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Tag: succession planning

  • Finito World Summer Roundtable

    Finito World Summer Roundtable

    Our regular roundtable this month involved questions about politics, succession planning and a disastrous pandemic. Finito mentors Sophia Petrides, Pervin Shakh, Caroline Roberts, Robin Rose and Andy Inman gave their advice

    I’ve always wanted to go into politics. There are a number of good experience routes through the Civil Service, Public Affairs agencies, Think Tanks and working as a Parliamentary Assistant for an MP. How do I determine if I will be suited and where I begin? Damien, 27, Exeter

    Robin: Damien, let’s deal with the suitability part of your question first. It’s encouraging that you’re asking whether you would be good for politics, not if the role would be good for you. The best politicians are those who genuinely want to make a difference, if that is you then stick with your ambition.

    Caroline: Yes, you clearly have a strong interest in working in the political arena so that’s half the battle won. The civil service and think tanks will have a strong focus on research skills and policy development. If you are in a position to offer some time to an appropriate organisation voluntarily, then that may also be a good starting point.

    Robin: I agree with Caroline. You mention some of the traditional gateways into politics and these areas should not be overlooked. However, if this is seriously the sector that excites you, these suggested routes are slow and too dependent on chance. To really make things happen just get involved in causes you believe in. Join groups actively fighting to promote your chosen cause. Hone your human relations and public-speaking skills. Study negotiation and conflict resolution. Do all this and your political career will take off much faster.

    My parents don’t want me to join the family paper business. They feel that I need to prove myself elsewhere before joining, which I understand but I’m also proud of the family and want to continue the tradition which goes back several generations. I am all for succession planning, but this is tearing me apart emotionally because there’s really little else I want to do. Harry, 20, Norwich.

    Pervin: Harry, it’s great to hear that you are very keen on being involved in the family business. Your parents’ perspective is understandable too. It might be a wise idea to get some external experience first, maybe in a non-related business, so you can pick up new experiences, develop commercial knowledge and formulate new thoughts and build a network. In the meantime, you can still be involved in the family business informally by looking for ways to improve the existing business, but try not to impose your ideas as an absolute rule, especially never at the dinner table! 

    Sophia: Your parents should be very proud of their son wanting to support the family business and continue the tradition. However, I agree with Pervin that it is important to broaden your horizons to other experiences to grow your business skills. 

    Robin: A thriving business has to continuously evolve with the times. It has to be agile, adaptable and resilient. When you are in the thick of daily business life you don’t get much time to try out new ideas or discover new approaches, so use this time to go out there and learn how you could take your family business to the next level for when you hand it over to your own kids. Look at the logistics chain, the suppliers, the customer service aspects, the customer journey and demand influencing factors. Try walking in your customer’s shoes for a bit. You can only achieve this by experiencing many different challenges in your life that push you out of your comfort zone. 

    Pervin: I’d add that maybe you could use your social and digital media skills to help improve the company’s social media strategy and increase visibility and client engagement. This way, you’ll gain your family’s trust, build credibility, whilst proving that you have what it takes to be involved in an official capacity later on. 

    Robin: Think of it like this. If you were to start straight away at your age you would immediately encounter difficulties from which your parents are trying to protect you. Other staff are unlikely to give you the respect you will eventually need to become a leader. You would be just thought of as the ignorant kid who is just there for nepotistic reasons. If you were to spend a couple of years elsewhere, think of the potential advantages that would result.

    My gap year was a disaster due to the pandemic. I don’t feel ready to start a job nor do I want to study for a Masters. What options are there for someone like me? Lucy, 22, Tunbridge Wells

    Caroline: Sorry you didn’t enjoy your gap year but you are clearly ready to move on to the next step. First of all think about what you would like to do. What are the skills you have developed through university and any other activities you have been involved in? Is there an industry that particularly interests you and why? Once you have narrowed that down you can then start to think about how you get there. Many industries now have good apprenticeship schemes which will allow you to earn while you learn, offering a great blend of study and work. The National Apprenticeship Service will have all the details of what’s on offer. 

