For the next generation, having a family enterprise changes everything – from your tax status to power dynamics in the family. The financial decisions once made single-handedly in the business must now be shared. Josh Baron, Rob Lachenauer & Diane Coutu from BanyanGlobal explain more. Imagine you — as an extraordinarily successful business founder — have just joined the exclusive ranks of the 200,000 people around the world with a net worth over $30 million. Your laser-like focus on the business is about to give way to what we call a Second Act. A successful Second Act often poses an existential crisis because it requires a very different approach than the First Act did. The First Act involved an intense drive to build the business. Your Second Act is probably going to involve the creation of some sort of family enterprise, meaning that there will be some collective family decision-making over shared assets such as a foundation, a portfolio of investments, perhaps some businesses and, likely, family properties. Having a family enterprise changes everything–from your tax status to power dynamics in the family. The financial decisions you once made single-handedly in the business must now be shared. This territory is familiar to successful family business owners, who have long organised themselves into enterprises as the best way of collaborating and holding their families and fortunes together. Your family enterprise, however, is best described as accidental because you never intended to work together with your family; it’s a by-product of having accumulated so much wealth that will outlast you. Think of two icons of American capitalism, Standard Oil and Microsoft. Standard Oil wasn’t, and Microsoft isn’t, a family business–unlike the Rockefeller Foundation and The Bill & Melinda Gates Foundation, which are. (John D. Rockefeller, Sr. started his foundation with his son, and Bill Gates’s wife and father are co-chairs of his foundation.) In both cases, these business icons brought family members into the fold to create family enterprises to help manage their massive wealth. As family business advisers, we have seen firsthand the challenges and rewards involved in creating and running family enterprises. Engaging with your family entails a radical shift in mindset, and conversations that you’ve never had before with family members, from “What are our family values and priorities?” to “Whose money is it anyway?” Answering these questions together with your spouse and adult children is also to engage them as business partners. Even with carefully orchestrated meetings and conversations, however, things heat up by nature of the fact that if the Second Act is to be successful, you must give up some control over the money that you worked so hard to earn. The mantle of authority that you had in the corner office will be challenged. You can no longer run the show; your spouse and children can disengage from your plans at any time. This is why governance becomes essential. Without structured decision processes, it’s too easy for one generation or the other to disengage. It’s by sharing the responsibilities for the wealth with your adult children that they can learn from your experience, and also learn to be in business together. You may either be unable or unwilling to make this transition; you may try to keep a tight fist on your assets, even attempting to control them from the grave. There are, after all, many tempting tax structures that encourage wealthy people to do just this. But even more commonly, in our experience, you may want to keep control of your money because you are deeply anxious that a massive fortune can be toxic for your children and grandchildren. What if they fail to develop your work ethic – or worse? But the antidote to indulgence and entitlement is engagement, not control. By getting stuck in the control mode, you miss a great opportunity to challenge and mentor your children and to help them develop their full potential. For some of you, this may be your last chance to become the parent that you had always hoped that you might be. Consider what happened to one very wealthy business family that we know well. The owners feared the downside of wealth so greatly that they waited until family members were in their mid-30’s before telling them their true worth. “And then we dropped the bomb on them that they are incredibly rich,” one owner told us. “Dropping the bomb” is the perfect metaphor. The news shattered many of the adult children who were not prepared to deal with a massive fortune. What happened next is not at all unusual in our experience. A number of the siblings became totally disengaged from the family and were only interested in the dividends. When you don’t educate your children and grandchildren about how to live with money, then, paradoxically, life can become about nothing but money. Engaging and educating the younger generations in the Second Act, though, isn’t only about what’s best for them. It’s also in your self-interest to involve your heirs in your legacy plans, which will more likely go awry after your death unless you get your spouse and children interested. We know of one hugely successful businessman who has built up a superb portfolio of companies that he is managing in the Second Act – but without the buy-in of his adult children. They are just waiting for him to die so that they can sell off the businesses and cash in. Your philanthropic legacy could also be jeopardised by the wishes of your children. We are working with a matriarch who is deeply involved in reinvigorating medical care in the inner city. It is a 15-year project, and if her sons and daughter don’t engage in it, their mother’s work will wither or be dismantled. That would be a missed opportunity both for the community and for the family. Even when