FAMIly BUsINEss THE MAN WHO MAKES PATEK PHILIPPE TICK

_ 09. June. 2011
Family
Business
THE MAN WHO MAKES
PATEK PHILIPPE TICK
page 04
_ plus why families are driving
developing economies, page 10
_ and maximilian riedel on his
glass-making dynasty page 14
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RACONTEUR 01
low res
Family Business
CONTRIBUTORS
Distributed in
Design
The Surgery
claire adler
Claire Adler is a freelance journalist
who specialises in writing about jewellery, watches and luxury. She writes
for the Financial Times, The Spectator,
family business magazine Campden FB
and global trend forecasters WGSN,
among others.
The information contained in this
publication has been obtained from
sources the proprietors believe to be
correct. However, no legal liability can
be accepted for any errors. No part of
this publication may be reproduced
withoutthe prior consent of the Publisher.
© RACONTEUR MEDIA
simon brooke
Simon Brooke is an award winning
journalist who writes about business,
marketing, style, and the luxury sector
for many newspapers including the
Financial Times, Financial News and
The Sunday Times. He is the author of
two novels and lives in London.
Published in
association with
Publisher
Eliza Allen
Editor
Jeremy Hazlehurst
Your feedback is valued by us.
Please send in your opinions to
[email protected]
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with Raconteur Media please contact
Freddie Ossberg: 020 7033 2100,
[email protected],
www.raconteurmedia.co.uk
randel carlock
The Berghmans Lhoist Chaired Professor in Entrepreneurial Leadership
at the INSEAD business school and the
founding director of the Wendel International Centre for Family Enterprise,
Carlock has been working with family
businesses for 25 years. His latest book
is When Family Businesses are Best.
clare gascoigne
Clare Gascoigne is a former Financial
Times journalist with 20 years’ experience of writing about finance and
business. As a freelancer, she writes
for national newspapers and trade and
corporate client magazines.
grant gordon
Grant Gordon is the director general and
co-founder of the Institute for Family
Business (UK), celebrating its 10th anniversary in 2011 the IFB is as an independent not-for-profit association promoting the success and sustainability of
family firms.
mark goyder
Mark Goyder is founder director of
business-led think tank Tomorrow’s
Company. A writer, speaker, broadcaster and advisor to companies and governments on governance, stewardship
and company law, he draws on 15 years’
experience in manufacturing.
Family values
drive success
introduction Good stewardship is part of the DNA of family businesses. It’s what
It’s important to pass on
skills to the next generation
makes them robust enough to withstand the current financial challenges – and it can
help rebuild the public’s trust in business, too
Grant Gordon,
director general
of the IFB
ȖȖ The family business sector continues to play a vital part in the economic and social fabric of our nation.
A year ago in this publication we
explored the theme of the public’s
trust in business; this debate has not
subsided, with further sectors coming under the spotlight. With family
firms representing the single largest
source of employment in the nation,
a healthy and growing family business sector rooted in strong values
and with a long-term vision is more
important to the UK than ever.
A recent Nottingham/Leeds University study commissioned by
the Institute for Family Business
(IFB) confirmed that family firms
add a much-needed diversity to the
economy. For example during the
recession, strengthened by their
financial prudence and stronger
balance sheets, they were better
able to weather the storm, with evidence showing lower numbers of
business closures. The IFB has also
been growing in strength as the voice
of the sector and celebrates its 10th
anniversary in 2011. This year has
seen the launch of an All-Party Parliamentary Group for family business, sponsored by the IFB, to spread
the word in Westminster about the
impact of the sector. However, without more signs of life to the economy
overall, family firms are proceeding
with caution. The latest global PwC
Family Business survey found UK
family business owners have confidence in their competitive position,
but are holding back investment.
There are signs that family firms,
having generally escaped the
excesses of the boom years and
avoided irresponsible levels of debt,
are capturing opportunities that
have emerged. Entrepreneurship
is a key part of the most successful
family businesses and Generation
X and Y family members are seizing
the baton of innovation and risktaking. When the recession struck
it was a catalyst for young people
to set up their own businesses, or
kick off an enterprising and innovative initiative, often from within
the family business.
Stewardship is natural
to businesses that think
about future generations
From early-stage entrepreneur to
family business steward, the transition may take years or decades.
Stewardship is a process that comes
naturally to organisations that see
the management of resources as
spanning decades and even generations. But while most people have
a good understanding of entrepreneurship, stewardship still means
different things to different people.
During recent IFB focus groups and
meetings owners have confirmed to
us that stewardship is seen as part
of the family business cultural DNA
– a way of doing business. This supplement looks at the many different aspects of stewardship and at
the new IFB report on Family Business Stewardship, launched today,
in partnership with the business-led
think-tank Tomorrow’s Company.
The report examines how successful
family business owners can master
stewardship – we believe that applying the principles of family business
stewardship will enable the family
business sector to withstand and
respond more effectively to current
economic challenges, promote better
workplaces and help regain society’s
trust in business.
The Tomorrow’s Company definition of stewardship appears to
resonate very strongly with family business owners – “the active
and responsible management of
entrusted resources now and in the
longer term, so as to hand them on in
a better condition.” In his article on
page 6 Mark Goyder of Tomorrow’s
Company explains more about the
new IFB report and sets out a model
for family business stewardship supported by stewardship principles
that are common across all types of
business.
At the heart of a strong family business the report identifies four forms
of capital, or the assets on which
stewardship can be built. This capital
consists of family, people and financial capital and the external relationships or social capital. The centre
spread in this supplement looks at
great family firms that have strong
leadership to ensure an enduring
vision and values. These firms also
have much of the governance and
succession planning required to
create a robust legacy that can grow
through the generations.
We hope the new IFB report will
not only stimulate debate among
family business owners and boards
for further improvement, but may
offer some useful ideas for the wider
business sector. www.ifb.org.uk
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RACONTEUR 03
Family Business
facing up
to the future
profile Swiss watch brand Patek Philippe is one of the best-known
in the world, blending old-fashioned craftsmanship with innovation.
Most of all, though, it is characterised by a strong, long-termist ethos
instilled by its family owners. The company’s president Thierry Stern
meets Clare Adler at his Geneva headquarters
ȖȖ Among serious watch collectors,
Patek Philippe is widely known for
the stratospheric prices its watches
achieve again and again in auction
sale rooms. In 1999, someone parted
with a cool $11 million for a Patek
Philippe Graves Supercomplication
pocketwatch, made in 1933. In 2007,
a rare stainless steel Patek Philippe
sold at Christie’s for a staggering $2.2
million, while in 2005 in its privately
owned Geneva museum the company held an exhibition of watches
previously owned by royalty.
Among the rest of us, Patek
Philippe is often best known for its
ubiquitous (and to some eyes excessively sentimental) ads of impossibly
well-groomed fathers and sons and
its tagline reminding people who
buy a Patek Philippe that they never
actually own it, they’re merely looking after it for the next generation.
Like the boy in the ads Thierry
Stern – who took over as fourth generation president of the company in
2009 – has been admiring watches
since he was a boy. “I remember
going into my father’s office when
I was six years old,” he says. “My
father opened a drawer in his desk
and showed me pocket watches with
intricate hand painted enamel dials. I
always remember those watches, the
colour of the drawer and its smell.
That was when I first said I wanted
to make watches.”
The first time Thierry Stern ever
wore a Patek Philippe watch was at
the age of 18, when he received a Nautilus for his birthday. “In my family
you receive your first Patek Philippe
when you are 18,” he says. “Before
that you couldn’t understand the
product. It would be like receiving a
Ferrari for your first car when you’d
just passed your test.”
