The world’s oldest continuously operating family business ended its impressive run last year. Japanese temple builder Kongo Gumi, in operation under the founders’ descendants since 578, succumbed to excess debt and an unfavorable business climate in 2006.

How do you make a family business last for 14 centuries? Kongo Gumi’s case suggests that it’s a good idea to operate in a stable industry. Few industries could be less flighty than Buddhist temple construction. The belief system has survived for thousands of years and has many millions of adherents. With this firm foundation, Kongo had survived some tumultuous times, notably the 19th century Meiji restoration when it lost government subsidies and began building commercial buildings for the first time. But temple construction had until recently been a reliable mainstay, contributing 80% of Kongo Gumi’s $67.6 million in 2004 revenues.

the article can be find by clicking here

According to Grant Thorton LLB Management Series, “Ninety percent of all businesses in Canada are family oriented yet succession of these businesses often just happens rather than being planned. Some 70 percent of family run businesses never make it to the second generation and ninety percent never see a third generation despite the genuine desire by most owners to see continuation in the family.”

A myth has been residential among the blacks in Zimbabwe that Black business persons do not plan for the continuity of their enterprises after they die. It is further believed that the Blacks’ entrepreneurial family background is most unfavourable for the business sustenance because members of an entrepreneurial family have negative experiences of endless economically precarious entrepreneurial work. Do black entrepreneurs have a business succession plan? Is the common negative cultural assumption that a known succession plan (among family members) is a recipe for the death of the owner/founder true?

to find out, read more by clicking here

Hi All

Your Final Challenge on GagaPost asks you to reflect on your learnings about FoBs with a sense of humour.

In the 3 Column table below insert either a cartoon or comic strip that you feel captures 1 key learning about a Family Owned Business (FoB) topic from the topics we debated in our weekly Lounge forums (anything from Conflict in FoBs, to Sons & Daughters in FoBs to the issue of Succession in FoBs).

If you can’t find an appropriate comic out there, draw one and upload it for us to enjoy.

To be inspired check this out PhDComics.

What is important is that in the 3rd Column you briefly explain what FoB topic the comic captures for you and build a hyperlink to the relevant source of theoretical reading or issues for us to verify and understand why you think the comic is relevant to learning about FoBs.

As Othmane has contributed a number of comics to the lounge we have done this for him by way of an example:

Name	Comic	Rationale & Link
OTHMANE	...Dad, go Now!	An example of the way Family Founding CEO’s depart
Alejandra		Prenups and The Family Business
Abhishek		Nepotism
Annabel		Nepotism
Anthony	one day my son.....	The lion king in real life,
Maddy		Example of a monarch
Paulo Gaspar		Are You Frustrated With the Younger Generation In Your Life?
Kitty	The picture of my Comic (You don’t have the same family name with us)cannot be copied here. So I have to attach the Comic picture to your email and my individual portfolio. You don’t have the same family name with us.	An example: the disadvantages of family business which is the constraints of human resources. Family business usually excludes external talent, and, as a result, lacks family human resources, especially senior human resource supply. http://baike.baidu.com/view/166857.htm#sub166857
Ralphw		Why It’s Smart to Pass on the Family Business Now If you’re brave enough, the time to transfer a business or other assets to your kids is when the economy is a wreck.
Enejo Oruma		succession in family businesses
Majella Mark		Monarchs preventing proper succession : http://www.ceoonline.com/expert_talk/family_business/exit_succession/pages/2_16_304.aspx
Veronica		Topic: Family Business Governance and Complexity of the family firms Rationale: Family businesses are frequently more complex due to the family emotions. As the family grows, younger generations and more members enter into the family firm . This implies different ideas and opinions and potential conflicts. It becomes necessary to create a family governance structure to formalize the relations among the family members, prevent conflicts, and protect the future of the business. Reading: ‘IFC Family Business Governance Handbook’ (2008). Link here.

^ The word of family originated from the Latin familia, which means household including relatives and servants of the householder (Levin, 1993).

^ Family was understood by the common as the model of a monogamous patriarchal family (O’Rand and Agree, 1993).

^ In the recent past, family was regarded as the patriarchal nuclear family. Thus, family was defined as “spouse” and “children” or “kin in the household” from economics, sociology and psychology perspective. In terms of legislators and Medical Leave Act of 1993, family was expanded from “spouse and children” to “spouse, children and parents” (Rothausen, 1999).

