Chapter 2 First Leadership Imperative The Mandate to Build Institutions of Governance and Manage the Transfer of Power Family Business, First Edition,

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Presentation transcript:

Chapter 2 First Leadership Imperative The Mandate to Build Institutions of Governance and Manage the Transfer of Power Family Business, First Edition, by Ernesto J. Poza Copyright © 2004 South-Western/Thomson Learning

2-2 The Ultimate Challenge A healthy business … A healthy family … That will continue from generation to generation FM O

2-3 CEO and Governance 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

2-4 Transfer of Power 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

2-5 Succession and Continuity 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

2-6 CEO Exit Styles 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

2-7 CEO Exit Styles, continued 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

2-8 Implications of Exit Styles 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