_ 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 TWITTER.COM/RACONTEURMEDIA 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] For information about partnering 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 TWITTER.COM/RACONTEURMEDIA 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 04 RACONTEUR TWITTER.COM/RACONTEURMEDIA 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.” TWITTER.COM/RACONTEURMEDIA 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 06 RACONTEUR TWITTER.COM/RACONTEURMEDIA 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. TWITTER.COM/RACONTEURMEDIA 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 TWITTER.COM/RACONTEURMEDIA 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. TWITTER.COM/RACONTEURMEDIA 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 TWITTER.COM/RACONTEURMEDIA 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 communication and collaboration platform for business families. Today, TrustedFamily has more than 40 customers in 13 countries that control businesses with combined sales over 300 Billion USD. We make it easy to post minutes of meetings, organize events, share news, reports and information, build a family archive, share photos or videos, and much more. If you want to preserve your family past and build your family future in an interactive way, feel free to get in touch. For more information, visit www.trustedfamily.net [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. TWITTER.COM/RACONTEURMEDIA 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- 12 RACONTEUR TWITTER.COM/RACONTEURMEDIA 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 TWITTER.COM/RACONTEURMEDIA 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.” TWITTER.COM/RACONTEURMEDIA 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 TWITTER.COM/RACONTEURMEDIA RACONTEUR 15 Hambros WORKING TO WA RD S ON E GOA L: YO U RS PRIVATE BANKING Yo u r p r i v a t e b a n k e r w o r k s c l o s e l y w i t h a t e a m o f d e d i c a t e d i n d u s t r y e x p e r t s d e ve lop ing a p p rop ria t e solut ions t o h e l p y o u m a n a g e y o u r w e a l t h a n d m e e t y o u r p e r s o na l ob je c t ive s. w w w. p r i v a t e b a n k i n g . s o c i e t e g e n e r a l e . c o m / h amb ros Please note that investments may be subject to market fluctuations and the price and value of investments and the income derived from them can go down as well as up. As such your capital may be at risk. 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