^ In family realities, households have dramatically changed. Two-parent nuclear families make up a smaller portion of family households. Therefore, there emerges a notion of family as a group of people who are interested in one another due to dependence, obligation or duty, love, caring, or cooperation.

^ Conceptualising “family”: there are diverse types of families, which including people related by marriage, biology, adoption, or people related through affection, obligation, dependence and cooperation.

Suggestions for Chinese family businesses succession

Chinese family businesses are not in big scale and the internal structure are likely to be simple. The main reason for this is the Father-to-son Mode of succession.

1. Reasons for the Father-to-son Mode

1.1  A great influence by China’s tradition

Because of the deeply rooted familism conception, Chinese family businesses are characterized by blood relation in corporate governance and personnel decision, and so on.

1.2 The ethic restricted role-play relation determined the differentiated credibility mode

The Chinese traditional social structure is a concentric-circle-differentiated-structure, which centers on a single person and spread by intimacy to other family members. Since the credibility of the family members relies on blood relation, the successors are more likely to be the son of the business owner. If a linear kin is not available, the succession will reach father’s brothers or their son.

1.3 Family-based governance

Most of the Chinese family businesses employ a closed capital structure and have a simple internal capital system. In corporate governance, the paternal mode is deeply rooted, which centralizes the power of enterprise to a single decision-maker. Additionally, the key employees are usually family members.

1.4 The immaturity of both the capital market and the professional manager market of China

The number of authentic professional managers in China is limited. Meanwhile, some of the existing professional managers are lack of professional training and morality, which always shatter the benefits of the enterprises out of their own interests when conflicting occasion occurs between the owner and them.

2. The demerits of father-to-son mode

In short term, the Father-to-son mode has several advantages. It does not change the internal network of the enterprise, will not change the ownership structure within the family, and the successor can usually be able to be persistent and consistent with the elder’s strategy. Nevertheless, in the long run, the father-to-son mode has apparent drawbacks.

2.1 Difficulties in financing

The conception to sustain stockholding of the company will unavoidably cause contradictions. The expansion of the company needs more capital, but the closed ownership structure limits the fund that they can raise, which may finally result in a mismatch between the enterprise expansion and fund raising.

In China, the hardship of SMEs in financing has long been a problem. Adopting father-to-son mode can not decentralize and diversify stock rights, which will definitely limit their money financed.

2.2 The enterprise’s human resources constraints

In father-to-son mode, “relationship” plays an important role in determining a person’s position and status. Such practice usually results in the mismatch between capability and decision-making power, which may further cause inefficient staffing.

2.3 The restrictions on the efficiency and effectiveness in corporate strategic decision-making

Under the leadership of the single leader, the organization is highly prone to authoritarian centralization, and children are likely to adopt the strategy of the former decision-maker. Such conservatism may be fatal in decision under high degree of uncertainties, may directly result in inefficient internal innovation, and is undoubtedly a serious impediment for the further development of the enterprise.

3. Chinese professional managers and family businesses

The quality and morality of the professional managers is an important factor in determining the development of the family businesses. However, these companies, who wish to count on the professional managers to improve their management, suspect and distrust them for various reasons.

3.1 The inconsistence between family interests and managers’ objectives

In the family business, due to asymmetric information, the owners -the family members- do not have fully access to the business information owned by managers. At the same time, the family members are solicitous about losing the enterprise to the managers; plus an imperfect law system, unable to restrict the behaviors of the managers; they are even less likely to trust the professional managers.

3.2 The conflict between the family enterprises’ characteristics and management professionalism

In the family businesses, paternalistic leader is identified to be the highest decision-making power. Since the complex network of relationships within the family business, the staffing and resource allocation are carried out in favor of the family to maintain control of the family business. Such a corporate environment has caused great difficulties for the professional managers to achieve or even to start implementing professional administration.

3.3 Family’s distrust of professional managers

As the managers are alien of the family members, they are generally distrusted. Family’s distrust of professional managers directly results in imperfect incentive policies of the professional managers. In fact, such system has increased the manager’s probability of speculation.