Now 41, Stern is still in love with
the business. Sitting in a meeting
room in the grand headquarters of
the company’s factory and administrative complex – which has a view
of the striking glass bridge that links
two wings of this high security facil-
ity, which opened its doors in 1996 at
a cost of SwF150 million – I ask him
whether his is a job for life. He smiles
and says: “Yes”, then hesitates briefly
and says “yes” a few more times.
After talking to him it’s hard to
escape his a sense of duty, loyalty
and immense privilege and responsibility that come with being the
custodian of a family empire. The
entire business has a sense of longtermism. That also goes for its customers, who often have to wait for
their watches. According to Stern,
demand for Patek Philippe products always outstrips supply, meaning that many clients wait years for
the watch they have ordered. One
lady recently went into the store on
Bond Street to check the length of
the waiting list for the World Time
5131, a highly sought after watch with
an enamel dial that shows the time
in all 24 time zones. An apologetic
salesperson told her she might have
to wait “up to 10 years”.
In solidarity, to this day Stern says
that he never wears new watches
which have come straight out of
the factory, because he knows his
customers are waiting for them –
two years or more is normal. Watch
repairs can also take the same
amount of time.
Partly this is a result of uncompromising standards. It takes 1,200 steps
to produce the components of even
Patek Philippe’s simplest self-winding
movement. “In some ways we shoot
ourselves in the foot by creating things
we know it’s going to be a nightmare
to produce,” says Stern, who heads
the creation side of the business. “But
we are constantly concerned with our
quest to increase the quality of what
we do and to achieve perfection. So I’m
not going to rush it. We have one lady
who works on the enamel dials of the
World Time watches to the quality we
require. I know that every investment
we make now is for the long-term good
of the company.”
Stern is convinced his customers
appreciate the value of this long term
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Thierry Stern has
loved watches
since he was six
view. “Our customers are looking to
invest in real value. We still repair
and restore all our watches. After 30
years, many big watch companies
Lesley Wild, of
Betty’s & Taylors
Group, one of the
IFB’s top family
businesses for
stewardship, p08
won’t fix your watch. But 30 years is
nothing for Patek Philippe because
we commonly repair watches that
are 100 years old. That’s our philosophy,” he says.
“At auction, the majority of watches
fetching record prices are from
Patek Philippe,” he adds, although
it is widely acknowledged that the
company itself is a regular auction
bidder, buying up classic watches
for its private museum collection.
Thierry’s father Philippe has even
been known to show up to a Geneva
auction in a tracksuit, looking like
he has just arrived from the gym to
make a quick multimillion franc purchase before leaving.
The company’s board is patriarchal – it consists of Thierry Stern,
his father and honorary president
Philippe Stern and managing director Claude Peny. Thierry has two
older sisters – one who looks after
VIP clients in the Geneva boutique
and one who left the company.
The company typically plans
two years ahead when it comes to
watch design – that department
is run by Thierry’s wife Sandrine.
The couple met at industry trade
show BaselWorld when Sandrine,
the daughter of a Geneva jeweller,
organised an event for international
retailers. They have two sons, aged
eight and nine.
But can this sort of business continue to flourish? There has been a
lot of consolidation in the luxury
industry in recent years and the vast
majority of Swiss watch companies
belong to either the Richemont or
LVMH luxury goods conglomerates. Can Patek Philippe remain
independent? Stern thinks so. “We
plan our strategy like chess. With
no shareholders, our independence enables us to focus on a clean
and clear strategy with long-term
vision,” he says.
And what about Asia, the big new
market for luxury goods? While more
fashion-conscious luxury brands
from Louis Vuitton to De Beers and
Gucci cater to the burgeoning middle class there, some might think that
Patek Philippe, with its more conservative aesthetic, might struggle to
carve out market share. Well maybe.
The entire watch industry has seen a
conservatism in watch styling of late,
proving that fashions come and go.
And during our trip to the company’s museum, almost every visitor was Asian. The company has a
longstanding presence in the United
States – Thierry’s grandfather Henri
Stern spent 20 years in New York –
Family Business
Thierry Stern CV
Born _ 1970
1988-90 _ Business studies at Ecole de Commerce,
Geneva; Watchmaking school of Geneva
1990-96 _ German Patek Philippe retailers; New
York Patek Philippe subsidiary founded by
Thierry’s grandfather Henri Stern; Patek
Philippe case and bracelet workshop
1997_ Marketing manager for Benelux
1998 _ Head of product development, Geneva
2006 _ Vice president and member of
management committee
2009 _ Patek Philippe president and management
committee member
but today its strongest markets are
Europe, the Middle East and Asia.
Family businesses have a reputation
for avoiding risk. But Thierry Stern
is adamant that Patek Philippe has
embraced risk for the long term gain
of the company – whether by investing in a state-of-the-art building when
shareholders would “rather have kept
the money for themselves”, new technology to increase the accuracy of its
watches, or research into the performance of specific materials. “We take
risks to stay at the top of the pyramid. I think that if people say Patek
Philippe is risk-averse, it is because
they are jealous of our success.”
Despite its conservative image, the
business is forward looking, Stern
insists. It channelled serious investment into machinery to research
how silicon can improve the smooth
running of its watches, resulting in
the introduction in 2005 of the silicon escapement wheel. “We had
no idea when we started whether
it would be a success. But I believe
that either you take risks, or you die.
Respect for Patek Philippe comes
from the fact that we are always
evolving, step by step.”
Stern says that joining
the business instead of
going to university was the
hardest decision of his life
Stern refers to his decision to join
the company full-time at the age
of 19 as the hardest of his career to
date. “I like travelling, but I don’t
like sitting for very long,” he says.
He decided university was not for
him and instead he chose to climb
the ranks starting with two German
retailers, moving on to the New York
subsidiary, returning to production
in Geneva, then heading the Benelux
market. He became head of product
development before becoming vice
president and then president.
“There are no books that teach you
what I’ve learned working my way up
in the business over the last two decades,” he says. “With our product, I
can seduce intelligent people to work
with us to run the financial aspect –
in fact they have proved to be some of
my best teachers. What I love is not
numbers or reports, but watches.”
There must be some stress in taking over the reins of a family business, and Stern says the greatest
challenge has been accepting he is
not the same person as his father.
“Many people taking over a family business expect to be as good
as their parents. But I don’t think
I should try to be the same. They
key is to surround yourself with
great people to call on when help
is needed.” Under Stern the business has flourished. When his father
took over as managing director in
1977 there were 150 employees.
Today there are close to 1,500.
Typically for a family businessman, Stern takes a keen interest
in his workers. “The greatest lesson I’ve learned from my parents is
to respect people and to say thank
you. There are people in our factory
responsible for making the smallest
holes on miniscule watch components and they are not on the highest salaries, but if they don’t do it, I
don’t have watches. My father really
pushed me to appreciate other people’s hard work,” he says.
Stern knows that the family business image is important for customers. “With most brands, CEOs are not
experts on the product, they are more
concerned about shareholders. But
our customers really care about the
manufacturer of their watches,” he
says. “Our customers appreciate the
fact we are a family business. They
enjoy meeting us, sharing our passion about passing their watches on to
the next generation of their families.”
If there is one challenge to firms
like Patek Philippe, with their tra-
dition and craftsmanship, it is technology. As if to underline that he
is in tune with the modern world,
Stern checked his iPhone twice during our meeting, once to clear time
for the photographer. Is he worried
that Patek Philippe might be left
behind? Not at all. “I have noticed
that the more successful digital and
virtual technology have become, the
more success we have had with our
mechanical technology,” he says.
“We have many clients from the
IT and technology industry. Their
own products have a short shelf life,
which is probably why they love our
watches. The fact there is no battery
and that it’s all handcrafted somehow
brings you down to earth.”
In a functional world, there will be
always be a place for luxury, he thinks.
