Building a Better Family Business Laying the foundation for Family Business Success. Dial-in Info: Conference ID

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1 Building a Better Family Business Laying the foundation for Family Business Success Wednesday, December 10 at 2PM EDT Dial-in Info: Conference ID Thanks for joining us! The webinar will begin shortly

2 Disclaimer Disclaimer: The material is provided to you solely for discussion purposes and does not constitute an offer, agreement, or commitment to lend, provide financing or sell any securities or financing instruments and shall not be construed to create any fiduciary, advisory or other relationship or the provision of any investment advice or service. No representation or warranty, expressed or implied, is made as to the accuracy or completeness of this material or any information contained herein and nothing contained herein is, or shall be relied upon as, a representation, warranty, or covenant, whether as to the past or the future. In no event will GECC be liable for any losses or damages arising from or as a result of the use of the information or the materials contained herein. The information provided in this material is of a summary nature, is not intended to be complete or final, and was not prepared for use by readers unfamiliar with financial information of the type described herein. Neither GECC, nor their legal or financial advisors or accountants take any responsibility for the information contained in this material. GECC does not undertake any obligation to update or otherwise revise this material or any information herein. RECIPIENTS OF THIS MATERIAL SHOULD NOT CONSTRUE ITS CONTENTS AS LEGAL, TAX, ACCOUNTING, INVESTMENT OR OTHER ADVICE. EACH RECIPIENT OF THIS MATERIAL SHOULD MAKE ITS OWN INQUIRIES AND CONSULT ITS ADVISORS AS TO THE MATTERS DESCRIBED HEREIN AND AS TO LEGAL, TAX, FINANCIAL AND OTHER RELEVANT MATTERS. ANY VIEWS EXPRESSED ARE THOSE OF THE AUTHOR AND DO NOT NECESSARILY REFLECT THOSE OF GE.

3 Today s guest speaker Andrew Keyt Executive Director Loyola University Chicago Family Business Center

4 FAMILY BUSINESS CENTER Building a Better Family Business Dec. 10, 2014

5 Family is about relationships The Power of Family Business Higher Performing More Investment Lower Risk Long Term Focus

6 Succession Planning Stats Succession Failures 30% of FOB s make it to the 2nd Generation 11% make it to the 3rd What CEOs say about letting go 40% plan to retire in 10 yrs or less 30% 10 years or more 30% have no plans to retire Over 50% have not planned for succession

7 Factors Affecting Families & Businesses Rate of change Globalization Complexity Growing families Governance

8 Pace of Change CONVENTIONAL 1 good business idea = 3 generations NEW NORMAL 3 good business ideas = 1 generation Are we ready?

9 Loyola Family Business Center Complexity Changes by Generation Age Span: 1-5 years Family Members: 2 In-laws: 2 Age Span: years Family Members: 8 In-laws: 8+ Age Span: 5-10 years Family Members: 4 In-laws: 4

10 Loyola Family Business Center Role Complexity FAMILY MANAGER OWNER

11 Ownership unity & family cohesion are a Family Business greatest strategic advantages.

12 Definitional Issues Cohesion Definition Feeling of unity Feeling of Unity Common Purpose Source: Hartman, J. J Group cohesion and the regulation of self-esteem. In H. Kellerman (Ed.), Group cohesion: Theoretical and clinical perspectives: New York: Grune & Stratton. Joint Action

13 Definitional Issues Real Cohesion High desire to remain in the group Low desire to leave the group There is a lack of coercion Lack of feeling held hostage Source: Hartman, J. J Group cohesion and the regulation of self-esteem. In H. Kellerman (Ed.), Group cohesion: Theoretical and clinical perspectives: New York: Grune & Stratton.

14 Family Strategy A comprehensive articulation of our vision for the future of our family, and the goals, strategies, and actions that will help us achieve that vision.

15 Why do we need a Family Strategy? 1. Because the forces pulling a family apart are often greater than the forces keeping them together, and; 2. a family s unity is essential for success across generations.