4. Suggestions

According to comparison between with foreign family businesses and Chinese family businesses succession, two obvious differences are reached; the first one is foreign family businesses (American, European and Japanese) have already separated ownership and management. The second one, level of socialization has become higher and higher. This two main differences lead to the American, European, Japanese families decreasing their participation, and more non-family members are one part of family business. They hold the company’s stock, so they will influence the succession more or less.

Whatever American, European and Japanese family businesses, many family businesses have a hundred years old history. They have been passed several generations. So they have already made standard rules that make sure the succession successfully. However, the most Chinese family businesses do not have any experience of succession, so the succession problem becomes urgent and outstanding.

Chinese family businesses only have less than thirty years of age, and most of them are small-medium size companies. Added that the traditional Chinese culture influences the people deeply, a Chinese family emphasizes the blood relation in succession. Son or daughter taking over the family business is the natural choice; however, this kind of succession has a lot of weaknesses. Because of the special Chinese one-child policy, it means the founder or their parents does not have any other choice if they only want to hand over the business to their child. If Chinese family business’s leaders want to continue the business successfully, they should develop and train the successor. Some European family business would make up a team (including teachers, lawyers, public relation official and experienced employees) to help the successors grow up and reduce the risk. Chinese family business also can follow this method to train and develop successors.

The other important part is the family’s culture and rule. Many Chinese family businesses build up by founder’s emotion. They manage the company based on the relationship, not according to performance or other fair management. So Chinese family business lacks some talented non-family members, and it limits their longer growth. It means Chinese family businesses should learn some experience from foreign family businesses, especially American, European and Japanese family businesses. Chinese family business can set up a more open policy, not only keep the family glory and pride, but also raise the non-family employees’ confidence and loyalty. In a word, the basic idea is to break up the blood in succession problem.

The third part is that one successful succession needs plenty of factors. For founder, the final company’s mission is developing as long as it can. So sometimes the founder needs to quit in a right time, do not occupy the position when successor taking charge. It is not good for successor’s growing. After hand over the business to young successor, training and developing next generation to be a talented successor are more proud and important. In the succession problem, they need to make a succession plan as early as they can, and develop his or her successors, build a suitable policy to rule, and take charge, let go. After the succession, founder should trust his or her successor, not always disturb the successor’s plans or strategy. This is the only way to keep the company developing longer and bigger.

Based on:

LV Chen, LV and Lin, G. (2008) ‘Inspiration from Foreign Family Businesses on the Succession of Chinese Family Enterprises’ http://www.seiofbluemountain.com/upload/product/201005/2010qyjjhy07a12.pdf

Ting, Z.(2009) ‘Succession in Family Business - Differences between foreign family business and Chinese family business’, https://publications.theseus.fi/bitstream/handle/10024/ 5765/zt.pdf?sequence=1

Christian Audigier: The founder of the famous Ed-Hardy fashion brand:

Christian Audigier was born in 1958 in a modest family in a small village in France called Avignon. His professional pathway is a real success. From scratch and in a very short period Christian Audigier has become a famous billion-dollar businessman.

The life of Christian is how he calls it: “the continuation of my dreams”.

He has been working all his life in the fashion industry. At the age of 14, he left school and because he did not have the legal age to work in France he started to work for a clothing brand cleaning the windows and hovering alleys. At the age of 16, while working in the store he discovered a passion and a talent for designing and drawing clothe and he then became a designer for some of the biggest brands in France such as Naf Naf, Levis or Liberto. Chrisitan then created a successful company, which he sold for 200,000 euro, which add 10 employees. The fact he was working with clients all around Europe gave him the idea to go live in the U.S to achieve the “American Dream”.

Christian then started as a designer in Los Angeles like he did in France. It is after the meeting and the collaboration with Paul Guez that this young stylist achieved a phenomenal success. He created original and fashion designs for a range of trendy brands, which was going to be worn by celebrities all around the world, from Britney Spears to Mickael Jackson Madonna etc…

After two years, Christian left the company to fly with his own wings and created Ed-Hardy after he had seen and loved the drawings and the tattoos Don Ed-Hardy an artist living in LA. The business really took off because one day he was walking in the streets of LA wearing a custom made cap he made from scratch. As he was walking, he saw Madonna on the streets followed by paparazzi and ran after her to place the cap on her head. The next day, the trendy magazines around the states had the photo of Madonna wearing his cap and it created a huge buzz for Christian who then had a rapid success.