“No-one needs a Patek Philippe
watch. The only one who is stuck with
no choice but to wear one is me,” he
quips. “Our work is not vital, it’s about
beauty, passion and history. That’s
why it has to be perfect.”
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RACONTEUR 05
Family Business
clear direction:
the key to longevity
management The secret of commercial success is to always have one eye
on the future. Family businesses are better at it than others, but a few rules
can help to build a sustainable culture
Mark Goyder
Founder director,
Tomorrow’s
Company
ȖȖ This month people are once again
arguing about private equity, asking whether it is an intrinsically bad
form of ownership.
In Tomorrow’s Company, we look
at ownership differently. Under any
style of ownership there can be good
businesses and bad ones. What matters is not the formal arrangements
but the approach.
So how do we understand what
“good” looks like? After looking at
successful businesses of all types –
family, employee-owned, private
equity-funded, listed and mutual –we
concluded that the answer lies in stewardship. How you deal with the assets
you have inherited? How you manage
them and hand them on in better condition than you found them?
That led us in 2009 to publish four
stewardship principles, and in 2011
to work with the IFB to understand
how the very best family businesses
are applying these principles.
Family businesses inherit three key
assets. First, family capital – that emotional attachment by the family to
the business, that sense of obligation
to past, present and future. As Alex
Scott, chairman of Sand Aire, puts it:
“This business is me. It is in my guts
and it is in my demeanour and I live it
and I breathe it and I sleep it”.
The second is people capital. The
best family businesses achieve a level
of commitment from people that,
as Jonathan Wild, former CEO of
Betty’s and Taylors, puts it: “Such
is the strength of the culture that
sometimes non-family behave more
like family than family”.
Thirdly there is financial capital.
With it comes a freedom to make
choices and think ahead. As Peter
Gordon, chairman of William Grant
& Sons, puts it: “If we were quoted,
the market would demand a return on
capital investment over a much shorter
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time frame. Being unquoted allows
us to make utterly unique decisions”
Obviously there are synergies
between these three capitals. For
example, some businesses, like Timken in the USA, used the strength
of their financial inheritance to
strengthen their people capital –
they avoided laying people off in the
recession, instead putting many of
them to work in R&D.
enduring link
By their stewardship successful businesses also build social capital - an
enduring link with those around
them. Take Marshall of Cambridge
Group, which has taken on young
apprentices every year since 1921.
There is some evidence in the UK that
customers trust family businesses
more: overall they seem to be better
at building social capital to the benefit
of themselves and the community.
In talking to us family businesses
stressed the importance of leadership with a clear vision, values,
good governance, and an excellent
approach to succession. They recognised that these were summed up by
the principles of stewardship.
Stewardship starts with clarity –
about why we are here; where we
are headed, what we stand for, and
what the shareholders expect of the
directors. That’s why we call Principle One “Setting the Course”. Many
family businesses have a charter or
mandate in which the owners set
out exactly what they expect from
the family, the board and the management. Have you? The best businesses, like for example the Linney
group, are relentless in their focus
on culture in the company. Are your
people clear not only on what you
want them to achieve but also how
they should behave?
Next comes the restlessness that
marks out all the great athletes and
performers. Principle Two is about
“Driving Performance”. How do
you benchmark yourself against the
best? Do you have independent nonexecutive directors who insist that
you benchmark yourselves against
the best?
Principle Three is called “Sensing and Shaping the Landscape”.
How do you scan the environment around you? And how do you
improve it to your and its benefit?
Can you sense the way the economy is shifting? Have you built in
the rising importance of carbon costs
into your model? How do you shape
the landscape – what are you doing
to persuade the chancellor of the
exchequer to ensure that UK family
business are encouraged to continue
investing for growth?
Businesses that endure are constantly managing the present while
investing in the future. They think
about succession as well as performance management; capital as
well as revenue, reputation as well
as results. We call Principle Four
“Planting for the Future”. North
American research by Miller and
Le Breton Miller tells us that the best
family firms are “unfailingly generous investors… they put more money
into competencies, infrastructure,
marketing and training” and are willing to wait longer for rewards. Do
you? Are you mobilising the next
generation? How do you inject talent
into your business that will make it
raise its game? The French Mulliez
family who put up €500,000 as an
investment in any business idea that
a young family member might come
up with. What are you doing?
Family businesses are the first to
admit there is nothing perfect about
them. With families, when things
go wrong they can go very painfully
wrong. The principles of stewardship
offer an important guide to avoiding
that pain, and making the very best of
what you have inherited.
Tomorrow’s Company is a business-led think and do tank. Mark
Goyder was co-author of the Family Business Stewardship report.
www.tomorrowscompany.com
Family Business
nurture your
business and
make the world
a better place
values A modern fable about a Swiss man
who single-handedly planted a forest reveals
a profound truth: that the best companies are
those that think about future generations
Randel Carlock,
Professor at
INSEAD business
school
ȖȖ Family business is a challenge
because families are about emotions
and businesses are about financial
performance – not a likely formula
for a successful partnership. Yet,
despite this apparent conflict in purposes, many family businesses create a competitive advantage based
on stewardship by aligning their
concern for family emotions while
acting professionally to deliver business performance.
Family business stewardship, like
any value, is hard to describe, but,
in simple terms, it is about leaving
your family and business in a better
condition than when you inherited it.
Obviously this can mean financially,
but for many business families it is
also about the family’s legacy, the
quality of their emotional connections and maybe a spiritual dimension of service to others.
Perhaps the best way to explore
stewardship is to consider a short
story titled The Man Who Planted
Trees. This is clearly not a business
case study or even about family business. Its author, the French writer
Jean Giono, was never even clear as
to whether it was fact or fiction. He
claimed instead that it was a modern
fable. Indeed, since he first published
it back in 1954 the short story has
been translated into all major languages and turned into an Oscarwinning animated film (see box).
The Man Who Planted Trees is a
parable about one person’s commitment to make the world a better place for future generations. His
reward was not personal recognition
or financial gain but rather the challenge of his work and the opportunity to use his simple talents for good
purposes. The current economic and
environmental challenges the world
faces make the story a powerful metaphor because planting trees and
businesses could quite literally save
our planet.
There are particularly powerful
lessons for business families in this
story. The stewardship behaviours
of focusing on the future, continuous learning, and sustainability,
combined with the entrepreneurial determination to do something
that had never been done before,
enabled Bouffier to transform the
arid countryside into a thriving landscape. Without any thought of personal recognition or financial gain,
the shepherd-turned-forester moved
tirelessly across the countryside,
selecting and planting the best trees
for the different soil and landscapes.
In short, this it is a story about what
can happen when stewardship is the
guiding principle.
Growing plants
can teach you
about growing
a business
the human dimension
Jean Giono’s story also helps us
to focus on the importance of the
human dimension to family businesses as they transition across
generations. Multi-generational
business families face a difficult
challenge of maintaining healthy
family connections because of the
natural tendency for wealth and
power to interfere with meaningful human relationships. Stewardship values can help hold a business
family together by providing a roadmap for transforming the founder’s
beliefs into a meaningful guide for
future generations.
Wealth and power have
a tendency to interfere with
meaningful relationships,
so families need a roadmap
The most important factors to the
first-generation entrepreneur are his
or her values and vision of what the
business can become. Stewardship
values shared by a family strongly
support the founder-entrepreneur’s
personal values of long-term thinking and ownership continuity. They
enable multi-generational business
families to commit their talents
and resources to professionalising
how they work together in developing strategies, investing human
and financial capital and governing
their performance.