multiple generations work together to script a different Second Act, family members often feel uncomfortable in the beginning. Sometimes this distress is almost visceral, as it was in the case of a founder who sincerely wanted to pass on the family business to his sons. He would sit on his hands in meetings, trying to force himself to be patient. His natural inclination was to take control and be the decision maker. Sharing power is really, really hard. The irony is that his adult children were satisfied to have their dad continue to play the role of decision maker. It has taken them several years to step into a more equal role, to engage eye-to-eye with their parents. For a Second Act to be as successful as the First Act, the relationships have to change in both directions. In this instance, the owner ended up bringing each of his adult children into the business even though none was an expert in the field. The father supported and guided the siblings throughout the project, and collaborating closely, the brothers invested in a multi-million dollar deal that almost doubled the family’s wealth. Their father is now easing into retirement knowing that he has positioned his children for a successful future together. There is no guarantee that every Second Act will work as well as this one did. But treating the Second Act as another start-up will almost certainly destroy the wealth that you’ve created, and it is also likely to alienate your family. Of course, you can continue to be a one-person show as you move into the Second Act. But in reality, control is no longer a viable solution if you want the legacy of your hard work to outlast you. The curtain has fallen. The First Act is over. This article was first published on the Harvard Business Review & is reproduced with the permission of the authors.

Christian Weber is the CEO of Karslberg Brauerei in Germany and shares an insight into taking the helm, although there was a time when it looked like he may have taken a very different course. Karlsberg Brauerei is a successful German brewing company with 1,400 employees and annual revenues of around 400 million euros. Christian Weber is the CEO and shared with us the journey that he has been on. Christian was educated in the UK, and started his career at major multinationals like Nestle and Heineken, where his time included spells working abroad. He was open-minded about returning to the family business, but equally open to other possibilities. Then, in 2009, everything changed. A major transformation of Karlsberg turned it back into a ‘pure’ family business by dissolving a joint venture and cross-shareholding. “Suddenly, a career at Karlsberg looked a lot more attractive, and I started having discussions with my father about what it might look like.” The result was a two-page paper in which Christian set out his plans in detail, setting out why he thought it would be better if he joined as successor in a role with overall responsibility, rather than taking charge of a division. His father agreed, and over the next few months Christian established himself in the business, and his father gradually took a less active role. “I worked hard to learn the business, and establish productive relationships within the company. Our ethos at Karlsberg is to ‘lead by sharing responsibility,’ and I made a point of not second-guessing experienced managers. It was a good time to join as we were making a lot of operational changes after the transformation, so everyone was receptive to new ideas and new ways of doing things. Within a year my father was coming into the office much less, which was a good way of signalling to people that they needed to talk to me about everyday decision-making.” Christian’s father still has a strong presence in the business, all the same: “He is my most trusted and most valued sparring partner, and I can talk to him about everything from strategy to HR issues. So he still has a huge influence on the company, but indirectly, rather than by running it himself.” The wider family has an important indirect influence too. There are four family members on the seven-post board, and 25 family shareholders. “When we hold our shareholders meetings the families, the children, and the next generation – everyone comes. The board updates them on what’s happening in the company, providing information and context, and allowing space for discussion. Governance mechanisms like this are an important anchor for family businesses.” Christian’s arrival has also coincided with changes in the brewing industry that have led to a change in the company’s management style: “In the past, whoever was quickest won. Making fast decisions and implementing them quickly was the key to success. Today, anyone can be fast, but the real differentiator is good ideas. My job is to nurture those ideas, and create a culture where innovation can flourish. That’s about having the right people in the right roles.” Christian is also aware of the potential for digital disruption in the brewing industry. “For us, the most important areas will probably be communication on the one hand and planning on the other. How will we supply the restaurateurs of the future before they even place an order?” A family business can have real advantages in this brave new world: “We are as professional and ambitious as any other company, but we are also value-driven, which means we can communicate to both employees and consumers in an emotional way without it sounding artificial. That’s because our culture stems from our family rather than anonymous owners no-one knows. That builds loyalty inside the firm, and is very attractive to talented people outside. That’s a huge advantage.” This insight was part of The Next Generation of Family Business Leaders published by PwC. It has been reproduced with their permission.