In 2007 the Christian Audigier Empire was present in 72 countries and was realising a turnover of 115 million dollar. All the family members of Christian are now involved in the business to some extend. He has a daughter of 18, which is currently designing some of the Ed-Hardy Collection.

As probably some of you have experienced, having our parent’s blessing, and more specifically, our DAD’s blessing is very important.

Below is a summary of the very interesting article i found about that subject. Take a quick look and if you’r interested click in the link at the bottom for the full article.

____________________________________________________

One of the least understood and most overlooked issues within family businesses is having Dad’s blessing or approval. One has only to go back to the Bible to learn how important this issue can be.

To a son working in a family business, nothing is more important than the knowledge that Dad approves of you and has given you his blessing. Money, power, titles… none mean as much to a son as hearing Dad say, “ I am proud of you. You are an outstanding business person.” Before women start accusations of sexism, let us explain that mothers generally give love and approval unconditionally to their children, so when Mom is boss this is not so much an issue. The need for Dad’s approval is present when a daughter works for her father, but it is not as strong a force as with sons.

Children know of the difficulties and struggles that were encountered in making the business a success. They worship their father - Dad is a hero to his children. Since he is such a hero, nothing is more important than having his approval. Further, there is a certain competition which exists between fathers and sons. The young man wants to believe he is as good as or maybe even better than Dad. Obtaining this approval is a motivating force that will be a factor in every family and business decision until it is resolved. Do not underestimate the lengths to which children will go to get Dad’s blessing. The child may say it isn’t important, but don’t believe him. In most cases, it is vitally important.

Three Ways To Attain the blessing

There are three ways children generally respond to this need for Dad’s approval.

• The first is the “defiant child.” Usually seen in the first-born, the child challenges Dad frequently to show that he is equal to the “old man” and therefore worthy to receive the blessing.

• The second approach is to be the “compliant child,” willing to do whatever Dad wants, even if the child doesn’t think it’s the right path.

• The third approach is the “escape artist.” This child, for whatever reason, decides that he cannot compete with his father and siblings in the family business arena and win Dad’s approval, so he finds a field in which he can compete and excel.

Approval Must Be Earned

Many entrepreneurial parents have difficulty expressing affection and praise to anyone. It isn’t their nature, and because they don’t need or crave praise themselves, they don’t understand children who do.

Fathers are often reluctant to tell sons how proud they are of them believing that too much praise might spoil the child or cause him to “ease up.” Quite the opposite is true. When sons no longer have to worry about whether or not dad approves of them, they are finally free to focus on other, more important issues.

By Wayne Rivers

Click for full article

Delta was founded in 1961 by Rui Nabeiro. In a small warehouse of 50m2, with two 30kg capacity roasting balls and three staff mark the start of this brand. In 1994 it became the market leader in coffe production in Portugal with a share of 42%. Have 41 000 direct customers and 3,000 employees.

Since its inception, Delta Cafés always maintained the philosophy of - A Friend A Client, and is also recognized as a mark of Human Face, where values such as Honesty, Loyalty, Humility, Total Quality Management, Solidarity and Citizenship have a prominent role in this organization.

SA 8000 gave Delta Cafés the first distinction in Portugal for Social Responsibility.

For  9 consecutive years, Delta Cafés is a trusted brand in the European Most Trust Brands studies from the Reader’s Digest.

Nowadays Delta employees 60% of the population of Campo Maior, the city where the company is headquartered.

The family is now on its third generation with the grand sons of the founder Rui Nabeiro already involved in the management.

Below is the family tree:

The grandsons of Rui Nabeiro are involved in the business. Rui Miguel is the general manager of Delta, Rita is encharge of marketing, and Ivan manages daily operations in the factory in Campo Maior. The curious thing is that the business passed almost directly from the founder to his grandsons, as the sons of Rui Nabeiro (founder) did not have much influence and involvement in the company.

Click to see how their coffee is made

Click to see the story of Delta in a nice video (portuguese)

Click to see a nice Delta coffe Ad

Hey guys,

I stumbled upon a very interesting article. An article that actually refers to me a lot, and of course to you. How will/should we be compensated in the future in our family business.

I’ve cut some boring parts of the article, below you can find the most interesting ones:

Article:

Believe it or not, the way we share money and allowances with our children when they’re young can influence their adult spending habits as well as compensation expectations when they join the family business. For example, how did you determine how much allowance to give your kids when they were young? If they spent their periodic allowances, did you give them more money to get through the week, or did you make them wait for next week’s allowance?