Examples of how stewardship values and behaviours can be expressed
in family business actions can take
many different forms, for example:
planning based on family values and
goals; teaching the next generation
about the responsibilities of ownership; supporting family education
and talent development; investing
capital in the business to support
sustainable growth; developing and
selecting the most capable leaders;
planning and discussing ownership
Maximilian Riedel
of the glass-making
dynasty explains
why hugging is
important, see p14
transitions; encouraging family participation and commitment in family
activities; contributing family talents and resources to philanthropy;
developing sound family agreements
to prevent conflicts; using governance to take decisions and improve
accountability; considering the interests of all stakeholders served by the
family business.
The 21st century is a new era of
global opportunity – particularly
for family businesses – because
families that combine stewardship
values based on professional practices create a competitive advantage that cannot be matched by
widely traded firms. These “best”
family businesses outperform
their listed competitors because
they lead, plan and govern based
on stewardship values. Their planning is for future generations not
the next 90 days; their strategy is
driven by value creation for their
family and stakeholders, not just
the shareholders and their governance is focused on sustainability
and accountability.
The family and business unity of
purpose around stewardship can
help ensure that business families
lead firms that perform in the marketplace and, most importantly, create families that are connected by
service and caring.
The man who planted trees
Exactly a century ago on the bare
contours of the southern French Alps,
one man began to plant trees.
Elzéard Bouffier had been a farmer
in the lowlands, but – after the death
of his wife and only son – he withdrew
to the mountains with his sheep. He
had a simple purpose: to bring the
withered landscape back to life by
populating it with trees.
Bouffier spent his days planting acorns and his evenings sorting
through the next batch of seeds, selecting only the best. He also started to introduce other species, such
as beech and birch. Over three years,
he planted 100,000 seeds in total. Of
these, only one-fifth produced seedlings. And he knew that only half of
these again would survive. But that
would still leave 10,000 trees – growing in a place where once there had
been nothing.
The years went by, and with them
the Great War. Elzéard Bouffier continued his single-minded pursuit. By
now the first oaks were as tall as a
man, and the beech trees shoulder
high. In the valleys birch thickets were
thriving, and water ran in the beds of
streams that had been dry throughout living memory. Little by little, as
the years went by, wildlife returned to
the landscape: first flowers and willow trees, then hare and wild boar. No
one yet suspected that man, let alone
one single man, was responsible for
this apparent miracle of nature. And
still Bouffier continued – with no recognition, yet much adversity.
One year he planted more than
10,000 maples, all of which died. But
the rest of the forest flourished to the
point that he now had to walk 12km
from his house to plant new beech
trees. Bouffier was 75 years old and
had almost forgotten how to talk,
such was his solitary lifestyle.
When the Second World War broke
out, his work was briefly in jeopardy.
Some of the trees were cut down for
much-needed fuel, but the forest was
so remote that it soon became apparent that felling them was uneconomical. Bouffier continued planting,
just as he had through the First World
War. By the time a distant peace was
declared in 1945, he was 87. He died in
hospital two years later.
During the last years of the old
man’s life, a wise forestry officer had come to realize that the trees
had not sprung up spontaneously. He had, unbeknown to Bouffier, assigned some of his staff to protect the young forest. At around the
same time, families had begun to return to the abandoned farms and villages. Water became plentiful, as the
trees retained the snow and the people learned how to channel streams.
Crops of all kinds grew abundantly.
Elzéard Bouffier left behind him not
only a forest of thousands of trees but
a community of nearly 10,000 men,
women, and children. His once-bleak
mountainside lived happily – if not ever
after – right up to the present day.
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RACONTEUR 07
Family Business
stewardship
at its best
Associated British Foods
Bestway Group London
Cash and carry operator Bestway Group is one of the largest
family-owned businesses in the
UK and the largest Asian family
business. The story of Bestway
cannot be separated from Sir
Anwar Pervez, who came to
London from Pakistan in 1956
aged 21. He took on various
jobs, including bus conductor,
and finally launched his own
business, the Kashmir convenience store in Earl’s Court, London, in 1963. One man’s vision
and passion has been translated
into a market leading business
and this vision is now being sus-
tained by the family’s continuing commitment. Governance
plays a key role; the non-family
directors are often thought of
(or mistaken for) family members, due to the inclusive and
broad definition of “family”
that is practised in the firm.
Integration of family and nonfamily has occurred in reverse
with established non-family
members inducting family into
the company. In 2011 Bestway
achieved Investors In People accreditation – the fourth time it
has been awarded this accolade
since 1999.
The William jackson food group Hessle, Yorkshire
The William Jackson Food Group
is a group of food businesses
most famous for the Auntie Bessie’s Yorkshire pudding brand.
The company strives to balance
continuity with change and has refocused its portfolio by disposing
of legacy assets and reinvesting
in new areas of activity. Over
the last 15 years the owners, the Oughtred family,
have created a governance
structure with a family constitution – setting out policies
for the family, with a forum to
discuss issues, foster the commitment and identify talent within the
family. The strength of its family
governance lies in how the family has reconciled continuity with
necessary change, and by extension engaged the future
generations with the
business. The present chairman, Nicholas Oughtred, says:
ABF is a diversified international
food, ingredients and retail group
and is the UK’s biggest family
business with 97,000 employees
– its brands include Kingsmill,
Primark and Twinings. In ABF’s
latest announcement, third
generation George Weston, the
current CEO, emphasises their
robust approach to investment:
“We have made further substantial capital investment for the
longer-term development of the
group.” People are the company’s
Betty’s & Taylors Harrogate, North Yorkshire
NG Bailey Ilkley, West Yor
NG Bailey, founded 90 years
ago, is among the UK’s leading
providers of building services,
mechanical, electrical, ICT, off-site
manufacture, interiors, systems
integration and maintenance solutions. The company employs
3,100 people and has a turnover
of £500 million. The family firm
has been strongly committed
to its workforce, spending more
than £3 million a year on training and development in order
to enhance skills at all levels of
the organisation. This commitment includes an apprentice programme that was
“What William Jackson strives in
all we do is to be a business to
be proud of. This helps guide us
because if we aren’t proud of our
products or the way we do things,
then we are doing
something wrong.”
Sir Anwar Pervez, founder and
Linney Group Mansfield, Nottinghamshire
Linney Group, which specialises
in providing design and communication solutions, sees its company culture as its competitive
advantage and makes a great
effort to communicate and improve its values. It believes that
people make all the difference.
The firm’s core values revolve
around four pillars of “healthiness”: Healthy Linney Person,
Healthy Linney Manager, Healthy
Linney Company and Healthy
Linney Values. Documents are
readily available to the workforce
describing what healthy means in
each particular context, what behaviours are expected and how
these should be implemented.
These values are open to challenge and modification on an ongoing basis. Every month a one
day Core Values course is held
for people who have just joined
the business with a refresher
every three years. Nick Linney,
the Chairman, said: “Our culture
is different from your culture, you
instantly feel the culture in our
family business.”
08 RACONTEUR
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Betty’s & Taylors is a Yorkshirebased third generation family
business specialising in tea, coffee,
speciality cakes and tea rooms
with a family atmosphere. It recognises that the long-term survival
and prosperity of the company
depends on sustainable relationships embracing staff, customers,
local and global supply chains,
communities and the environment.
The company, which has achieved
Investors in People status, believes in trading fairly, supporting
the local community and being a
good place to work for staff. The
strength of the culture at Betty’s
helps to underpin strong loyalty,
trust, and solidarity. Betty’s have
used cause-related marketing to
integrate charitable efforts which
promote ethical trade and social
responsibility. The Yorkshire
Tea Trees for Life consumer promotion is an
example of applying
a socially responsible
approach to marketing and has resulted
in the planting of
three million trees.