Conflict happens in any enterprise. However, when your co-workers are also your family, conflict can take on new levels of complication and affect both familial and business operations. There are many common sources of conflict in a family business: Everyday spats over business operations, conflicts between older and younger generations over succession or the future of the business, or resentment stemming from feelings that certain family members are being compensated in excess of their productivity can all lead to conflict. Often, working and non-working family shareholders have different opinions about the distribution of business profits or compensation, causing friction that can lead to power struggles that damage business operations. Even garden-variety family drama can blossom into full-blown family crises if they aren’t adequately addressed. We’ve seen many situations where in-laws or partners of family members attempt to exert influence or otherwise involve themselves in the business. The hazy line between business time and family time can mean that family issues are dragged into work and business issues can contaminate family time. Rivalries between siblings or others members of the family can turn ugly when there’s money or authority at stake. Whatever its source, resentment and frustration can eat away at business and family harmony. Many (if not most) family businesses struggle to confront sensitive issues because they want to avoid conflict. The problem is that conflict can never be avoided – only prolonged. The end result is often that small ‘kerfuffles’ turn into major family crises because there was no early intervention. The vast majority of family conflicts can only be resolved through early, direct conversation and a commitment to honest dialogue. In my opinion, successful long-term family businesses: Anticipate conflict and can have productive conversations when they arise. Clearly communicate their values and expectations to each other. Use formal councils or family meetings to address grievances in a structured way. Are willing to actively work at their communication skills and invest in training and guidance. Fortunately, there are a lot of ways to build healthy communication into your family business. First of all, start early and speak often. Sometimes, spotting trouble early and addressing it before the problem grows is enough. Other times, even large problems can be addressed through a series of conversations that tackle small aspects of the problem, rather than trying to solve a big issue all in one go. In my opinion as a family advisor, one of the best places to hash out major issues is at a formal family meeting. This might sound unnecessarily complicated, particularly if family members see each other regularly. However, while your family might be great at discussing everyday business and family matters, it’s very common for families to feel unable to tackle the big issues – the elephant in the room. A formal structure can help families set policies, open lines of communication, and give members permission to bring up big issues. An effective communication structure can also help avoid major conflicts by giving the family space to manage the inevitable issues that will arise in a family business. Mediated discussions can help when a thorny issue simply cannot be resolved internally. Oftentimes, issues have become so large and the relevant parties so entrenched that constructive dialogue is no longer possible. In these situations, an objective outsider who is trained to resolve disputes and negotiate tricky emotional territory can help cut through the drama and focus on the issues at hand. We have found that many clients achieve more in a few hours than they have in the last decade. Family retreats offer the opportunity to get away from the everyday and come together as a family business team while doing something fun and constructive. Retreats can involve all family members, just those who are active in the business, or may include spouses and young adults. What’s important is that you focus on building family ties and strengthening communications. Family retreats are not just events – they should be the start of your commitment to better communication and healthy conflict resolution. Bottom line: Conflicts happen in a family business. Resolving them takes time, honesty, and good communication skills. Ignoring problems never works because if you ignore them long enough they turn into crises that can damage the business and cause your family to suffer. If you’re concerned about conflicts in your business or your ability to resolve them, reach out to an expert. It’s time well spent.