Many family business owners struggle with how to fairly compensate their children who work for them.

Overcompensating children in the business can lead to an exaggerated sense of self worth and encourage family business children to lose touch with the economic value of a dollar. Especially if their job responsibilities are not proportionate with their high compensation, the children can suffer from a devastating loss of confidence and a feeling that they’re still on an umbilical with Mommy and Daddy providing their life support.

Undercompensation is just as damaging potentially. Many family business owners purposely undercompensate their children to teach them the value of hard work and thrift. Their rationale is one day the business will belong to the kids and they must be thrifty to make money; besides they’ll have their turns at bat to enjoy affluence and the accumulation of wealth. This “carrot and stick approach” is very common, but it’s not fair to the children to expect them to work 60 trying hours a week for low wages while their peers who work for non-family employers enjoy the benefits that growing incomes provide.

To assure a high probability of family harmony in the business, compensation plans should be based on responsibility, productivity, and what you would expect to pay non-family members.

Click to see the entire article here

____________________________________________________________________________

Now I believe it would be nice to have your own opinion on how do you see yourself being compensated in the future, in you family business.

Hi All

Your Final Challenge on GagaPost asks you to reflect on your learnings about FoBs with a sense of humour.

In the 3 Column table below insert either a cartoon or comic strip that you feel captures 1 key learning about a Family Owned Business (FoB) topic from the topics we debated in our weekly Lounge forums (anything from Conflict in FoBs, to Sons & Daughters in FoBs to the issue of Succession in FoBs).

If you can’t find an appropriate comic out there, draw one and upload it for us to enjoy.

To be inspired check this out PhDComics.

What is important is that in the 3rd Column you briefly explain what FoB topic the comic captures for you and build a hyperlink to the relevant source of theoretical reading or issues for us to verify and understand why you think the comic is relevant to learning about FoBs.

As Othmane has contributed a number of comics to the lounge we have done this for him by way of an example:

Name	Comic	Rationale & Link
OTHMANE	...Dad, go Now!	An example of the way Family Founding CEO’s depart
Alejandra		Prenups and The Family Business
Abhishek		Nepotism
Annabel		Nepotism
Anthony	one day my son.....	The lion king in real life,
Maddy		Example of a monarch
Paulo Gaspar		Are You Frustrated With the Younger Generation In Your Life?
Kitty	The picture of my Comic (You don’t have the same family name with us)cannot be copied here. So I have to attach the Comic picture to your email and my individual portfolio. You don’t have the same family name with us.	An example: the disadvantages of family business which is the constraints of human resources. Family business usually excludes external talent, and, as a result, lacks family human resources, especially senior human resource supply. http://baike.baidu.com/view/166857.htm#sub166857
Ralphw		Why It’s Smart to Pass on the Family Business Now If you’re brave enough, the time to transfer a business or other assets to your kids is when the economy is a wreck.
Enejo Oruma		succession in family businesses
Majella Mark		Monarchs preventing proper succession : http://www.ceoonline.com/expert_talk/family_business/exit_succession/pages/2_16_304.aspx
Veronica		Topic: Family Business Governance and Complexity of the family firms Rationale: Family businesses are frequently more complex due to the family emotions. As the family grows, younger generations and more members enter into the family firm . This implies different ideas and opinions and potential conflicts. It becomes necessary to create a family governance structure to formalize the relations among the family members, prevent conflicts, and protect the future of the business. Reading: ‘IFC Family Business Governance Handbook’ (2008). Link here.

As probably some of you have experienced, having our parent’s blessing, and more specifically, our DAD’s blessing is very important.

Below is a summary of the very interesting article i found about that subject. Take a quick look and if you’r interested click in the link at the bottom for the full article.

____________________________________________________

One of the least understood and most overlooked issues within family businesses is having Dad’s blessing or approval. One has only to go back to the Bible to learn how important this issue can be.

To a son working in a family business, nothing is more important than the knowledge that Dad approves of you and has given you his blessing. Money, power, titles… none mean as much to a son as hearing Dad say, “ I am proud of you. You are an outstanding business person.” Before women start accusations of sexism, let us explain that mothers generally give love and approval unconditionally to their children, so when Mom is boss this is not so much an issue. The need for Dad’s approval is present when a daughter works for her father, but it is not as strong a force as with sons.