    Pervin: It’s natural to feel disheartened, Lucy, especially as the pandemic has been incredibly challenging for those looking for work or trying to get good quality work experience. If you are unsure, don’t rush into the next step. Instead, step back and think about what you’d like to do. Your interests, motivation, and aspirations may have changed because who you were 15 months ago is not who you are today, and not who you will be in the next 15 months. Be flexible with your plans and try different things and see what you like and dislike.  

    Andy: 2021 has not gone to plan for many. The great thing is that you have so many options available to you. One of those options could be to take a role in the care sector, earn some money to either fund a future gap year or help pay for further education, while developing your people skills and helping those less fortunate. If not that, then are you in a position to do some voluntary work and get similar benefits? Doing something positive will always be better than doing nothing, it will develop you and reflect well on your CV, those that come out of this pandemic ahead will be the ones who have acted in one way or another.

    Sophia: Andy’s right. When life throws us a curveball – and it often does – the hardest thing is letting go of your previous plan and thinking up a new one that’s a better fit for your current circumstances. This is also a great time to give something new a chance. Throw your own curveball back at life! Have you considered supporting your local community and giving a helping hand to those less fortunate? Are there any local charities where you can offer support? Volunteering can transform your CV as well as offer real, life-changing help to elderly people who live alone and have never felt lonelier. 

  • The Succession Question: why family businesses need to plan ahead

    The Succession Question: why family businesses need to plan ahead

    By David Hawkins, co-founder of Percheron Advisory

    What do we mean by the term ‘succession’? The term is most synonymous with the TV series Succession, which centres on the Roy family, the dysfunctional owners of Waystar RoyCo, a global media and hospitality empire, who end-up in a battle royal for control of the family business amid uncertainty about the health of the family’s patriarch, Logan Roy and his plans for the empire’s future. At his 80thbirthday Logan shocks his family – particularly his son Kendall who was primed to take-over the business reigns – with the news that he will not be stepping-down as planned whilst he also throws at his children the news that he is naming his third wife as successor.

    Who the Logan family are based upon is an open secret – think of an octogenarian Australian media owner and his warring family – but the issues raised here via satire are key to highlighting real world family, business and wealth survival.  What follows during Succession is a series of family and business conflicts, attempted hostile takeovers and family politics that makes Shakespearean narrative seem simple.  

    Fundamentally, a failure of clear family governance leads to family, business, asset and wealth destruction – that old chestnut “from clogs to clogs”: the first generation earns the family money, the second generation manages it and the third generation loses it. This trend turns out to be universal across cultures – think of the Vanderbilts in the West. In the East this was summed-up by Sheikh Rashid Al Maktoum: “My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel.”

    What are the main risks to a smooth succession and how should the present generation react, respond and accommodate the next generation? How does the next gen become more active in the business and play their role in the family business?   

    1) A lack of clear governance systems and processes across the family, business and wealth management

    Logan Roy’s impromptu tearing up of any coherent succession plan leads to war amongst competing family members, attempts at hostile takeovers, family members resigning and business, regulatory, security and political risks. So having family governance or a family protocol in place which formalises the family’s mission statement, its USP, why the family are in business together and what the long-term objectives are, is as vital for the family as corporate governance is for the business.

    This family protocol becomes enshrined as a family constitution from which policies and processes relating to the family, the business and its wealth are then outlined in detail according to the specific family’s requirements and it is discussed, bottomed-up and amended as a dynamic document during regular meetings of a family council – a council which present generation and next generation participate and lead.  

    This would seem foundational to all families – yet as Smith & Williamson’s Family Business Survey 2020/21 reveals, the percentage of families that have a key piece of family governance – the family constitution – in place, is still only around 38%, of which half thought they would have to review this within two years.  The Roys would have found it instructive to have a family constitution and council – and include input from the business units including non-executive directors who could have been involved with the succession discussion so turning a family decision into a corporate one.  The next generation would also have had the insight into first generation decision-making and a sense of the direction of travel which would have allowed them to avoid being frozen-out so spectacularly. 

    Without changing TV genres abruptly, the Game of Thrones analogy symbolises the challenges faced by India’s Ambani family.  When the patriarch died in 2002 like many Indian families there was no succession plan and no will. Chaos reigned.  Rather than a structured approach as to which assets brothers Mukesh and Anil Ambani would inherit, it was left to their mother to preside over an ‘organised demerger’ in 2005, which gave Mukesh control of oil and gas, petrochemicals, refining and manufacturing while Anil took reign over electricity, telecoms and financial services. As the Economist wrote at the time: “Why do family firms so often fail to make the generational leap? Family firms are frequently more riven with intrigue and visceral hatreds than a medieval court – and for similar reasons.”