Respect is the cornerstone for all work with families. Each family has its own culture and each part of the world has its own culture. We can all learn so much from each other. Barbara Hauser shares her insight. My own work includes frequent trips to Saudi Arabia (and the surrounding GCC region) where I continue to learn from families about their own important traditions. The beauty of focusing the advisory work on “process” and not on “products” or even “solutions” is that the local traditions and local family culture will surface on their own, and will add the meaning and content that is most important for that family. In the Gulf region, the two strongest traditions I see are the importance of Islam and the importance of families. Coming in as a Westerner, I believe it is critical to have genuine respect for these related values. Looking at Islam, one distinction from other religions is that Islam permeates daily life, it is not a separate religion as much as it is a way of living in the world and with each other. In Saudi Arabia, the law of the land is the law of Islam (Shariah law)—it would be impossible to separate Church and State. The church is the state, and the religious law comes ahead of all other law. Rich traditions include the call to prayer that is observed five times a day. Our meetings are fit around prayer times, and breaks are taken for prayer times, in the board room and in the home. Many investment categories are forbidden in Islam, including making money by way of “usury” (which seems to have been recently confused with “interest”). Islam includes a duty to give to the poor. The Shariah law obligation of “zakat” is regulated by the Ministry of Finance in Saudi, which is responsible for “ the collection of “Zakat” from individuals and companies holding Saudi citizenship at a rate of 2.5 percent [each year, based approximately on total net worth], in accordance with Islamic Jurisprudence.” (In practice, I am told that individuals make their own Zakat calculations and their own direct payments to the poor.) Many of the gender separations are based on religious law (although many are not, and vary according to the culture of a particular family, such as whether the hair and the face of females need to be covered, and when.) This is a rapidly changing area, and is one in which an attentive and respectful learning attitude is extremely valuable. The issues are often more complicated than are presented in world news media. What I have learned the most about the Islamic culture is how much there is that I do not know. Families love to explain their views and their customs, and I am always learning how different they can be, family to family. The second strong value is the importance of the family and the bonds among family members. More than once a patriarch has explained that if the wealth will cause conflicts among the family members, he would give away the wealth. The family is more important. The desire to keep the family strong motivates all the members to support each other. This is especially important because under Shariah inheritance laws all of the children will probably become joint owners of the business. Key features of the importance of the family include the tremendous respect for elders. Following are just a few of my personal observations over the last ten years. I have often been in a home where the conversations among 10-20 family members completely stop, because the patriarch has entered the room. All of the family members stand up, and seem to follow an order in approaching to greet the patriarch, with a kiss on the top of his head. (This needs to be remembered when working on projects like a family constitution: it might be important to include specific exceptions, so that some of the rules will simply not apply to the patriarch or his wife.) The family name identifies all of the family members, and must keep a good reputation. This means that, for example, one faulty bank loan by one family member was likely to be paid in full by other family members, to keep the good name. In recent times this is changing somewhat. Family trees (literal tree designs) are often on proud display in the home or office. A traditional preference is to marry within the same group and to live in a family compound. (One little girl was changed to a private international school and commented “But they are not family, who will I play with?”) Respect for the family includes patience and time invested in knowing more about them. Rushing in to do business will usually backfire. The relationships need to be established first. Those often become relationships that will last much longer than any particular project. This strong family bond makes it even more important to family businesses to be as proactive as possible to break the “three generations of failure” pattern. The key success factor is often the closeness, cooperation and participation by the third generation. The whole family is part of the business and that business is part of their family. They all very much want both to succeed, for many generations. In closing, respect, for traditions, cultures and families, is the key, as I think it is everywhere.

Châteraisé Holdings produces and sells Japanese confectionery as well as Western-style cakes and pastries, which it produces in its own factories using local ingredients from the Yamanashi area. The business was founded by Hiroshi Saito in 1954 when he was 20 years old. They started with one tiny confectionery store selling local specialities, but have now grown into one of the largest companies in the sector in Japan. It now has 3,000 employees and annual turnover of 63 billion yen. The business has also diversified as it’s grown, and now includes wineries, resort hotels, and golf courses across Japan, and Hiroshi is now looking overseas to achieve further growth, and positioning the company for expansion in the Netherlands and Asia. Today, Châteraisé is a big success story, with big ambitions. But it hasn’t always been an easy ride. The company has had to adapt and reinvent itself several times over, in everything from what it makes to how it sells. Early on, for example, it struggled to compete with the selling-power of the major brands on ice cream, but fought back with a sensationally popular range of 10-yen choux puffs. Getting distribution right was challenging, too, and after several unsuccessful attempts to use existing retail channels, Châteraisé developed its own highly effective franchise sales system, which circumvents the wholesalers and allows the company to get maximum leverage from its own capital. The real turning point came in 1984, when the company marked its 30th anniversary. Annual sales had stagnated at around 4.8 billion yen, and Hiroshi took the bold step of investing 5 billion yen to re-locate the main factory. There were still some significant setbacks, including a fire at the existing factory, but the company’s strong culture stood it in good stead, and it has since built a powerful brand based on the use of fresh ingredients, which is the foundation for its international expansion plans. It’s using milk from Brittany to make cakes in the Netherlands, and has opened stores in Singapore, Taiwan, Malaysia, and China, with more planned in Dubai, Korea, Indonesia, and Hong Kong. “Looking ahead, we cannot rely solely on the Japanese market, where confectionery consumption is falling as the birth rate declines and the population ages,” says Saito. “In the future I would like to increase the proportion of our sales made overseas.” Overseas sales currently account for less than 10% of the total, but Saito’s aim is to increase this to around 50% in five years’ time. Saito believes that the secret of Châteraisé’s success has been its dedication to its three-fold founding principle: to manage the company in a way that brings joy to customers, business partners, and employees. It’s a philosophy he learned from his parents, and has passed on to the next generation – Saito’s daughter and younger sister are Executive Director and Managing Director respectively, and his nephew Makoto manages operations in the Netherlands. Saito may be 82 years old, but he is still looking to the future, with a new 30-year plan: “I want to see through our plans for global expansion, but I’ll be 110 by the time we accomplish them,” he laughs. This feature forms part of the PwC Global Family Business Survey 2016. It has been reproduced with permission of PwC.

