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.

If family enterprise is a mindset, then being more mindful seems fundamental to this effort. Awareness changes everything: You can’t address an issue or work on something until you are aware of it. So if you aren’t cultivating awareness as a leader, in your family, and your enterprises then you are at greater risk. As a family dealing with exponential change and interdependency, Stephanie Kilroy at the Traynor Family Enterprise (an organization that self-identifies as a family enterprise) after having roles on the Family Council, in Human Resources, and on the Board of Directors, has created with broad support, a new and compensated role of Governance Director. That ability to step back and reframe things beyond the conventional way of thinking is increased by mindfulness, something Stephanie practices. The world today is changing, that certainly includes the worlds of family, family business and the emerging model of family enterprise. Here are the factors that are deeply redefining family business and more broadly, our lives: Exponential change, complexity, and increasing interdependency. One thought leader posits that we will experience 20,000 years of change in this century measured by today’s rate of change. As change amps up dramatically in all areas of life from technology to genetics to national security and even how we define family, remember: everything affects everything. Innovation and entrepreneurship. There is a need to more rapidly incrementally improve all that we do (we get app updates daily) but perhaps more challengingly we have to work to learn to not unduly resist breakthrough innovation. Families have to maintain values but not mistake innovation for lack of loyalty to the values. Reframing shareholder value to shareholder values. The bottom line may be that the singular focus on the bottom line may be coming obsolete. Increasingly traction is being gained by notions such as the triple bottom line (profits, people, and planet), as well as in the family wealth field, Jay Hughes four sources of capital (intellectual, social, human, and financial) shows there is a growing need for a more holistic way to define success for families working together. We believe that all these factors are helping to necessitate the emergence of a family enterprise model (to paraphrase the old adage: necessity is the mother of innovation). Over a quarter century of solid research in both the academic and medical realms have validated—for the Western mind, the legitimacy and benefits of mindfulness. It has become mainstream as evidenced by its presence everywhere from Google to elementary schools to top athletes-even the Navy Seals. In this world that borders on chaos, we as family members, but especially those of us leading our family (business) through change realize there are risks attendant to this new environment: We, perhaps especially Gen Y’s, don’t have time to reflect. White space, so necessary for reflection and creativity is becoming rare. Intimacy with oneself, in ones relationships, the present moment, and even with ideas is being lost. A subtle but profound point is that our unproductive or even unhealthy attachment to things is easier to miss (i.e. a growing blind spot). The benefits of mindfulness have been relevant for millennia, but never as much as today. One meditation teacher I worked with described meditation; considered the most direct route to mindfulness, as solvent for the ego. Who doesn’t know a leader that could use a healthy does of solvent for their ego (really couldn’t we all)? That greater awareness cultivates the ability to step back from a situation or system be that your own ego, your own organization, or your own family. How do you cultivate mindfulness? A full discussion of that may well be beyond this article but simple, secular mediation is the most basic and direct approach. Innovation and entrepreneurship: Mark Peters, CEO and President of Butterball Farms, Inc., has been a bold social entrepreneur who reframed the role of businesses in doing social good in communities through his highly innovative social entrepreneurial program The Source. This program has reframed how (family) business leaders can help develop the talent, careers, and lives of people in the state of Michigan and has become a model the state and federal government are very interested in replicating. Mark is a life-long learner, meditator, and creates time daily for reflection. If Family Enterprise is a mindset, then being more mindful seems fundamental to this effort. Everyone, especially the leadership needs to have an ongoing practice. Then analogous to getting in shape, this needs to be ongoing. It helps to start with an assessment, ongoing benchmarks, and stated goals (both process and outcomes). What better place to combine these essential elements of life: innovation and intimacy? Redefining shareholder value to shareholder values: The Luck Stone Company has invested a decade of adopting values-based leadership and seeks to develop its people. This work has led to the creation of their leadership institute which champions mindfulness for everyone both inside and outside the Luck Company. Their company mission is “Igniting Potential”. They are driven by why, by doing good to do well, and have a culture where the values drive the numbers- not vice a versa. As the world becomes more complex our leaders will have to be more evolved, more mindful. Family enterprises will always be more complex by their very nature. Thus if you as a leader aren’t cultivating your awareness with a mindfulness practice, you are missing out on a way to help yourself, your family, and your enterprises. FACT: Family Enterprise an emerging model This is an evolving term that families, practitioners, and scholars will help define, but my perspective is that family enterprise is a mindset that puts greater emphasis on the family being aligned, cohesive and developing a practice to be more agile in dealing with the challenges facing all its enterprises (be it a family office, a foundation, and/or multiple businesses). The mindset will shift the emphasis from the business to the family and seek to capitalize the family’s involvement to make it a strategic and cultural advantage. Research shows that the top 5% of leaders tend to have a daily reflective practice. FACT: White space and reflection for innovation and intimacy. Ori Brafman, author of The Chaos Imperative puts forth that one of the three aspects of creating an innovative culture is white space that he defines as time to reflect. White space is vital to creating, which is what innovation is: creating change that creates value. Perhaps even more important is reflection and being present. Intimacy requires that you be present. Reflection is how we put meaning to our lives.

A look into why it can make sense for the next generation to succeed outside the family business first. 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 a July 2011 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.

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.

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.