1. Workshop Session IV Determinants of Longevity of the Family Enterprise
Professor Alden G. Lank
UBC C1
Alden G. Lank

2. Achievable Strategies
Determinant I
Achievable Strategies 2
UBC C
Alden G. Lank

3. Determinant II
Common Vision 3
UBC C
Alden G. Lank

4. Appropriate Governance Institutions
Determinant III
Appropriate Governance Institutions 4
UBC C
Alden G. Lank

5. “Appropriateness” is a function of…
(for the Business):
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. 4a
UBC C
Alden G. Lank

6. “Appropriateness” is a function of…
(for the Family):
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. 4b
UBC C
Alden G. Lank

7. Clear Separation of Roles
Determinant IV
Clear Separation of Roles 5
UBC C
Alden G. Lank

8. Effective Conflict Management Mechanisms
Determinant V
Effective Conflict Management Mechanisms 6
UBC C
Alden G. Lank

9. Defining Conflict Competitive or opposing action of incompatibles
Antagonistic state or action (as of divergent ideas, interest, or persons)
Hostile encounter: fight, battle, war
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
UBC C
Alden G. Lank

10. Conflict Management Proposition No. 1
Over time, conflict is inevitable in families and in family businesses
Proposition No. 2
Conflict can be healthy or unhealthy, functional or dysfunctional
Proposition No. 3
How conflict is managed is one of the key determinants of effective families and family businesses
Proposition No. 4
There are several conflict management strategies: no single one is a panacea
Proposition No. 5
Pre-establishment of “rules of the game” can obviate many conflicts
Proposition No. 6
Goal 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
UBC C
Alden G. Lank

11. 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
Disruptive Constructive
Conflict 9
UBC C
Alden G. Lank

12. 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
UBC C
Alden G. Lank

13. 10a
UBC C
Alden G. Lank

14. 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
UBC C
Alden G. Lank

15. 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
UBC C
Alden G. Lank

16. 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
UBC C
Alden G. Lank

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

18. 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
UBC C
Alden G. Lank

19. 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
UBC C
Alden G. Lank

20. The Four “Pillars of Peace” in the Puig Family (Spain)^
Truth
Justice
Love
Freedom
^1998 Distinguished Family Business of Year - IMD 15
UBC C
Alden G. Lank

21. Two Key Forms of Justice
Procedural Justice
Distributive Justice
N.B. Perceived procedural justice can have a major impact on perceived distributive justice 16
UBC C
Alden G. Lank

22. Explicit family personnel policy
Determinant VI
Explicit family personnel policy 17
UBC C
Alden G. Lank

23. 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
UBC C
Alden G. Lank

24. Attracting and retaining competent non-family managers
Determinant VII
Attracting and retaining competent non-family managers 18
UBC C
Alden G. Lank

25. Effective management succession process
Determinant VIII
Effective management succession process 19
UBC C
Alden G. Lank

26. Effective ownership succession process
Determinant IX
Effective ownership succession process 21
UBC C
Alden G. Lank

27. 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
UBC C
Alden G. Lank

28. Developing enlightened owners
Determinant X
Developing enlightened owners 22
UBC C
Alden G. Lank

29. 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
UBC C
Alden G. Lank

30. Continuous building of family cohesion
Determinant XI
Continuous building of family cohesion 23
UBC C
Alden G. Lank

31. A word to the wise… Gather around business issues and
gather to have fun together
virtual or real
23a
UBC C
Alden G. Lank

32. Creating and up-dating family protocols
Determinant XII
Creating and up-dating family protocols 24
UBC C
Alden G. Lank