Children know of the difficulties and struggles that were encountered in making the business a success. They worship their father - Dad is a hero to his children. Since he is such a hero, nothing is more important than having his approval. Further, there is a certain competition which exists between fathers and sons. The young man wants to believe he is as good as or maybe even better than Dad. Obtaining this approval is a motivating force that will be a factor in every family and business decision until it is resolved. Do not underestimate the lengths to which children will go to get Dad’s blessing. The child may say it isn’t important, but don’t believe him. In most cases, it is vitally important.

Three Ways To Attain the blessing

There are three ways children generally respond to this need for Dad’s approval.

• The first is the “defiant child.” Usually seen in the first-born, the child challenges Dad frequently to show that he is equal to the “old man” and therefore worthy to receive the blessing.

• The second approach is to be the “compliant child,” willing to do whatever Dad wants, even if the child doesn’t think it’s the right path.

• The third approach is the “escape artist.” This child, for whatever reason, decides that he cannot compete with his father and siblings in the family business arena and win Dad’s approval, so he finds a field in which he can compete and excel.

Approval Must Be Earned

Many entrepreneurial parents have difficulty expressing affection and praise to anyone. It isn’t their nature, and because they don’t need or crave praise themselves, they don’t understand children who do.

Fathers are often reluctant to tell sons how proud they are of them believing that too much praise might spoil the child or cause him to “ease up.” Quite the opposite is true. When sons no longer have to worry about whether or not dad approves of them, they are finally free to focus on other, more important issues.

By Wayne Rivers

Click for full article

Delta was founded in 1961 by Rui Nabeiro. In a small warehouse of 50m2, with two 30kg capacity roasting balls and three staff mark the start of this brand. In 1994 it became the market leader in coffe production in Portugal with a share of 42%. Have 41 000 direct customers and 3,000 employees.

Since its inception, Delta Cafés always maintained the philosophy of - A Friend A Client, and is also recognized as a mark of Human Face, where values such as Honesty, Loyalty, Humility, Total Quality Management, Solidarity and Citizenship have a prominent role in this organization.

SA 8000 gave Delta Cafés the first distinction in Portugal for Social Responsibility.

For  9 consecutive years, Delta Cafés is a trusted brand in the European Most Trust Brands studies from the Reader’s Digest.

Nowadays Delta employees 60% of the population of Campo Maior, the city where the company is headquartered.

The family is now on its third generation with the grand sons of the founder Rui Nabeiro already involved in the management.

Below is the family tree:

The grandsons of Rui Nabeiro are involved in the business. Rui Miguel is the general manager of Delta, Rita is encharge of marketing, and Ivan manages daily operations in the factory in Campo Maior. The curious thing is that the business passed almost directly from the founder to his grandsons, as the sons of Rui Nabeiro (founder) did not have much influence and involvement in the company.

Click to see how their coffee is made

Click to see the story of Delta in a nice video (portuguese)

Click to see a nice Delta coffe Ad

Hey guys,

I stumbled upon a very interesting article. An article that actually refers to me a lot, and of course to you. How will/should we be compensated in the future in our family business.

I’ve cut some boring parts of the article, below you can find the most interesting ones:

Article:

Believe it or not, the way we share money and allowances with our children when they’re young can influence their adult spending habits as well as compensation expectations when they join the family business. For example, how did you determine how much allowance to give your kids when they were young? If they spent their periodic allowances, did you give them more money to get through the week, or did you make them wait for next week’s allowance?

Many family business owners struggle with how to fairly compensate their children who work for them.

Overcompensating children in the business can lead to an exaggerated sense of self worth and encourage family business children to lose touch with the economic value of a dollar. Especially if their job responsibilities are not proportionate with their high compensation, the children can suffer from a devastating loss of confidence and a feeling that they’re still on an umbilical with Mommy and Daddy providing their life support.

Undercompensation is just as damaging potentially. Many family business owners purposely undercompensate their children to teach them the value of hard work and thrift. Their rationale is one day the business will belong to the kids and they must be thrifty to make money; besides they’ll have their turns at bat to enjoy affluence and the accumulation of wealth. This “carrot and stick approach” is very common, but it’s not fair to the children to expect them to work 60 trying hours a week for low wages while their peers who work for non-family employers enjoy the benefits that growing incomes provide.