The family business
holds a Queen’s Award
for Enterprise
for Sustainable
Development.
director of Bestway Group; Leslie
Wild, chairman of Betty’s and
Taylors; Tim Wates, chairman of
Wates Family Holdings
Family Business
s plc London
survey The ten family-owned businesses in this Institute for Family Business survey have shown
their ability to manage their company resources with care and conviction. Achieving business success
never comes easily, but building on the four types of capital identified in the IFB Family Business
Stewardship report (family, people, financial and social) has enabled each firm to develop and prosper
beyond one generation. Strong leadership with a clear vision, allied to identifying and embedding
a strong set of values in the company, is a common factor throughout. These firms also place high
importance on governance to enable good decision making. Individually they have made great efforts
to ensure effective succession planning, without which continuity would not be achievable. All 10
deserve to be commended as examples of the UK family business sector at its best.
Clinton Devon Estates Budleigh Salterton, Devon
most important resource and the
firm has won accolades for their
solid employment practices. ABF
recognises its responsibilities
and encourages its businesses to
engage with the local community.
The Garfield Weston Foundation,
set up in 1958, is one of the UK’s
foremost philanthropic organisations and derives a substantial
proportion of its funds from its
interests in the group’s ultimate
holding company, Wittington
Investments Limited.
rkshire
established since 1934. Their Engineering Academy was opened
over 40 years ago and more than
4,000 people have successfully
completed an apprenticeship.
Many of these people have won
national and industry awards, and
have progressed to senior management positions. The company
continues to develop their staff
training programmes as part of
their ongoing investment in learning, education and development.
Clinton Devon Estates is a rural
property and land management
business now in its 22nd generation of family ownership. It places
responsible stewardship at the
heart of the business. The estate
takes pride in its conservation
credentials across both the built
and natural environment, with
climate change, fuel and food security high on the Estate’s agenda.
Modern business practices help
to embed a culture of innovation
across the business. In working to
meet the needs of a transform-
ing countryside, it aims to be a
leader in the practice of modern
land and property management,
while preserving the estates’ heritage and environmental assets for
future generations. Lord Clinton
sums up the Estate’s approach like
this: “We aim to hand over the Estate in a better condition that we
found it not only for our family but
for the wider community.” Clinton
Devon Estates has been awarded
the Queen’s Award for Enterprise
in the Sustainable Development
category twice in five years.
Walkers Shortbread Banffshire, Scotland
Arco Hull, East Yorkshire
Arco is a fourth generation
business, established in
1884, and a UK leader in
workplace safety clothing and equipment. It
has 40 branches across
the UK and Ireland. The
current generation of
family leaders made
their mark by initiating a process to
capture and embed the company’s
cultural DNA. This is
defined by three core
values: respect for people;
excellence in reputation; hard
work and enterprise. The approach has paid dividends
and has resulted in lower staff
turnover. Employees regard
the family nature of the organisation as a positive contributor to
job satisfaction. All new joiners are
welcomed by a family member, and
this is just one of a number of ways
in which family owners remain visible in the business. The family’s
professionalism and commitment
to good governance has also been
a factor in attracting non-family
senior management.
Founded in
1898 by Joseph Walker
the company, based in Aberlour
on Spey, concentrates on the sector of the biscuit market that they
know best – shortbread. As the
leading brand of its kind, business
success at this family firm means
not only having a strong market position, but the capacity for
longevity. Excellent relations with
employees, suppliers and other
members of the stakeholder community sit alongside a track record
for
innovation, and
a solid balance
sheet. There is also something
more intangible, the essence of
“familiness” or family capital. At
the head of the business siblings
Joe and Jim Walker lead by example, arriving before dawn. Through
the brothers’ “no hurry” approach
they are able to engage with one
of the most simple methods of
leadership: listening. As leaders
they are always available, both in
terms of practical and emotional
support for their employees.
Wates Group Leatherhead, Surrey
This building and construction
group was founded in 1897 by Edward Wates and his three brothers. The Wates family are now
preparing themselves for the transition of ownership from the third
to the fourth generation by aiming
for “world-class professional family ownership and to be a great
company to work with”. Their approach includes examining the
family’s strategic vision and its
values as well as the commitment
of all family members as owners
of the business. They examined
the strengths (and weaknesses)
of individual family members and
where their skills could match the
needs of the business. These values include financial stability demonstrated through the strength of
their balance sheet, with no reliance on external funding.
Away from the pressures of City
institutions the company can
take a long-term view of the construction industry. Wates understands the value of working with
partners and has a deep commitment to social action. Its priority is to help create sustainable
communities raise educational
aspirations, improve skills and
create employment.
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RACONTEUR 09
Family Business
family business makes
the world go round
ONES TO WATCH:
SUCCESsFUL FAMILY BUSINESSES
IN EMERGING MARKETS
globalisation From Thailand to Brazil, economic and cultural reasons
mean that families are driving development. But as they get bigger, they
must bring in outside expertise in order to survive, writes Fergal Byrne
ȖȖ Family business is the natural unit of economic enterprise
in emerging markets. They make
up some 70 percent of businesses
within the emerging markets. Family-owned companies make up
something like 95 per cent of Indian
businesses, for example, 90 per cent
of Chinese businesses, and 80 per
cent of Brazilian businesses.
“Family businesses account for
the bulk of economic activity in the
emerging markets and are responsible for creating the lion’s share of
employment and economic growth,”
says Andrew Keyt, executive director
of the Family Business Center of Loyola University Chicago. As economic
growth in the emerging markets has
exploded, eclipsing growth in Europe
and the US, an array of large family
businesses has emerged: Mittal, Tata,
Sabanci, Godrej, Votorantim, Reliance Group. Many of these companies
have a strong or growing presence on
the world stage.
Family businesses in these markets
have had the resources to capitalise on opportunities that come with
rapid economic growth. “In India,
family businesses have the wealth,
the networks, and the social and cultural awareness to take advantage
of the myriad economic opportunities that are available,” says Kannan
Ramachandran, Thomas Schmidheiny Chair professor of family business and wealth management at the
Indian School of Business. Speed is
another key advantage. “The family’s ability to move quickly in a very
dynamic and, fast-moving business
environment is a real asset for family businesses in emerging markets,”
says Andrew Keyt. “They can move
more quickly and they can make
decisions that seem antithetical to
global multinationals that are not
family owned.” Flexibility allows
them to take advantage of opportunities that large global businesses can’t.
great contribution
Families make a greater contribution to the success of businesses in
these markets, according to Christian Stewart, founder of Family Legacy Asia, an advisory company to
families. “In general, family businesses in Asia tend to underinvest
in marketing and R&D and have
weaker, less recognised brands
than family businesses in developed markets, so you find that a lot
of the strengths of these businesses
come from their family: it’s knowhow, expertise and connections that
account for their success.”
At the same time families must
deal with the same issues as those
in developed markets, Keyt says. “All
families need to deal with questions
of communications between family
members, decision-making about
responsibilities, succession, and
leadership development. Although
the questions families face may be
the same, they tend to be dealt with
differently,” he says. These issues can
be made more difficult by specific
cultural aspects – see box.
While culture is one factor affecting developing market family businesses, pragmatism is another. “In
the more remote parts of many Asian
markets – Thailand, Philippines
Indonesia – it is harder to find the
professional talent,” says Stewart.
“Quite simply, family members are
often smarter, more willing to do the
hard work, more committed to sustaining a family legacy. The mindset
of many is that the only viable succession option is someone within
the family. Only family members will
do what is necessary to get it done.”
transparency drive
Governance is an area where family businesses are improving. The
reality that many emerging market
family businesses have stock market listings has been an impetus for
some to develop more transparency and financial discipline, and to
improve their corporate governance.
But more professionalism is needed,
according to Mr Stewart. “You rarely
see professional directors on family
business boards in Asia, except listed
companies,” he says.
