Poza Chapter 2

1. Build Institutional Governance and Manage the Transfer of Power 2. Promote Trust Among Family Members 3. Develop the “Next Generation” 4. Estate and Ownership Transfer Planning 5. Promoting Strategic Growth 6. Defining the Role and recruiting Critical Nonfamily Managers 2-2 Family Business, First Edition, by Ernesto J. Poza Copyright © 2004 South-Western/Thomson Learning

STAGEKEY RESOURCECHALLENGE CONTROLLING OWNER Concentration of opwnership in controling owner Develop other interested, empowered shareholders SIBLING PARTNERSHIP Experience diversity of talent pool Integrate sibling goals and styles COUSIN CONSORTIUMDiversity from extended family pool Representation of multiple, politicized family interests PARTIAL PUBLIC OWNER Financial supportIdentification as a family business despite non- family interests. 2-3

FamilyManagement BIZ  A healthy business …  A healthy family …  Continuity from generation to generation

Build Institutional Governance and Manage the Transfer of Power 2-5

 Governance can include  Advisory or statutory board with independent outsiders  Family meetings or family council  Family participation and employment policies  Key nonfamily executives  Current generation CEO builds institutions for governance and then passes the torch

 CEOs must be architects of transition  Transfer of power can be problematic when  CEOs don’t want to leave  CEOs fail to prepare next-generation members for leadership  Succession is triggered by illness or death of CEO  Transfer of power must be uniquely designed for each family and business

 Requires CEO committed to company rather than own agenda  Enlist “right people” and strategies to create continuity plan for business  “Right people” in top management team and governors of shareholder group  Complemented by board members and outside advisors

 Monarchs  Don’t leave until forced out  Imagine no one could ever replace them  Generals  Leave office reluctantly and plot return  Hope next-generation leader proves inadequate  Ambassadors  Allow others to learn business and then manage it  Hold onto diplomatic duties for company

 Governors  Lead for a limited term, then move on  Ensure successor will be trained and ready  Inventors  Return to development activities  Take a key position in another enterprise  Transition czars  Provide active leadership during succession process

 Monarchs and generals worst enemies of succession  Monarch and general behavior may impact average tenure of family CEO: 17 years  Other exit styles allow for orderly transition to be planned and executed