    2)  Conflict and disagreement in the family destabilises the family and the business 

    The chief wealth destroyer, and one of the main features that family governance should work to reduce, is the exponential damage that conflict and disagreement can do to a family and its business. 

    When families fight, businesses lose their direction, fail to innovate and are often subsumed by their competition. 

    Whether it’s the ongoing dispute within the Ambani family – which even after the separation of assets was followed by defamation suits, involvement of the Indian prime minister and even Anil publicly blaming his brother for power-cuts that swept across India in 2009.  In Succession, Logan Roy takes his family to the family ranch, Austerlitz, to try to patch things up – yet this sticking plaster is too little, too late.  

    The core of family governance is trust, communication and the prevention of disputes spiralling out of control. In the Ambani case, a Family Council could have allowed managed conversation and dialogue unifying the family around values and mission but also outlining and preparing the brothers for ownership and management of specific business units.  If agreement could not be reached then the brothers could have been bought out.  Disagreement would have a forum for debate so issues that do arise can be dealt with via dispute resolution and mediation processes precluding the revelation that the founder has no will, or shock announcements at the patriarch’s birthday party, or even in an interview with Oprah which seems the de rigueur approach these days for airing grievance.  

    What is instructive is the new family council structure that Mukesh Ambani is working on, whereby his immediate family and three children are granted equal representation to enable succession planning whilst at the same time the children have been taking on increasing responsibility within the family business.

    3) The present generation is avoiding – or dreading retirement – or hanging on due to crises such as COVID-19 whilst the next generation wants to get more involved 

    The endemic issue that the institution of effective family governance and succession runs into is that often the founder doesn’t want to retire or be succeeded.  They may resist efforts to outline a clear succession plan – or if one is introduced may impede it: e.g., one American next gen was given 75% of the family business to run. The only issue was that he didn’t know from day-day which 75% it was. Pedestrian issues such as moving into father’s office or clearing out the old retainers caused emotional eruptions from the patriarch. 

    This issue has been particularly relevant due to the ongoing COVID-19 pandemic. As a Barclays Private Bank family business report on Smarter Succession of October 2020 shows: 57% of the present generation are concerned about trusting the next generation’s ability to manage the business. Drilling into the figures shows a possible reason why: 42% of the over 60s want to preserve the family business across the generations compared to 18% of under 40s.  So, there is a clear pretext as to why the present generation might want to stay on. 

    These figures highlight the lack of family governance.  The next gen should be mentored and grown into the business, socialised to understand the family’s source of wealth, the importance of their involvement in the business and how they can begin to play a role in the management or board team looking at questions such as:  

    • The focus and direction of the business.

    • Business transition and the impact of succession planning on the business.

    • The corporate governance framework – including appointments to the board or any significant changes to board structure.

    • The operational framework.

    • The family’s attitude to ethical and moral issues that may arise in connection with business operations.

    In conclusion, the message for the existing generation and next gen is: develop family governance, sincerely commit wholeheartedly to the succession plans that are developed and ensure that dispute resolution and conflict-mitigation mechanisms are in place.  Sadly Logan Roy did not get the memo. 

    About Percheron Advisory:

    Percheron Advisory works with entrepreneurs, HNW clients and business families with a focus on two key areas:

    • Building resilient and agile operational business frameworks so removing risks, developing robust and integrated systems and supporting new strategic directions, and; 
    • Where appropriate, developing effective family governance structures which encourage open and transparent communication, reduce conflict and integrate the next generation into the family business.  

    90% of family businesses fail by the third generation, 60% of family businesses fail because of disagreement and lack of trust in the family. 

    Regular reviews of the family enterprises, building-up resilience and agility ensuring clear reporting, metrics and efficiencies allows for clear strategic decisions to be taken, whilst looking at family governance – that is a family constitution, family council and conflict resolution, can build a resilient family that helps drive the business and removes threats to the business that can come from conflict and disputes.