“But even there, you get the sense
that they are there to look after the
interests of minority shareholders;
they are not involved in strategy
and oversight. Professionalising the
board – or having an advisory board
Grupo Votorantim,
Brazil
Revenues: $17.6 billion
Carlos Ermírio
de Moraes
Headquartered in São Paulo, the
Votorantim Group is among the largest
business groups in Latin America,
specialising in basic industries with
interests in mining and metals, cement,
paper and pulp, polypropylene biooriented films, and chemical specialities.
Votorantim also has an important share
in the financial sector through Banco
Votorantim. Carlos Ermírio de Moraes, son
of the founder, is chairman of the company.
Going public has been
an impetus for many family
businesses to become more
professional and improve
corporate governance
– is a good first step and would even
help take the pressure off the succession issue.”
Caroline Seow, executive director of Family Business Network
Asia believes things are gradually
improving in Pacific Asia. “We’re
noticing the openness of patriarchs and founders to consider
top-notch non-family CEOs. Here
at FBN we’re also passionate about
responsible stewardship as businesses grow across generations.”
Professor Ramachandran believes
COMMERCIAL FEATURE
TrustedFamily:
a secure intranet for your family!
If your answer to these questions is
“yes”, you are probably a member of a
third generation or more family business.
Congratulations, because that means
you are in the 13 per cent of family companies that make it to the third genera-
tion. But it also means that family communication and cohesion will become
more and more important for you.
While there are no scientifically
proven reasons why certain family
enterprises outlast others, there are
many common values believed to be
driving that success. These include
family unity and cohesion, communication, trust, entrepreneurship and
engagement of family members, just to
mention a few.
About three years ago I went to my
first family business conference and
there I realised that my family was in
exactly the same situation as other third
generation plus family businesses when
it came to communications challenges.
I myself am a next generation member of a Belgian family business which
10 RACONTEUR
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Does your family include more than
10 family members over 18 years old?
Do you have family members spread
out over different cities or countries?
Are most of the family members
not working in the family business
or office?
Is the next generation starting to ask
questions about the family business
and its history?
Do you struggle to bring everyone together and keep everyone
informed?
is active in plastics. During the conference, I met with Edouard Janssen, a
next generation family member of the
Solvay Group, who was in a similar situation. We exchanged business cards and
decided to do something about it.
At the time, Facebook, YouTube
and Wikipedia were emerging. I had
a technology background, so we tried
to find out if we could use the internet
to connect better with our family and
our business.
After looking for a solution, we realized
there was nothing out there that could
solve our specific needs. We wanted to
find a platform that was secure, easy-touse and that would combine all the necessary tools in one place.
We also found out that 70 per cent
of companies worldwide are family
businesses, so we assumed others out there
would have similar needs.
We ended up creating a company, called TrustedFamily, with a simple idea: to build a secure
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Today, TrustedFamily has more than 40 customers in 13 countries that control businesses with
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If you want to preserve your family past and
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free to get in touch.
For more information, visit
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[email protected]
Family Business
Chinese entrepreneurs are reluctant to
hand on control to the next generation
Sabanci Holding,
Turkey
Revenues: $13 billion
Güler Sabancı
Sabancı Holding is one of Turkey’s largest
industrial and financial conglomerates,
controlling some 70 companies with
operations in a wide array of areas ranging
from telecom and retail to cement, tyremaking, hotels, and power generation.
Sabancı and its subsidiaries also own
more than 40 per cent of Akbank, Turkey’s
largest bank. Güler Sabancı, a thirdgeneration family member, is chairwoman.
Li Ka-shing
Hutchison
Whampoa Limited,
Hong Kong
Revenues: $42 billion
Hutchison Whampoa Limited is an
international conglomerate with a diverse
array of holdings including port operators,
retailer, property development and
infrastructure, and telecommunications
operators. It is a Fortune 500 company
and one of the largest companies on
the Hong Kong stock exchange. The
company is controlled by Li Ka-shing, the
company’s chairman.
THE CULTURAL ANGLE
Naguib Onsi
Sawiris
Orascom Telecom
Holding,
Egypt
Revenues: $3.85 billion
Tata Group,
India
Revenues: $76.4 billion
Ratan Tata
Orascom Telecom is a large and diversified
telecom operator running GSM networks
in 11 emerging markets in the Middle
East, Africa and Asia. It launched the first
mobile operator in Egypt, Mobinil. Naguib
Onsi Sawiris is the company founder and
executive chairman and with his family of
company owns a controlling stake.
there has been a major drive toward
professionalism recently. “Family
size is shrinking so family members
realise the need to work with outside
talent. This is particularly true of
the younger generation, which has…
studied and worked abroad.”
Adapting to global business culture is another big challenge. Education abroad and internships can
help. According to Henry Waichung Yeung, an academic from the
National University of Singapore,
family business heirs educated in
top business schools abroad who
eventually take over the business
are more likely to use professionals
in management roles. These managers play an increasingly vital role
in key positions and are more likely
to be independent-minded and less
easily controlled than in the more
traditional Asian management style.
But there are dangers, says Mr
M V Subbiah, former chairman of
Murugappa Group, now a fourthgeneration Indian family business.
“In India, you now have a situation
Tata Group is the largest private corporate
group in India with interests in an array
of areas ranging from communications
and engineering, to energy, consumer
products and chemicals. It has operations
in more than 80 countries; leading
companies within the group include
Tata Steel, Tata Motors (including Jaguar
and Land Rover), and Tata Consultancy
Services. Ratan Tata is chairman.
where everyone goes to the US to get
their MBA,” he says. They think they
should become the successor. But the
business schools don’t teach holistic leadership or the ability to make
quick decisions the way grandfather
or father took decisions.
“And often, when the younger generation comes back, they question
or dismiss their family’s values and
culture, which can be fatal for the
business. In my experience, clear
and aligned values are the bedrock
of a sustainable family business.”
In some developing countries culture
can impact on how a business is run.
Things are done differently in London
and Saigon. Take succession, for example. Indian cultural dimensions can
make succession in India a challenge.
Prof Ramachandran of the IBS says
that this can be made tricky by the
active involvement of all male members in the business, which provides
specific leadership, identity and status; and then there is the inherent assumption that the eldest is the brightest, smartest and best to lead able the
business. Only 25 per cent of Indian
business boards discuss succession
planning, according to the Bain Corporate Governance in India Survey in
2009. Several of India’s largest family businesses are currently grappling
with this question, including Tata, the
first major Indian family business to
look outside the family for leadership.
Succession is a big issue for Chinese family businesses, too, as first
generation Chinese entrepreneurs
near retirement age. According to research by Zhejiang Chamber of Commerce, about 80 percent of private
enterprises face succession problems. Liu Shengjun, deputy director
of the Case Center at China Europe
International Business School, writing recently on the Harvard Business
Review Blog, identifies the impact
of Chinese culture on succession:
sons are expected to take over running family businesses because there
is usually low trust outside of family members; and, many larger-thanlife CEOs expect to continue to influence their companies when they are
no longer CEOs.
Chinese cultural influences extend
throughout Pacific Asia, where ethnic
Chinese families have a strong presence, according to Christian Stewart
of Family Legacy Asia. “Ethnic Chinese families tend to be inward-looking and find it hard to establish trust
outside the family; as a result, they
tend to have more difficulty professionalising than western family businesses. Most still rely on family at the
highest levels. The top jobs are not
going to professional managers but
to family members who are being
groomed for success.”
may no longer be relevant to current
and future generations. In some cases,
the application of what worked in the
past may very well do damage to future
generations. Good stewards of family
businesses allow for change and in so
doing protect their legacies.
Good stewards also provide freedom.
Freedom to leave the family business,
freedom to grow independently and
freedom to give back in their own way.