To assure a high probability of family harmony in the business, compensation plans should be based on responsibility, productivity, and what you would expect to pay non-family members.

Click to see the entire article here

____________________________________________________________________________

Now I believe it would be nice to have your own opinion on how do you see yourself being compensated in the future, in you family business.

Lead team:

MOB: PierLuigi, Philipp, Kitty

Introduction

Situation:

1- Noren Discount Stores: How could the death of the company been avoided?

- declining sales and profits at the end

- terrible management atmosphere

- Fights and legal troubles within the management

- low cash flow forces the family to sell

2- Consultant report recommendations.

3- Disagreements between shareholders and management.

Agenda

Ice breaker. (5 min)

Summary Case. (2 min)

Annual Shareholder meeting (20 min)

Conclusion (3 min)

Total time required 30 minutes

Roles

Each team will represent the main roles for the annual shareholders’ meeting.

-Team MEP: Joel Noren (son)

-Team MOB: Sam Hershman (COO)

-Team X: Max (CEO/COB) and Sarah Noren

-Team David’s posse : Leo Aaronson (COB)

-Team 1: Sam Hershman VP & COO

-Ed: Art Grossmann Sr. VP. Admin.

You have now been engaged with learning about Family Businesses and related concepts for 9 weeks.

Below please embed 1 concept map which captures the essence of Family Business for you. Capture all your learning about the various themes, issues, topics and their respective sub-categories into ONE MAP…not multiple Maps

That is 1map/individual...make sure you identify yourself as the map creator- by including your name in the central bubble. This is not optional as it will be considered by Azam Ali and myself as part of your Individual learning portfolio.

Below is sample of a concept map that I have derived from my lecture slides about FB..ie from the lecture on ‘Definitions’ and the lecture on ’succession’…this is just the start.

Ψ Yours needs to look more like the second Concept Map on the subject of Innovation.

You are required to provide comprehensive and rich (pictures, colours, etc) maps such as the second sample that depicts your understanding of the weekly themes and sub-themes. The key themes could form your initial parental branches and then sub-themes branch outwards, etc, etc. Please make sure you embed the images here….this map will also be included in your individual learning portfolio submission.

Below the maps I have provided links to MindMapping sources (free software)- do not feel obliged to construct your maps by using the software- feel free to hand draw, scan and embed:

Useful Concept Mapping Freeware- you do need to sign on for some:

1. Freemind

2. Mind42

3. You also have a great mapping tool called Inspiration available through the college’s Citrix applications resource.

4. You can see last year’s efforts here- we expect more elaborate maps this year given the benefits you have of the previous years’ content and experience

Majella Mark

Maddy Jones

Anthony V.

Philipp K.

Ralph-Steven Petang

Kitty

Alejandra Abilahoud - Concept Map Portofolio

Enejo Oruma

Annabel

Othmane Benzit

Abhishek Kapoor: -

Veronica

Family firms can enjoy substantial longevity. Ironically, however, they are often imperiled by

the very process that is essential to this longevity. Using the concept of managerial discre-

tion as a starting point, we use a human agency lens to introduce the construct of successor

discretion as a factor that affects the family business succession process. While important

in general, successor discretion is positioned as a particularly relevant factor for produc-

tively managing organizational renewal in family businesses. This study represents a foun-

dation for future empirical research investigating the role of agency in entrepreneurial action

in the family business context, which consequently can contribute to the larger research

literature on succession and change.

The Werhahn KG – a 160 years old family business with 9.100 employees and 2.5 billion Euros turnover anually.

Over more than 160 years, Werhahn has developed into a corporate group with diverse activities in Germany and abroad. A close relationship with their markets and customers, reliability and social responsibility are the values of the mid-sized family-run business.

The family orginially made its money with Oil and flour mills, that turned into a diversified conglomerate.

Wilh. Werhahn KG is decentralized in its structure. The companies belonging to the Group, legally independent as a rule, and are organized into six corporate divisions. Their flat management structure, with short and non-bureaucratic decision-making channels, provides room for maneuver. This enables the requirements of the market to be fulfilled rapidly and flexibly – to the benefit of our customers. For each individual employee, this means a high level of motivation as well as individual responsibility.

