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 October 2013

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Tandeau de Marsac

Mediation -- A Factor of Sustainability for Family Businesses? 

Family businesses have become a hot topic all over Europe, probably because they appear as an interesting model compared to widely held firms. Indeed, they seem to have specific characteristics that are answers to what a wide consensus today recognizes as the reasons for the crisis the occidental economies are going through.

 

Yet media frequently report dramatic conflicts which sometimes lead to a strengthening of the family shareholding, but more often than not to muddled sales which seal the end of the family business as such.

 

It is frequently highlighted that the method chosen to resolve conflicts can be seen as a factor of improvement of the performance, provided that the process chosen allows the confrontation of different opinions during the course of its implementation. Only such a confrontation can generate a new way of envisaging the stakes which are at the heart of the conflict, and thus enable the parties to overcome them and find a solution.

 

Three main types of answers to the conflicts are possible: the denial, the dispute or the conciliation.

(Read more from Tandeau de Marsac and add comments.)

Walid Chiniara

Defining a Family Business Under the Laws of the UAE:  Challenges

Walid Chiniara

Family business research and statistics is riddled with methodological issues, not least when determining what constitutes a family business. Whether it be in relation to ownership, control or management, countless factors are overlooked, creating inherent flaws in many definitions.  The UAE is no different. To this day, defining a family business is challenging, particularly considering the lack of accurate statistics to draw upon to correctly develop the criterion to differentiate between a family business, and non family ones. Within the common literature in the realm of family businesses, it is generally accepted, that a family's involvement in the business makes the family business unique, however the lack of distinction between theoretical and operational definitions leads to complications.

 

The applied Companies law of the UAE determines to a significant extent the setting for family businesses in the UAE. The law prescribes a requirement of at least 51 percent to be locally owned, therefore from a perspective of ownership and control, if one single family owns the majority shareholding, any such company may be categorised as a family business. However, upon closer inspection the issues are far more complex with regards to the involvement of such an ownership requirement in the family business, as this will inevitably impact the way in which the business operates.

 

To expand further, in many cases it is important to differentiate between the active owner-entrepreneur and the silent partner. The active owner tends to be the foreign partner, who under UAE Law will be a minority shareholder, despite the fact that it is he who 'controls' and 'manages' the business by way of his intimate knowledge, and personal involvement.  (Read more from Walid Chiniara and add comments.)

Greetings!

Family business success is all about relationships.

 

Quality, efficiency, strategy, capital -- they're all vital to business success.  But the foundation is built on relationships.

 

This issue of the Family Business Wiki Newsletter illustrates some interesting aspects of family business relationships:

  • Transitioning business relationships between generations
  • Using a mediator -- who might even be a family member -- to help resolve conflicts
  • The interaction between individual agendas and the goals of the larger enterprise
  • The impact of family dynamics on the level of entrepreneurship
  • Transferring an entrepreneurial approach to marketing from one generation to the next
  • The relationship between silent majority partners and minority operating partners in the UAE.

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Starting with this issue, Family Business Wiki is pleased to welcome Tharawat Magazine as a regular contributor to the Family Business Wiki Newsletter.  Tharawat Magazine is "The Arabian Publication for Family Businesses."  Our relationship with Tharawat is consistent with Family Business Wiki's mission of "Sharing family business knowledge around the world," and we look forward to the family business knowledge which Tharawat can bring to our readers.

Hischam El Agamy 

Family Business Succession Planning:  Why Relationships are an Important Asset to Hand Over 

  

Presented by
  
Family businesses are crucial to the welfare of economies around the world. In order to ensure continuity and sustain their growth, family businesses have to adopt best practices in terms of transparency and corporate governance. But contrary to public companies corporate governance is not the only pillar in the governance system of the family businesses. In addition to corporate governance they must establish a family governance system as well, which regulates the family's relationship with the business. This additional pillar is critical for the sustainability of family businesses and is often confused with corporate governance.

 

At the heart of the family governance system lies succession planning. Lack or weak succession planning remains the main reason of high family businesses mortality. While family businesses make great efforts to prepare the next generation through the development of their managerial and leadership skills, it is often forgotten that one of the most important factor in assuring the next generation's success is the ability to manage the existing network of relationship surrounding the business.