As economic and social conditions
change over generations, so should the
ability of family owners be allowed to
change in accordance. If we think about
it, freedom is what underpins entrepreneurialism - the very thing that began
the family firm in the first place.
Given this freedom, how can we learn
from each other? I recently heard a family business owner in the Middle East say,
“I only exist to provide for my children
and to care for my parents.” A family
owner in Asia told me, “I want to ensure
that my children integrate with the rest
of the world, given the globalisation of
my business”. A highly successful European entrepreneur who endured the
Second World War said, “ I don’t care
what my children do with their money
as long as they leave the world a better
place than I found it”.
Instead of looking for recipes and
things we can copy, let us look at the
uniqueness of each family firm, its culture and its environment. Let us move
beyond best practice and focus on what
is fit for purpose. We are all unique and
must be treated as such. There is no one
size that fits all.
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RACONTEUR 11
COMMERCIAL FEATURE
FBCG advises more business-owning
families than any other firm in the world
Beyond Best Practice
We can be in no doubt that the principles of stewardship are universally
recognised by successful family firms.
But these principles are interpreted
differently by every family and every
culture. Let us not create a buzzword.
Let us instead understand what every
family needs and wants in expressing
their duty of care. The most successful
family firms believe that they exist to
serve others and are true servant lead-
ers. They do their best to nurture the
potential of all stakeholders and remain
committed to ensuring that “wealth” is
expressed in its widest form and shared
among many. They create meaning in
their activities, which allows them to
transcend generations.
Most importantly, they allow each
generation of owners to define their
own leadership style and values. What
made previous generations successful
Penny Webb
Is Founder and Managing Partner
of Familias & Company and
Senior Associate of the Family
Business Consulting Group.
Please contact her at
[email protected]
or [email protected]
Family Business
managing
the fault lines
Succession As they evolve all family businesses face problems, especially
when it comes to passing on control to the next generation. Handling it
well is the difference between survival and failure, writes Clare Gascoigne
ȖȖ A family business faces all the same
problems as a non-family company.
But it also has some extra challenges
along the way, and it is these added
extras that often cause the greatest
disturbance. “Any business needs to
change in order to grow, and there are
trigger points in any family business
that make things change,” says Sally
Brett, senior family business adviser
at the BDO Centre for Family Business. “But unless there is a mechanism
to keep the family working together,
family harmony and the family business can be badly damaged in times of
crisis. It can be pandemonium.”
Succession of management, or the
passing of ownership from one generation to the next, is one such trigger,
but there are many others. It could be
the birth of a first child that prompts
a sibling to demand a more formal
working arrangement; it could be
that recession forces a dividend cut
that means cousins start to query the
return on their investment; it could
be a surprise buy-out offer that brings
to light previously hidden differences
of opinion about what the business
means to the family.
“No generation wants to be the one
that messes it up,” says Patricia Milner, head of family and business planning at law firm Withers. “But when
families haven’t put much effort into
articulating their values, that mix
between business and emotion can
be a very difficult combination.”
How can family businesses minimise the disruption? Experts are
united in recommending that a family sets out its values in a family char-
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ter – a kind of business plan for the
family that identifies the governance
and core principles which will inform
any future decisions. But, says Lorna
Collins, director of the Family Business Research Unit at Bristol Business School: “Some of those decisions
are quite difficult and hard to do on
your own. How do you decide the best
way to treat the next generation, who
may not even be born yet?”
This is where paying an outside
adviser can be a really valuable
Experts are united
in saying that it’s vital
to write a family charter
investment. Someone who carries
no emotional baggage may be necessary to disentangle the emotion from
the business, and so help prevent a
change turning into a crisis for either
the business or the family. Setting
aside time for a family retreat can pay
off for the business, while promoting
family unity makes it more likely that
the family can move to a strategic role.
But, adds Collins, “it’s very difficult
to find the right advisers; there are
Family Business
family businesses that failed to manage change
THE DASSLERS
Brothers Adolf and Rudolf Dassler
founded a shoe company in Herzogenaurach, Germany, in 1924, and
found success after American sprinter Jesse Owens won four
Gold medals at
the
Berlin Olympics in 1936. But sibling rivalry was brought to the fore during
World War II, when Rudolf became
convinced that his imprisonment
by American forces was orchestrated by his brother. When he returned
home in 1948, the business was split:
Rudolf founded the company that would become Puma,
while Adolf (known as Adi)
launched Adidas in 1949. The rivalry divided Herzogenaurach, with rival factories on opposite sides of the
river, and the brother were never reconciled – though the two companies
made their peace in 2009, long after
Rudolf and Adi’s deaths, when employees of both factories played football together, pitting mixed Puma and
Adidas teams against each other.
THE GUCCIS
Guccio Gucci founded his eponymous business in 1906 in Florence. His
sons, Aldo and Rodolfo later took over
the company, growing it exponentially. But it was when the third generation came into the business that family in-fighting really began to damage
the company.
Family disputes included suits filed
by Paolo Gucci against his father, Aldo,
often pockets of expertise, but your
accountant may not be the best person to deal with the relationship
issues. It is less a business than a
psychological process.” And that is
not something you normally learn
at business school.
Sadly there is no easy way through
what can be a long and arduous process of communicating honestly and
openly – one reason why many families fail to act until there is a crisis.
Managing the evolutionary process
becomes much cleaner and less
painful if everyone has agreed the
terms and conditions beforehand.
That means agreeing on matters
such as the purpose of the business: should it provide employment for any family members or
only those whose skills match the
business plan? It means agreeing
what counts as family: does a husband or wife automatically become
part of the family? Perhaps a family
needs to identify what type of owner
it is (managing, governing, or simply
investing?), or how far the business
can interfere in an individual family
member’s personal life. It’s all tied in
with taking a long-term stewardship
approach to the business.
“A family charter is a very, very useful tool, a guidebook for the family,”
says Collins. “But it’s not a quick fix.
It can take anything between two and
four years to sort out the strategic
goals and how best to achieve them.”
Many families rely on the annual
general meeting to prompt a discussion, but that is not enough, says Milner. “The best family businesses are
those where there is a buy-in from all
family members as to the family values. This needs to be a project on its
own, where the family works through
the issues separately.”
Brett agrees. “You need a family
forum outside the boardroom and
the management meetings so family
matters are decided outside the dayto-day stuff. Set up a family council
so you get to know each other – practice communication and try and get
some inter-generational teamwork
going. It does take a lot of energy, will
need passion to make changes that
will stick – don’t underestimate how
much energy is needed.”
Simply talking to other families
may also be a help. Says Brett: “Lots
of family businesses don’t chat to
other families, and don’t realise that
everything they are facing has been
faced by every other family business.
Learning from other families is the
best tonic, but lots of families struggle along thinking their problems are
unique. Yet it’s quite normal to face
these challenges.”
Involving younger family members
from an early age can reap dividends,
Most business schools
don’t teach you to deal
with the psychological
issues that affect families
as individuals that are aware of the
family history and culture are more
likely to be able to build a shared
vision – or understand that their own
view on life does not match up, leading to a willingness to step away from
the family business. “You don’t have
to like each other, but if you understand the tradition and culture and
have a common goal, you can often
work together within a structure,”
says Brett. It’s the best way to ensure
evolution does not turn into a bloody
revolution that leaves the family as
broken as the business.
and other relatives and the company.
Countersuits were filed by the defendants, partly to prevent Paolo from producing a competitive leather line with
the Gucci name. Paolo Gucci’s suits
were dismissed in 1980 – but a mere
eight years later, the family sold a 50
per cent interest in their high-fashion
retail empire to a Middle Eastern investment banking firm.
THE AMBANIS
India’s largest private company Reliance was nearly torn apart by bitter fighting between brothers Mukesh and Anil Ambani in the years after
their father’s death in 2002.
