the company in 1995 with just two goats. Sheree and her husband Saul bought 50 per cent of the company 10 years later and says her family’s success can be traced to its “migrant model”. Everyone, including her parents, worked outside jobs when the business was getting off the ground. There, they learned “a unique and very diverse skill set,” says Sheree, including business administration and equipment maintenance.

Family businesses are the engine room of economies the world over and they are all about the nature of the family and the values that underpin them. Due to the very nature of their ownership and the family dynamics within them, and the delicate balance between family, business and ownership, it is important to understand them and what makes them different to their non-family counterparts. This online training programme will provide a good insight into the world of family business, business models that help understand them and some of the drivers, values and purpose behind family firms. It will also discuss some of the unique challenges facing family firms today. This is an introductory programme that will be of benefit to those involved within a family business as well as those working in professional services advising family business clients. It is a top level overview and will help to build awareness of the family business as a business model and provide context and examples to help client discussions, and to appreciate some of the relationship matters associated with family businesses too. The interactive programme will provide plenty of opportunities to ask questions throughout. Spaces are limited so book early to avoid disappointment.

Instituting a family council can be a significantly positive step toward managing the business in a more rational and professional manner. In the majority of privately held multi-generational family firms, the family council is the main vehicle of family business governance. Instituting a family council is a significantly positive step toward managing the business in a more rational and professional manner. The family council is more formal than a family meeting. The purpose of the council is to present and discuss the family issues of running the business. The family council is where problems, concerns, issues, and opportunities are presented and discussed, alternatives are weighed, and decisions are made. In a family council, the family usually takes a vote, and decisions are made either by a simple majority or by consensus. Some families strive for unanimity, which can tend to delay decisions but has been found to increase family unity. For the family council to be effective, all members must recognize the council is the proper time and place to present their point of view. One of the major positive attributes of the family council is that family members agree to abide by the decision of the council (even if they disagree or are on the losing end of the vote) and consent to not grumble about it outside of the meeting, but instead show support and unity for the family decision. In smaller to medium sized firms the council acts as the governing body. In larger firms, most commonly public family firms, the decisions and positions of the family are presented by a member of the council to the board of directors. The family council elects at least one person to represent the family and sit on the board of directors. The creation of a family council can be difficult to manage initially. Research has found that for the council to work well, it often needs to be facilitated by a professional. This enables the meetings to be more productive, allows every member the opportunity to present their view, prohibits one dominant family member from taking over, and also holds members accountable for following through on decisions. The institution of a family council can be a tremendous adjustment for the owner- manager, who often leads in a paternalistic manner, to relinquish decision- making power and authority to the council. Moving to a more professional and rational method of decision making has been shown to increase family business longevity. By the third generation of family ownership and control, there are a large number of family members involved in the business. There are cousins working together, and some second- generation members are still active. With more people involved, often with differing goals, decision making is more difficult and conflict is common. This creates a need for a formal decision-making process. There are several corporate governance structures similar to the family council including: the shareholders assembly, comprised solely of stockholders; and the family assembly, composed of family members by birth and marriage, ranging from owners and non-owners to family employees, and family non-employees such as spouses and in-laws. Each family is unique and each business is unique. Families in business together should be aware of the various structures used to govern family firms for increased success and continuity. Reproduced with permission from Keanon Alderson and The Press-Enterprise (www.pe.com) Keanon Alderson Ph.D. is an associate professor in the Robert K Jabs School of Business, at California Baptist University in Riverside CA. His book “Understanding the Family Business” was published in 2011. He can be reached at kalderson@calbaptist.edu