With increasing competition for jobs and an apparent ever-rising need to achieve the best grades, does education actually deliver potential leaders of the future? Sandy Loder looks at the challenges associated with selecting the right school. Talk to any parent and the need to give their kids the best chances in life is something that most recognise and strive to achieve, within their means, and education and schooling is more often than not top of the list. But there are some serious questions that come to the fore when discussing the suitability of schooling, not to mention the grades delivered, the topics covered on the syllabus and the level of preparedness that individuals have for the competitive jobs market that they are ultimately going to end up in. Society is looking at the need to deliver grades and the competition for places is tougher than ever. As Sandy Loder explains, “it is not uncommon to hear of children as young as three and four receiving tutoring to prepare them for the tests to get into their chosen pre-schools,” something that may seem difficult to comprehend for some, but a necessity for wealthy parents who are trying to secure a place for their kids in their preferred schools. Schools inevitably have a reputation and they are under enormous pressure to continue to receive great reports from bodies such as OFSTED, not to mention the need to continue to deliver exemplary results too. As Sandy continues, “there is undeniably pressure on schools to perform, but the bigger picture has to be the need to deliver results that put the UK economy on the right footing in terms of the skills needed in future generations to drive the UK to the fore when it comes to dealing with the competition for talent.” Whilst there is competition for places, there also needs to be a more strategic consideration, which in many cases falls by the wayside. What is the best school to provide the holistic education and life experiences for the selected child. All schools have to deliver the core syllabus whilst offering other benefits too, access to sports, cultural studies, music, technology and never forget the networking potential and connections that can be made simply by being in the same school as peers who have parents who have already demonstrated an ability to deliver great results in their own careers too. Sandy is aware that good schools deliver good results but he is prepared to question some of the syllabus, and as he puts it, “should we be spending hours teaching the history of Britain and World Wars when more could be done with leadership and technology to prepare them for the commercial world. Ultimately, history has shaped our nation and should not be forgotten but there needs to be balance, to make sure that the future generations deliver the best skills in people from the UK.” The competition for grades is important and hence the desire to go to what have been long recognised as the ‘best schools.’ In fact, the names speak for themselves, and grades or not, people have aspired to go to schools such as Harrow, Eton, Wellington and Millfield, and then to secure places at Universities such as Oxford and Cambridge for generations and this is unlikely to change in the near future. But, as Sandy continues, it is not just about grades. Serious questions need to be considered such as whether you want your children to board, and if so from what age? Do you consider the need to learn Chinese essential to prepare for the business world of the future? Is technology key to education for your children? There are others of course but there is a growing competitiveness amongst schools, and amongst parents seeking to gain access to the desired school for their children too. And don’t forget the international element. More and more children from India, China and the rest of the world are coming to the UK to obtain what is, in their eyes, an exemplary education, and this places more pressure on the UK system. These individuals are coming to the UK because of the schools and the reputation that these establishments have where they come from and this is important. These children graduate and return home with the name of the establishment firmly contained within their CV and that stands for a lot. So, clearly, it is not always about the grades, and a lot rests with the reputation of the establishment itself. As a parent of two, Sandy appreciates the need to consider the education of ones children carefully. However, as he points out, “life is something of a game and we all do our best to prepare our children to achieve their full potential. However, one must never lose sight of the fact that each and every child is different and what will work for one child in terms of a school, may not be right for another. As parents, there is a need for honesty when it comes to each and every child, to make the right decisions for them and help them to find the right environment in which to learn and flourish. This is turn should help them get the best our of their education, get the best grades possible and then put them firmly on a career path for life.” So as for grades, they are important to a degree, but in reality, the choice of school can actually open doors too through the alumni and ‘old boys’ networks, and if the best teachers are at the best schools and get the best results, there is a strong correlation which leads us full circle in terms of actually understanding why parents strive to send their children to the ‘best schools.’ Furthermore, if the education system prepared the future generation with the skills required, there would be no need for further courses and programmes to deliver the training and tools to become leaders. There are a growing number of MBA’s and other programmes coming to the fore to help plug some of the skills gaps from the general education system too. Grades from school are one thing and help to meet minimum criterion when applying for jobs but there are also other ways that individuals can stand out such as volunteering, summer programmes, work experience and this can enhance the employability of an individual immensely. Clearly, many of the best leaders and bastions of industry have not been to what are courted as the best schools and have done very well for themselves, but parents being parents will always try and push their children to achieve more. Hence it is easy to understand why there is competition for the best schools, but as Sandy concludes, “Parents need to make the right choice for their children and not be afraid to challenge the system at any stage too. It is not just about the grades!”

Tere Cazola is named after its founder. She started making Mexican desserts and cakes in her kitchen back in the 1980s, and now they’re sold all over the country. There are two main aspects to Tere Cazola’s success: an efficient production and distribution operation, and a strong brand. With both of these in mind, she has been very careful to make the business grow in a way that doesn’t affect the quality of the product, and the authentic ‘home-made’ taste. So, as the business scaled up to a new production plant, the emphasis was on ensuring the highest possible standards throughout the production process. “It had to be the same as cooking in my own kitchen,” she says, “only on a much bigger scale. That means taking care of every little detail. That also includes the service we offer to our customers, which has to be second to none.” The other key factor is the brand: “Tere Cazola is all about getting back to the best traditions of home cooking. Flavour, freshness and taste. So we absolutely cannot compromise on quality.” Tere’s plans for the future centre on widening their distribution to more areas of Mexico, and bringing in more members of the family. She has two daughters and a son who already work in Tere Cazola stores, and a second son who is a general manager in the company. Geographical expansion is going to bring new challenges on the distribution side, and will probably mean opening new production facilities, so that freshness and quality can be guaranteed. “I’ve already achieved my first dream of starting this business, and now I want to make sure it can stay in the family for future generations.” T his piece featured in the 2016 PwC Global Family Business Survey and has been reproduced with their permission.

As family businesses passes from one generation to the next, there is the inevitability that the number of shareholders will increase. Such an issue can create a challenge for the family and the family business, not least because of the need for communication but also due to the need to manage the individual relationships within the family and with the business itself, with some family shareholders working within the business and some not. As Howard Hackney, one of the leading family business consultants in the UK explains, “there is a big difference between the creation of a business by an entrepreneur who starts out on a journey with nobody to report to and a third or fourth generation business. Put simply, the founder normally owns all the shares but after a few generations there are likely to be more shareholders and they will all have different needs and aspirations too.” Take, for example, a business that was set up by a founder that grew into a successful operation and was passed to the second generation equally prior to his death. The two brothers continued to develop the business, and were joint shareholders (50% each). Everything was fine and the brothers worked well together. In their personal lives, the brothers began families with the first having three boys and the second having one daughter. This example is actually quite common and moving on a number of years the business had continued to grow. The cousins got on well and were all brought up knowing about the family business, the opportunities it provided them as families and the benefits in terms of their lifestyles too. It was as the transition to the third generation that there were challenges and issues that had hitherto never been considered. As Howard continues, “most families face the challenge of doing the right thing by their children and want to make sure that they are fair to them all. In this example, the brothers were originally going to follow the lead from their father and provide for the passing of their shares to the next generation equally. That would have effectively resulted in the daughter owning 50% of the business and her cousins owning 16.67% of the business each. When you consider that the eldest son was working in the business as the Managing Director and the daughter was not working in the business, there were questions that arose.” This scenario is one that is obviously exacerbated as the business gets older and emotionally be difficult for families to address. There is a clear need to consider the role of the shareholder differently to that of