Dhirubhai Ambani built up the
company, but did not leave a will; in
2005 the brothers agreed to split the
company, with Mukesh taking Reli-
ance Industries and Anil the remaining assets. However, non competition agreements became a source of
bitter dispute, leading to court battles that damaged both companies;
the agreements were scrapped in
2010, but the brothers have yet to be
fully reconciled.
Branding the family business
Part of managing the evolution of the
family business is managing its image. So should you push the fact that
you are a family business? The very
word “family” conjures images of
love, stability and warmth that many
advertising campaigns struggle hard
to evoke. Such associations provide
a unique competitive advantage for
any family business, according to research carried out at IMD, an international business school.
“Many business reputations have
been harmed during the recession, but not that of family businesses,” says Willem Smit, research fellow at IMD, who co-authored a study
looking at whether businesses took
full advantage of the premium that
comes from being known to be family-run. “Most of the associations that
people have with family businesses
are positive: such companies are seen
as being traditional, smaller, closer to
customers and more local.”
Such assumptions hold good even
when the company is in fact much
larger, but many family businesses
fail to capitalise on their heritage. C
Hoare & Co, a UK bank that has been
in business for 340 years, is one that
believes strongly in promoting its status as family owned and run.
“Being a family business is the essence of what we do, it’s one of the
reasons we are successful,” says Bella
Hopewell, a partner and one of seven
family members that are shareholders
Hoare & Co has used the “golden bottle”
logo for 300 years
at the bank. “We play to that strength –
it’s on the front page of our website.”
Of course, branding has to be
backed by the reality of family involvement. Smit says: “Branding
a company as a family business is
about the heritage that you try to
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pass on, and how that explains your
strategic choices – communicating
your principles, and the culture you
seek to maintain. It is about creating a
trusted environment.”
Some businesses put the family at
the forefront of their branding – one
US producer of cleaning products,
SC Johnson, has ensured its status is
well-known by always tagging “a family company” on to the company name.
Of course, there can be downsides
to being branded as a family business
– the corporate world is littered with
examples of family companies destroyed by feuding siblings or cousin
rivalry, so any public communication
has to ensure the connotations are of
love and support rather than the bitter disagreements of the nursery.
That can mean being prepared for
certain inevitable questions. Says
Hopewell: “I am only 42, and I am regularly challenged on how I’m going
to manage my succession! I wouldn’t
face those questions as a director in
a public company, but there are so
many examples of family businesses
wrecked by succession issues, clients
need to ask.”
RACONTEUR 13
Family Business
glass
consciousness
profile Riedel has been manufacturing luxury glass for nearly 300 years,
surviving wars and revolutions, but their experience will be familiar to many
younger family businesses, discovers Simon Brooke
ȖȖ Any Hollywood scriptwriter
searching for inspiration for a threepart mini-series would do well to look
at Riedel for inspiration. The Austrian luxury glassmaker is now being
run by the 10th and 11th generations
of the same family that founded it
during the 18th century.
The Riedels have survived wars
and revolutions and at least one
empire has risen and fallen around
them and their business. The family’s members have been murdered
and imprisoned. Walter Riedel, of
the eighth generation, was interned
in a Russian labour camp and the
company was confiscated from the
family by the Czech government
just after World War II. Walter’s
son, Claus, was forced to escape
from the Russians by leaping from a
moving train and walking ten miles
through thick snow.
In contrast Maximilian Riedel, the
11th generation, cuts an immaculate figure as we meet at Vinopolis,
the wine tasting venue near London
Bridge before a tasting session at
which he will demonstrate to a hall
of oenophiles how the celebrated
glassware can enhance a great wine.
He’s clearly conscious, though, of the
responsibility of being the latest in a
three-century dynasty.
“I’m very lucky to have the same
passion for glass and fine wine as
my father and grandfather,” says the
33-year-old in a clipped Austrian
accent Americanised after nearly 10
years in the States, where he heads
up Riedel’s operations. “In a family
business there’s always the possibility that one generation might have
different interests and not want to
follow in the footsteps of the previous one, so it’s important to have
a father who makes it interesting
enough for the next generation to
be willing to want to be involved.”
Much of what Maximilian has
experienced as a member of a family business will ring true with those
who have a shorter lineage, especially
the choice of whether to follow in his
father’s footsteps and the thorny issue
of working with someone with whom
there is a close emotional tie.
14 RACONTEUR
After a stint in the Austrian army
the young Riedel became interested
in Formula 1 motor racing but soon
realised that glass was the life for
him. Looking back he can see how
his father cultivated his interest,
allowing him to travel and to learn
about the business that he could one
day inherit. This included visiting
Venetian glass manufacturers where
the company has sourced glass for
centuries and working with champagne producers, a business closely
associated with Riedel.
“At family dinners my sister and I
always were always allowed to experience fine wine from a beautiful glass,”
he remembers. “But we never discussed business at the table, although
I knew from an early age what the
family business was. I really only
started getting involved after management school and my father exposed
me from a young age to the process
of taking management decisions.”
His mother is the sixth generation
of a steel and aluminium producer
and he believes that this has given
him another perspective on family businesses. His sister, Laetizia
Riedel-Röthlisberger, has not gone
into the family business and is now
a lawyer in Switzerland.
with gusto
Once Maximilian realised that his
future lay within the company, he
threw himself into it with gusto –
helped by his father, Georg, who
handed him the entire American
operation, then the fastest growing
market with the greatest potential,
at the tender age of 23.
“It was like jumping into very cold
water without any experience, far
away from home and family,” he
remembers. “But, when you grow up
in boarding school and the Austrian
army you become very independent.
My father allowed me to do it my way
and it’s worked out very well. I think
he decided that if I couldn’t take care
of it then perhaps I wouldn’t be right
for the company generally.” He has
been well blooded by the recession
whose damaging effects he describes
simply as “huge.”
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After an argument
you still have to be able
to hug your dad
père has been responsible for a major
global expansion of the company. It
now sells in almost every country of
the world and is expanding rapidly
in China. Father and son also take an
equal interest in the artistic development of the brand.
Georg developed the close connection between Riedel and the great
wineries of the world. Clearly conscious of the need to make his mark
as the 11th generation, Maximilian
has established a diffusion brand
aimed at the hospitality business
and is currently developing new col-
laborations with prestigious houses
such as Krug. Moving beyond wine,
though, he is currently working on
a water glass.
“Unlike wine all you taste with
water is its minerality,” he enthuses.
“Like wine, it has its own DNA. It’s
also affected by the shape of the
glass.” New products aside Maximilian sees great potential in Brazil
because of its European, wine drinking heritage. A Brazilian girlfriend is
an asset here, although it’s perhaps
too early to talk about the prospects
of the 12th Riedel generation.
Maximilian Riedel , 11th generation
of the Austrian glassmaking empire
Riedel believes that
his father’s decision to
send him abroad had
another motive – a
very understandable one that will be
familiar to many of
those involved in
family businesses.
“The distance has
been an advantage,”
he says. “I know that
between my father and
grandfather there was
a difficult work relationship. Here were two very
intelligent people hitting
against each other in
a very small space.
Their offices
were side by
side but they
didn’t work
well together.”
Maximilian and
Georg, who is 62, are coowners of the company and
it has no external shareholders. Both believe that this is
a great advantage for the company, especially given its status as
a luxury goods manufacturer. “We
are the true owners,” he says. “We
manage everything so anyone gets an
answer from the management within
24 hours. My father and I have similar management style. We keep our
employees very close and exchange
knowledge rapidly. We have very
good communication. You have
to differentiate between business
and family. After an argument
you still have to be able to hug
your dad – and don’t take it personally.”
Georg Riedel is described by
Maximilian as cautious and “a
humble person,” but Riedel
Family Business
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