Alfred Kärcher, like Robert Bosch, Gottlieb Daimler and Graf Zeppelin, was one of the inventors and entrepreneurs that Württemberg produced in such great number since the beginning of the industrial era. With the utmost commitment, he dedicated himself to bringing his ideas to fruition. In 1924, the then 23-year-old completed his studies at the Technical University of Stuttgart and worked first of all at his father’s agency, which he developed into an engineer’s office. In 1935 he founded his own company in Bad Cannstatt, Stuttgart so that he could produce and market his own products in the field of heating technology. Alfred Kärcher designed and built the “Kärcher salt bath furnace”, among other products, for tempering steel and light metal in industry according to his own patent. In 1939, the family-owned company relocated to Winnenden, where it still has its headquarters. By this time the company was also producing heating devices for aircraft engines and cabin heating systems. Following the Second World War, the company turned its attention to products for urgent, everyday use: round stoves, small cookers, handcarts and trailers for tractors. Move into cleaning technology Alfred Kärcher made his breakthrough into the cleaning technology industry in 1950 with the development of the first European hot water high-pressure cleaner (the DS 350 steam jet). The design of the water heater proved to be so pioneering that it still forms the basis of all burners today. Like so many, Alfred Kärcher did not live to see the global success of his innovation. When he died on 17 September 1959 at the age of 58, his wife Irene took over the management of the company and steered its fortunes for three decades. Today their children Johannes Kärcher and Susanne Zimmermann von Siefart are in charge of the family-owned company in its second generation. Internationalisation In 1962, Kärcher founded its first foreign subsidiary in France, followed by Austria and Switzerland. Internationalisation continued apace. In 1975, Kärcher opened a factory in Brazil; 10 years later, the company had founded 16 sales companies in North America, Africa, Australia and elsewhere. By 2012, Kärcher was represented by subsidiaries in 57 countries and generating 85% of its sales abroad. With 40,000 customer service points in over 190 countries, Kärcher provides comprehensive support to its customers all over the world. Growth through innovation After a phase of diversification, Kärcher turned its attention to high-pressure cleaning in 1974. During this period, the colour of the machines was changed from blue to the now world-famous Kärcher yellow. In 1980, the company expanded its product range to cover basic cleaning requirements, initially in the areas of transport and buildings. Step by step, the range was expanded with the addition of wet and dry vacuum cleaners, sweeper vacuums and scrubber driers, vehicle washing bays, steam cleaners, cleaning agents and drinking water and wastewater treatment systems. Among the milestones in Kärcher’s history was the introduction in 1984 of the HD 555 profi, the first portable high-pressure cleaner, and the subsequent expansion into the consumer market. In 1993, this range was expanded to include indoor products and Kärcher has since added steam cleaners and vacuum cleaners for private households to its range. The RoboCleaner RC 3000 was launched in 2003 as the world’s first fully automatic robotic vacuum cleaner. In 2007, Kärcher moved into the completely new sector of gardening, which includes pumps for watering, water removal and service water supply in households, as well as an extensive range of accessories. In 1986, Kärcher launched its pioneering roller brush technology for scrubber driers in the professional range. Thanks to the development of a new rotary nozzle (dirt blaster) in 1995, the cleaning effect of the high-pressure cleaner was almost doubled. The dust intake of commercial wet and dry vacuum cleaners was continuously improved, and in 2007 the innovative Tact filter cleaning system was launched. New procedures were also developed in the course of worldwide cleaning projects: the 284 travertine columns on St Peter’s Square in Rome were restored using a specially developed spray process over a total area of 25,000 m². Since 2009, Kärcher has been selling ultra-high pressure cleaners, which, at up to 2,500 bar pressure, not only clean but restore facades and strip concrete. In the same year, a multipurpose municipal sweeper was released onto the market and new target groups were gained with the launch of water dispensers. Kärcher becomes a global market leader Innovation has been and continues to be the most important growth factor. In 2011 alone, Kärcher launched over 100 new products. The global market leader in cleaning technology will continue to be characterised by its ingenuity, top performance and innovative problem solving. Top performance for cleanliness and value When it comes to quality and technology, Karcher are the leading provider of cleaning systems, cleaning products and services for leisure, households, trade and industry worldwide. Their customers benefit enormously from using their effective, efficient and environmentally friendly cleaning products. Karcher make a noticeable difference in the lives of their customers by providing effective, efficient solutions for everyday cleaning and watering tasks all over the world. Kärcher have come a long way since the business was formed by Alfred Kärcher and is now a global brand. It remains family owned to this day and continues to push boundaries through innovation, evolving as a family firm all the time. Find out more at www.karcher.com