an employee/director and there is a need for all owners to take on their role responsibly. Whilst easy to say, there are complications for the family firm when roles are so closely entwined and some family members are actively involved in the day-to-day operations as well as owning shares, whilst other family members are only shareholders. In the example above, the family met to discuss the situation and a solution was determined whereby the shares were put into trusts with each branch of the family having their shares put into a trust for them, thereby ensuring that each family branch had equal voting power. Mechanisms were also put in place to create an internal market for shares so that anyone wising to ‘cash-in’ their shares could do so according to the agreed protocols. The issue of who could on shares was also discussed and it was agreed that they could only be owned by the direct bloodline descendants of the founders, thereby protecting the family business from any issues in the future arising from divorce, civil partnerships etc. As Howard continues, “each family is different and there needs to be recognition of the family needs and wants in determining an approach for the future. Share ownership in the family firm can be a very emotive matter and by going through a process to determine the roles and responsibilities of the shareholders, and determining the role and the involvement of the family is an important process for any family in business to go through. There is no formulaic solution either, as it needs to reflect the drivers and goals of each family. What is right for one family will not work for another.” Clearly, the challenge of shareholder succession is one that needs to be addressed. Sadly, in many instances, the issue is not addressed prior to a significant event occurring, be it a serious health issue or a death in the family, a time when emotions are raw and time needs to be dedicated to dealing with the family crisis, rather than potentially fighting over who owns what and who can do what in terms of the shares in the family business. By drafting appropriate policies and communicating these to the next generation, there are ways to mitigate the risk of conflict and also preventing the family and the family business from suffering due to perceptions of unfairness due to individual shareholdings.

Apart from excellent employee loyalty, Anderson Maguire have continued to succeed as a family business because we are part of the community and the personal relationships we build with families endures throughout the generations. Anderson Maguire Funeral Directors was founded in 1982 by Dominic Maguire. It is one of the top three independent family run funeral directors in Scotland with eleven branches throughout Glasgow and a head office in Hamilton Street, Glasgow. Throughout its 33 years in operation, it has remained a steadfastly independent, family owned and run business. Dominic Maguire shares his thoughts on what it means to be a family business and how family values are an integral part of what they are all about. Statistics prove that approximately 62% of Funeral Directors in the UK are still owned and managed by families and I believe that figure will remain high for many generations due to the nature of the service we provide. Anderson Maguire has a special legacy to the people of Glasgow and the communities we work in. Everyone who works for Anderson Maguire is part of the family and we have a staff culture of providing a caring and compassionate service. Many employees’ families have enjoyed several generations of parents, children, spouses, siblings and cousins working with Anderson Maguire. Keeping a stable and extremely reliable workforce has long been a core strength of our company, with many employees having worked with Anderson Maguire for more than 15 years. Apart from excellent employee loyalty, we have continued to succeed as a family business because we are part of the community and the personal relationships we build with families endures throughout the generations. By doing what we do very well through our inherent empathy with our clients, we have built a loyalty to our family business and it is the backbone of our success. We have and will continue to eschew the takeover by the large, faceless corporate companies who may provide a reasonably good service but cannot provide the level of personalisation we give to everyone who comes to us at their time of need. Although we are very progressive in continually evolving, we strongly adhere to our ethos that personal contact is paramount to maintaining excellent client relationships. We deliver what we promise and it is this commitment which has helped insulate Anderson Maguire from low-cost competitors. Our core strengths are: We care about our clients and their families – we know them personally and we are interested in them, building strong and lasting relationships We provide a unique client experience – if it matters to you, it matters to us We don’t just provide a funeral service – our ongoing support is why we have such a high level of client loyalty. Anderson Maguire is a company which, in an increasingly aggressive commercial environment, punches well above its weight. As a Glasgow based family business employing over 50 local people, our success is not rocket science; it is quite simply through providing the best personal service we can to our clients at one of the most critical times in their lives. Visit www.andersonmaguire.co.uk to find out more