16 Loyola Family Business Center FAMILY EMOTIONAL Basic family attachment BUSINESS EMOTIONAL Pride, identity and social status DIMENSIONS OF COHESION FAMILY FINANCIAL Bonding related to satisfaction of financial needs BUSINESS FINANCIAL Cohesion based on financial results of the business

17 Ways We Build Cohesion Cohesion Dimension Family Emotional Cohesion Cohesion Enhancing Mechanisms Regular meetings Family name & history Philanthropic activities Family Financial Cohesion Money-Material objects Inheritances Elevated lifestyle Business Financial Cohesion Dividends Salaries in excess of market wages Investing and business opportunities Business Emotional Quality products Archives, museums, artifacts Plant tours, internships Corporate social responsibility Source: Pieper & Astrachan, 2008

18 Ways We Build Cohesion Cohesion Dimension Cohesion Enhancing Mechanisms Family Emotional Cohesion Family Financial Cohesion Business Financial Cohesion Good family relationships Celebrating Milestones & accomplishments Having fun together Trust funds Family financial support of each other Family Office Services Shareholder agreements Business Emotional Newsletters regular communication Governance bodies as mediators between family and business Company logo and brand identity Celebration of corporate QUINLAN anniversaries SCHOOL OF BUSINESS

19 The Profound Questions: 1. What do we need to hold on to and preserve about our family business? 2. What do we need to change in order to survive and grow?

20 Interview Lynn Eplway, Gary Jet Center

21 Moving from Working in the Business to Working on the Business Values & Culture Mission Vision Strategies & Tactics

22 Three Keys 1. Family Governance 2. Boards of Directors 3. Strategic Planning

23 Common Elements of Family Business Governance Family Family Meetings Family Council Family Assembly Business Board of Advisors Board of Directors Ownership Shareholders Meeting Family Office

24 Used with permission Joe Astrachan, 2010 Ownership Pyramid OWNERS Value Stewardship Jobs Ensure growth, survival Core Task Oversight, accountability, director election BOARD Value Stewardship, family business balance Jobs Accountability Core Task Senior leader selection, oversight SENIOR MGMT ORGANIZATION & EMPLOYEES Value Integrity, honesty, performance Jobs Leadership Core Task Manage enterprise to standards set by ownership and board Value Loyalty Jobs Performance Core Task Set by management

25 Family Shareholders Basic Family Business Governance System Family Council Family Assembly/Meeting Board of Directors CEO Senior Management

26 The Successor Challenge Finding Your Sweet Spot Needs that are bigger than you Your Interests Your Capabilities

27 It s very important to know your measure, know your size, and know where you can improve on what has been handed down to you. How do you improve it and get it to the next level. Massimo Ferragamo Salvatore Ferragamo

28 Family Governance Paths to Leadership Ownership 4 Buckets Business Governance Management

29 Common Leadership Myths 1.Born not made 2.Lead the way we have been lead 3.What got us here will get us there 4.Only one path to success 5.No one can live up to those who went before us

30 The Challenge of Credibility 1. Self Awareness 2. Building Internal Credibility 3. Building External Credibility

31 Self Awareness Developing a sense of one s own emotions Developing a sense of what matters most Know your Strengths & Weaknesses Know how you react to stress Know your personality

32 Sense of Self The stronger your sense of self: The greater your capacity to receive negative feedback The less you will feel defensive, threatened, or overly emotional The greater your capacity to conflict in a healthy manner The more you will exhibit self-confidence and independence

33 Internal Credibility Ideal Self Actual Self When our Ideal Self is closer to our Actual Self (our behaviors) in the world: There is a greater likelihood of higher self-esteem It increases Internal Credibility

34 External Credibility Your Reputation Self Perception Reputation When our Ideal Self is closer to the way others perceive our Reputation: There is a greater likelihood of external credibility We have a more realistic sense of who we are in the world

35 I never, ever wanted to give the family any reason to, to not trust me. I believe that trust is a, is an absolute foundation holding a family together. And once it s breached, it is very insidious. Samuel Schwab, CEO S. Schwab & Co.

36 Personal Successor Dilemmas Gaining stature w/out leading revolution Secure strong personal identity w/out threatening team How to accept conflict when family culture avoids it How to deal w/need to be liked / while dealing with unhappy people Perceptions that you are there because of your name

37 Institutional Successor Dilemmas Success Culture of Loyalty Tradition

38 Preparing Successors: Family Business Leadership Model Self Awareness Self Management Family Awareness Family Management Social Business Awareness Relationship Management 360 Feedback Coaching/ Peer Group Genograms Family Meetings Development Plan Peer Group Coaching

39 Q&A Andrew Keyt Executive Director Loyola University Chicago Family Business Center