1. UBC C1 Alden G. Lank Workshop Session I Richard White Pty. Ltd. - Case Study - Professor Alden G. Lank

2. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant I Achievable Strategies 2

3. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant II Common Vision 3

4. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant III Appropriate Governance Institutions 4

5. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank “ Appropriateness” is a function of… Trans-national, national, local laws and regulations Cultural traditions Size of the business Age of the business Complexity of the business Ownership stage: Owner-manager Sibling partnership Cousin consortium Etc. (for the Business): 4a

6. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank “ Appropriateness” is a function of… Which generation(s) in power Family traditions/values/history Number and ages of family members (active and non-active) Number of in-laws Geographic distribution of the family Type, size, complexity of the business Degree of cohesiveness of the family Availability of talent to lead and staff Breadth of distribution of ownership Family wealth Etc. (for the Family): 4b

7. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant IV Clear Separation of Roles 5

8. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant V Effective Conflict Management Mechanisms 6

9. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Defining Conflict 1.Competitive or opposing action of incompatibles 2.Antagonistic state or action (as of divergent ideas, interest, or persons) 3.Hostile encounter: fight, battle, war 4.A type of behaviour which occurs when two or more parties are in opposition or in battle as a result of a perceived deprivation caused by another or others 7

10. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Conflict Management Proposition No. 1Over time, conflict is inevitable in families and in family businesses Proposition No. 2Conflict can be healthy or unhealthy, functional or dysfunctional Proposition No. 3How conflict is managed is one of the key determinants of effective families and family businesses Proposition No. 4There are several conflict management strategies: no single one is a panacea Proposition No. 5Pre-establishment of “rules of the game” can obviate many conflicts Proposition No. 6Goal should be to maximize win/win for all parties concerned and arrive at the best decision given the family’s and the family business mission/ goals/ objectives 8

11. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank 2. Family Business: The Ultimate Paradox? Family businesses have BUILT-IN CONFLICTS due to the intersection of two worlds which are governed by DIFFERENT VALUES AND LOGICS* Family World Mutual cooperation Loyalty Unity Permanence Stability Business World Competition Opportunities Diversity Impermanence Instability Conflict Disruptive Constructive 9

12. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Conflicts: within the Business Family; within the Family Enterprise; between the Business Family and its Enterprise - I Same as in any family or business but In addition unique causes and impacts, e.g., conflict within the family can have short- or long-term negative consequences for the business and vice versa! 10

13. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank 10a

14. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Conflicts: within the Business Family; within the Family Enterprise; between the Business Family and its Enterprise – II - Battlegrounds - Who gets what percentage of ownership, of voting shares? Can one get rid of (or acquire) shares and at what price? Who represents the family as owners in the company? What are his/her/their responsibilities and rights? How can we fire our representatives? What are the ground rules for election to/tenure on the board? Who of the family has the right to work in the family business? For that matter, who is family? How are career decisions made for family members in the business? What’s our philosophy: Family first? Business first? Other? 10b

15. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Conflicts: within the Business Family; within the Family Enterprise; between the Business Family and its Enterprise – III - Two Fundamental Triggers of Conflict - Sense of inequity Desire for power 10c

16. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Conflicts: within the Business Family; within the Family Enterprise; between the Business Family and its Enterprise – IV The goal of conflict management in the family business and the business family should be to apply conflict management strategies that are most likely to produce positive outcomes for both the family and the business —Win/Win — N.B. Easier said than done! 10d

17. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Generic Conflict Management Strategies Avoidance Ignorance Withdrawal Denial Confrontation Face-to face Problem-solving Dialogue Referral Arbitration Triangulation Fate Degree of long-term effectiveness in resolution of major actual and potential conflicts 11

18. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Positive Outcomes of Constructive Conflict Higher motivation and energy Higher innovativeness of individuals Better understanding of own position Greater understanding of own identity Means of managing own internal conflict R. Walton 13

19. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Prerequisites for Effective Conflict Management in Business Families and Family Enterprises Supportive value system Written “rules of the game” preferably before they are needed Structural/institutional mechanisms for maintaining constructive dialogue Known and accepted process when agreement not possible Sense of humour 14

20. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank The Four “Pillars of Peace” in the Puig Family (Spain)^ Truth Justice Love Freedom ^ 1998 Distinguished Family Business of Year - IMD 15

21. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Two Key Forms of Justice Procedural Justice Distributive Justice N.B. Perceived procedural justice can have a major impact on perceived distributive justice 16

22. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant VI Explicit family personnel policy 17

23. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Explicit Family Personnel Policy - Issues - Who is family? Philosophical considerations; right or privilege? Why is it important to have family in the business? What prerequisites for entry? Conditions of employment over the career: N.B. Same or different than non-family employees? Monitoring of career progression by whom? How? Who takes decisions on career issues of family members? How are grievances handled? By whom? 17a

24. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant VII Attracting and retaining competent non-family managers 18

25. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant VIII Effective management succession process 19

26. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant IX Effective ownership succession process 21

27. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Some Thoughts on Ownership Transfer What is desirable and/or doable is a function of tax and family From the family viewpoint, “fairness” – procedural and distributive – is often the key criterion Three basic approaches to fairness: Capitalistic: To each according to his/her contribution (may be OK if primary goal is to ensure business productivity) Egalitarian: To each in equal measure (may be OK if primary goal is family cohesion and no one is working in the business) Communistic: To each according to his/her needs (may be OK if primary goal is collective family welfare) If family tree is not pruned, need to keep many non- active family shareholders informed and, hopefully supportive. Beware of golden handcuffs. 21a

28. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant X Developing enlightened owners 22

29. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Developing Enlightened Owners Keeping informed Becoming and/or staying educated Understanding legal rights and obligations Creating stock liquidity mechanisms Verbalizing realistic but demanding expectations Spreading the news Sharing the wealth 22a

30. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant XI Continuous building of family cohesion 23

31. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank A word to the wise… Gather around business issues and gather to have fun together virtual or real 23a

32. BMO Harris Private Banking 2003 Outstanding Workshop Session IV UBC C Alden G. Lank Determinant XII Creating and up-dating family protocols 24