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