 

Successful leaders in family businesses are usually, in addition to their leadership skills, great networkers and they show great agility in managing relationships. Managing social relationships and business networks are key enablers to success.  (Read more from Hischam El Agamy an add comments.)

 

Gary Giallonardo 

Succession Planning with Bite:  Strategic Business Development for Long-Term Sustainability 

  

When it comes to succession planning, your attorney, accountant and financial planner can help you to transfer ownership, management and wealth to the next generation.  But all of this is for naught if the underlying business is not healthy and growing.  And far too many family businesses, by the second or third generation, are selling "the same old products to the same old customers" -- and becoming more moribund by the day.  This is where "the rubber meets the road" in succession planning.  This is what I call "succession planning with bite".

 

Internal Focus Only Part of Solution

Succession planning advisors typically focus on three main areas for long-term sustainability -- the continuation of: 1) management, 2) ownership, and 3) wealth.

 

While essential to any business succession plan, these three areas primarily focus on preserving the internal workings of the family business. However, no company exists in a bubble devoid of outside influencers like customers and competitors. Since these influencers' needs and solutions are always changing, the family business can't survive on perpetuating a previous generation's offerings. Instead, it must constantly compare and adapt to fluctuations in the outside world in order to stay competitive and rele­vant. A company's capabilities and solutions must evolve with the ever-changing marketplace.

 

Family businesses need a systematic process of ongoing business development -- investments in learning, comparing and adapting -- to grow and thrive in an ever-changing marketplace.  (Read more from Gary Giallonardo and add comments.)

Katherine Grady 

Oneness is Not Something You Turn on with a Switch

  

A dear friend recently sent me an email under the title "Legendary Basketball Coach on Team Building".  As as I opened the message, I thought to myself, "Oh no, not another sports' reference about team leadership." 

 

Then, I read the quote:  "Basketball is a great mystery.  You can do everything right.  You can have the perfect mix of talent and the best system of offense in the game.  You can devise a foolproof defensive strategy and prepare your players for every possible eventuality.  But if the players don't have a sense of oneness as a group, your efforts won't pay off.  And the bond that unites a team can be so fragile and so elusive.  Oneness is not something you can turn on with a switch.  You need to create the right environment for it to grow then nurture it carefully every day." (from Eleven Rings: the Soul of Success, by Phil Jackson, 2013)

 

As I reflected about this elusive and fragile bond of oneness that he wrote about, I wondered how often I remember that this deeper level of cohesion exists as a possibility when I am consulting with family businesses.  After all, a family enterprise is made up of many individual players within the overlapping business, ownership and family spheres, and teams are constantly forming and reforming around different needs and tasks, some short-lived and others existing across generations.  And those teams always consist of exactly the same two elements that Phil Jackson has spent his entire professional life wrestling with: the personal needs, dreams and agendas of each individual versus the needs, goals and agendas of the group as a whole, and the interaction between the two is always where the real action is.  (Read more from Katherine Grady and add comments.)

Rick Raymond  

Factors Influencing Entrepreneurship and Innovation in Family Business

  

Entrepreneurship and its integral component, innovation, are of vital importance for family enterprises in adapting to today's dynamic market environment. Increasing competitiveness, globalization and growing marketplace demands make developing an entrepreneurial culture an essential ingredient for success in the economy. No family firm can afford an attitude of passivity if it seeks to survive through multiple generations.
  

Although family firms are widely recognized as a major source of innovation, over time some become conservative and are unable to see the benefits or are unwilling to take the risks associated with entrepreneurial activities. Others develop the capacity to regenerate, allowing them to renew their operations, grow new markets, develop new skills, and adopt new strategies. A wide range of factors including family dynamics influence a company's attitude to entrepreneurship, innovation and their inherent challenges.

 

Founder's Length of Tenure

While the importance of the founder in shaping a firm's culture is indisputable, studies show significant negative correlation between the length of the founder's tenure of control and the company's involvement in entrepreneurship, innovation and the pursuit of new ventures. This is especially true with the founder as CEO. The dual function serves to concentrate power in the founder's hands and leads to intensification of conservatism, resistance to change, stifling of entrepreneurial activities and aversion to risk.  (Read more from Rick Raymond and add comments.)
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