Family Business Dynasty - University of Wolverhampton

January 5, 2018 | Author: Anonymous | Category: Business, Finance, Personal Finance
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Family Business and Succession Planning Dr. Yong Wang Reader in Family Business & Entrepreneurship Wolverhampton University

Proportion of OECD Firms That are Family-Run in Percentage

Italy

99

US

90

Sweden

90

EU

Over 85% of EU/US businesses are family run

85

Spain

80

UK

75 0

50

100

150 - Upton and Petty (2000)

Family Business Dynasty TOYOTA, FORD, HONDA, FIAT MORISSONS, WAL MART, SAINSBURYS, WOOLWORTH L’OREAL, ESTEE LAUDER IKEA AMAZON

MARS, REMY COINTREAU HOSHI HOTELS OF Japan: 718AD, 46th Generation

®

What is family business? 

degree of ownership and management by family members e.g. ‘A company in which more than 50 percent of the voting shares are controlled by one family, and/or a single family group effectively controls the firm, and/or a significant proportion of the firm’s senior management is members from the same family’ - Leach et al. (1990)



inter-dependent subsystems e.g. ‘The sub-systems in the family firm system include (i) the business as an entity, (ii) the family as an entity, (iii) the founder as an entity, and (iv) such linking organisations as the board of directors’ - Beckhard and Dyer (1983)

What is family business? 

generational transfer e.g. ‘A business that will be passed on for the family’s next generation to manage and control’. - Ward (1987)



multiple conditions (a combination of three former dimensions) e.g. ‘Family ownership of more than 50% of the business in private firms or more than 10% of the stock in public companies; more than one family member works in the business or the owner anticipates passing the business to the next generation of family members or the owner identifies the firm as a family business …’ - Astrachan and Kolenko (1994)

Failure rate from 1st to 2nd generation

30% Continuation

70% Failure

Failure rate from 2nd to 3rd generation

20% Lost 2nd Gen

10% Continued Initial 70% Failure

•Manufacturers •200 •1924-1984

80% failures •33%: 0-29 years •35% 30-59 years •32% 60+ years

Survival 20% •5% sold-out •2% flotation •13% familiar •7% -declining •3% - stable •3% - growing Business Survival –Ward (1987)

Why failure to transfer to the young generation? • Lack of a clear, well-defined succession plan • Failure to address the issue of who will run the business • Owner-manager unwilling to relinquish • Reluctance of offspring to take over • Non-family managers unwilling to assist successors • ……………………

Appoint a family member Sell part of the business

Do nothing

Succession Options

Liquidate the business

Sell the entire business

Family Business Strategy – the likely routes To pass on to the next generation within the family To partially exit, realise wealth and become less active To sell the business (trade sale) To float the business and realise wealth

51.5%

To liquidate the business

3.8%

SandAire 2001 Survey - MBS

44.9% 44.1% 15.3%

Succession Planning • Business plan • Family plan • Tax plan • Financial plan ……………….

Picking the Successor •



• •

The rules – The oldest son principle – The best candidate principle Sifting process – Leadership traits – Start-up venturing – Organise assignments – Offer platforms Interim leadership Declaration ASAP

Mentoring the Successor •



Mentor – Senior manager – Offer offspring principles of management – Offer offspring different working opportunities Offspring – New ventures boosting multi-managerial talent – Playing leading not shadowing roles – Leadership and entrepreneurial spirit development – A project per sibling to avoid rivalry

Succession viewed as a process Predecessor Sole Operator

Monarch

No Role

Helper

Overseer/Delegator

Manager

Consultant

Leader/Chief Decision Maker

Next-Generation Family Member

The Succession Process: Mutual Role Adjustment between Predecessor and Next Generation Family Member(s)

Departure style of founders or CEOs in family businesses 

Monarchs: - do not leave until they are forced out or die.



Generals: - leave passively while planning a comeback to

rescue the company from an incapable successor. 

Governors: - rule for a term and then pursue other organisations.



Ambassadors:

- leave willingly and serve as advisors. -Sonnenfeld and Spence (1989)

Tips for Succession Planning • Commence to plan at an early stage • Offer opportunities for capability development • Seek professional advice • Build consensus within the family and the business • Clarify the transition process -International Finance Corporation

Thank You! Any questions?

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