Central corporate management functions are performed directly by Wilh. Werhahn KG. Among the areas which this covers are those of long-term strategic orientation as well as the financing of individual companies and the review of their performance. With the aim of continuously safeguarding and further developing the Group, organization is directed towards an economic and structural balance between the corporate divisions in the interests of risk distribution.

Wilh. Werhahn KG is a company for entrepreneurs, a family-run business which places great value on a relationship of mutual trust with its customers, business partners and employees. The corporate culture which is based upon this is the vital foundation for our success.

Today, the Werhahn family is according to manager-magazin the seventh wealthiest tribe in Germany. The group is current led by Anton Werhahn.

http://www.werhahn.de/en/home.html

http://de.wikipedia.org/wiki/Wilh._Werhahn_KG

Mr. Dhirubhai Ambani, One of the leading Indian businessmen was born on December 28, 1932 in Gujarat, India. He headed The Reliance Industries, India’s largest private enterprise. Mr. Dhirubhai started off as a small time worker with Arab merchants in the 1950s and moved to Mumbai in 1958 to start his own business in spices. After making modest profits, he moved into textiles and opened his mill near Ahmadabad. Dhirubhai founded Reliance Industries in 1958. After that it was a saga of expansions and successes.

His journey of real rags to riches, took off in 1958 when he, with his cousin and a capital of Rupees 15000 (£200 approx.), started The Reliance Industries. He loved taking risk, because of which his company achieved many milestones thereafter. He had a new style of management, which was really successful & earned him the confidence of nearly 1.2 million investors by 1985. Later the business tycoon established such a big business house that every body in India and abroad was envy of the progress. It was in 1977 when Dhirubhai Ambani took initiative for first IPO. In 1993 the IPO of Reliance was the largest IPO of India at that time.

It was in 1981, his elder son Mukesh Ambani (left in the picture) joined the business. He then initiated Reliance industry’s backward integration journey from textiles into polyester fibers and further into petrochemicals, petroleum refining and going up-stream into oil and gas exploration and production. Followed by his younger brother Anil Ambani (right in the picture), who joined the company in 1983, as the co-chief executive officer and is credited with pioneering many financial innovations in the Indian capital markets.

This incredible rise and growth in the business was so enormous that by 2007, the combined fortune of the Ambanis was 100 Billion dollars. In 1992, Reliance became the first Indian company to issue Global Depository Receipts in global market. Later in 1999-2000 followed by the establishment of world’s largest integrated grassroots refinery in Jamnagar.

Another major milestone was the launch of the CDMA mobile telephony in India, in 2002. This was when the mobile communication actually entered the revolutionary era. The famous 500 Rupees (£6) mobile offered by the company, this brought mobile phones to every nook and corner of India. From CEOs to auto rickshaw drivers, every body was laced with mobiles! The high growth figures and innovations of company made it the first Indian private sector company to enter Fortune’s Global 500 list.

This was when, a great visionary, who loved to dream big and to attain them, passed away on the 6^th of July 2002 in Mumbai, without providing a succession plan for such a giant corporation. It may be because he never thought that even such huge empire would fall short of the aspirations of his two little Ambanis. He failed to understand the strategic importance of planning the succession in advance and in the year 2004 the split and sibling rivalry in reliance became the most talked story in the business world, which also affected badly on the stock markets

Result After Split:

Step 1: Split the Ambani family stake in RIL in the 30:30:40 ratio among the two

Brothers and Kokilaben (Dhirubhai’s wife). Anil Ambani to relinquish control to Mukesh, who gets full control of Reliance Industries’ core oil and gas business.

Step 2: Create a special purpose vehicle to house RIL’s stake in Reliance Energy and

Reliance Capital. Anil Ambani to continue heading the two firms.

Step 3: In lieu of Anil giving up control in RIL, Mukesh Ambani transfers part of his

45% stake in Infocomm to Anil, who now gets to run the venture.

Reliance split is a burning case presenting the biggest challenge for any family indulged in business. Just after the split the company slipped in Forbes list. Even if the reliance do not suffer severely, it certainly devalues the status of the family in the society and trust of the customers and the shareholders. If Mr. Dhirubhai Ambani had planned a business envisioning the inherent conflict it could have been another story altogether, where both the siblings would have complemented each other with their unique skills and have consolidated the empire created by their father into a well established and cared family business not just another business.