The Mane Group is a fascinating business. Founded in 1871, it’s now a billion-dollar company, operating in 32 countries, with 92% of that revenue generated outside France. And it has built its success by applying the power of technology to the time-honoured skills of using aromatic raw materials to create scents for perfume, and flavours for food. The result? Market leading positions not just in fragrances and flavourings, but state-of-the-art pharmaceutical compounds too. Jean Mane is the great-grandson of the founder, and has a deep respect for the values and sense of social responsibility which have been passed down through the generations of his family firm, and sees his mission as “reaching (at least!) the 150th anniversary of the company still independent.” But he combines this with a passion for innovation and an extremely forward-looking approach to manufacturing. In fact, it’s rather like combining two different but complementary scents: tradition on the one hand, innovation on the other. Mane invests heavily in R&D, seeing it as essential to competitive advantage: with 15% of its range becoming obsolete each year, finding new and better products is absolutely key. One way Mane does this is by having 40 different R&D centres all across the world from Singapore to Mexico, which can spot new and emerging trends, and tap into the changing tastes of local consumers. And once you’ve created a new truly innovative product, you need to protect it: Mane has been extremely effective at developing its own proprietary production processes to defend its vital Intellectual Property. It’s also organised in highly diverse project teams involving people from departments as different as R&D, manufacturing, procurement, and legal. Research suggests that this sort of cross-functional working creates a flexible and agile culture which is much more likely to be good at new ideas. Culture is crucial to Mane in other ways too. The company puts a high priority on happiness and well-being at work, and backs that up with significant investment in development. Though Jean Mane acknowledges that the risk is that his company ends up training people so well that his competitors poach them: “a family business doesn’t just have the challenge of attracting the best talent, but retaining them too. That’s why our culture is so important – the relationships we build with our employees. In our latest employee survey 50% of our people said that family governance was one of the best things about working here.” This feature forms part of the PwC Global Family Business Survey 2016. It has been reproduced with permission of PwC.

Linfox has recently celebrated its diamond anniversary, and has long been one of Australia’s most successful and high-profile family businesses, operating in the transport & logistics, property, airport and cash logistics markets Momentous milestones: 60 years of growth in Australia, so how did they do it? How did they go from owning a single truck in 1956 to over AUD$3.5 billion dollars in revenue 60 years later? We talked to Peter D Fox AM, Executive Chairman, about some of the key milestones along the way. Milestone 1: From One Truck To Two “My father was a truck driver – in fact, I think I had diesel in my blood from a very young age. The business started when my mother lent him the money to buy his first truck. But the moment he bought a second one, you could say that’s when he went from being self-employed, to running a business. That was in the late ‘50s. And he never looked back.” Milestone 2: The first professional manager “In the ‘70s, we brought in an accountant called Sandy Murdoch, who set about introducing some structured processes and some financial discipline. He became a mentor for me personally, too, and gave me the best piece of advice I ever had which was to get myself some business qualifications to add to my practical experience: ‘then you can sit at the front of the room, not at the back’. He was soon joined by a couple of other external hires, and we ended up with a really strong senior team. In 1978 we were turning over AUD$18 million, which seemed pretty amazing, back then. Now it’s nearly 200 times that.” Milestone 3: International Expansion “We started expanding into Asia in the late ‘80s and early ‘90s. First Thailand, then Malaysia, and now we’re in Indonesia, Vietnam, Hong Kong, Singapore, and India, with plans to move into the Mekong Delta, which would give us access to Burma, Myanmar, Laos and Cambodia. In fact there are more people working for Linfox today in Asia than in Australia. We saw an opportunity in Asia and moved quickly. We were one of the first in our industry to enter the Asia market, and it’s become a key competitive advantage. That’s the advantage of being a family business – when we decide to do something, we can move really fast.” Milestone 4: Stepping Up “2000 was a big year for us – we managed the supply chain and all the inventory for the Sydney Olympic Games. It was incredibly exciting and rewarding to be working on such an iconic event. It really put us on the map.” Milestone 5: A Big Acquisition “In 2003, we bought Armaguard, which marked our first decisive move into cash logistics, which has since become such an important business for us. The process of identifying, buying and then integrating businesses of that size was a real learning experience, and it turned us into a billion-dollar business almost overnight.” Milestone 6: Streamlining And Refining “The next step for us was to take a long hard look at the business we had, and decide where we wanted to take it, both in terms of sectors and markets. One result was a much leaner management structure internally, and the decision to focus on our biggest customers externally. We had 300 customers in 2008; now we have about 80. That took courage, but it was the right thing to do. For us, it’s about quality, not quantity: our strategy is ‘less is more’.” Milestone 7: Looking Ahead “If I look ahead for Linfox, I see two key challenges for us. One is for the business, and it’s all about technology. People often think about digital in terms of the information it gives you, and yes, that’s important. But I look at it in terms of all the other things digital makes possible. There are some incredibly exciting developments in our sector using technology like driverless vehicles, robotics and automation to run warehouses better, manage deliveries more efficiently, and improve productivity.” “At the moment, our IT infrastructure isn’t as good as it needs to be, but we have to be the first into these new technologies just as we were the first into Asia. The second challenge is for the family. Our third generation is just reaching the age when they’re going to have to decide if a career here is right for them, and we’re going to have to decide the right management structure for Linfox in the longer term. That’s not a decision we can make yet; it may be a member of the family, but it might not. But what I do know, is that it will be the best person for the job.” This feature forms part of the PwC Global Family Business Survey 2016. It has been reproduced with permission of PwC.