Arjan Stephens was named one of ‘Business in Vancouver’s Top 40 Under 40 in 2012.’ He’s the second generation of the Nature’s Path organic foods company, a business he says was ‘founded on a hope and a dream.’ The business is still driven by those same values 30 years later. Now it’s turnover is over $300 million a year and selling into over 50 countries. “We want Nature’s Path to be a sustainable business in every sense – both financially and environmentally. My parents’ vision was always to leave the earth better than they found it, which is why we still work to the triple bottom line: people, planet and profit.” There’s another ‘p’ too, which is passion. “My parents had this enormous passion to make organic food accessible to everyone. I remember growing up, seeing them struggling to get the business off the ground, going with them to trade shows, and helping with really basic things like sticking labels on boxes.” But Arjan didn’t originally intend to follow his parents into the business at all. After a degree in history, Arjan was looking at the possibility of a Masters when a conversation with his mentor proved to be a lightbulb moment: “He said to me, your parents are doing great things with the business, and they’re not doing all that just in order to sell it to the highest bidder. They’d much prefer to get their family involved – why don’t you give it a try?” “So I did. I started in operations, then product management, and somewhere along the line I found the same passion for the business that my parents had. I could see how what they were doing was translating into a better future for people and the environment, and I really wanted to be part of that.” After an MBA in Chicago. Arjan returned to the business full time, and took on his first solo project – setting up a new factory in Mississauga, Ontario. “We had to get this plant off the ground in six months, and we had less than a $1 million budget, but it proved to me that if you have a dedicated, experienced team who can rise to a challenge you really can make things happen. Since then I’ve worked on our new export business to the UK, and then on sales, innovation, and our strategic plan.” That plan was developed during the economic downturn. It was a tough time for the business, because consumers were spending less and less on premium food products, and at the same time the price of organic commodities was rising. “But because we’re a family business we could take a longer view and stay true to our values. We basically said, look, we believe in organics no matter what. And because of that, consumers know that our brand is authentic – that we stand for what we believe. That set us up for the new strategic plan and the next phase of growth, and we basically doubled in the last five to six years.” Since then Nature’s Path has expanded beyond its core category of breakfast products with the acquisition of Que Pasa Mexican Foods. “This was a significant change in direction, and it was also a challenge integrating it into our business and aligning everyone to it, and communicating it. That’s part of a much bigger challenge of making sure you reinforce your values as you grow. How you stay nimble, and entrepreneurial, and pioneering.” “When you grow from $10 million to say $100 million you probably still know all your team members and have the same family atmosphere. But when you get to $300 million, you suddenly have 600 employees, some of them 4,000 miles away. How do you ensure that the working culture is still what you want it to be?” So what’s the next road for Nature’s Path, and how is the digital revolution affecting their business model? “The thing about digital is that you can’t afford to be complacent, because sooner or later someone will come up with an idea and suddenly the whole market has changed. Organic food was the disruptor once so I know what it means. One thing we’re looking at is customization. Lego have done it, and Nike have done it – allowing consumers to create their own personalized versions of their products online. In theory, we could do it too – customized granola mixes for example. But at the moment the sums don’t add up.” “It would cost too much to be a competitive option for people. We’re innovative in other ways too. I’d really like to adapt our business model by starting up an incubator for other entrepreneurs with similar values, which would sit alongside our main business. We could mentor them, and give them start-up funding, and if they’re successful we could either buy them out or spin them off. I’m really interested in doing that.” This insight was part of The Next Generation of Family Business Leaders published by PwC. It has been reproduced with their permission.

Started 30 years ago, Luxasia is Asia’s leading distributor and retailer of beauty products where two of the founder’s children have now taken on roles in the family firm. Luxasia has a string of joint ventures with some of the world’s biggest beauty companies, including LVMH, Coty, Elizabeth Arden and Yves Rocher. The company was started 30 years ago, and now two of the founder’s children work in the firm – his son Alwyn, and his daughter Sabrina. Sabrina Chong started out practising as a lawyer at Baker & Mackenzie but after several years in corporate law, she wanted to expand her skillset into finance. Juggling work and study was already tricky with the long hours as a corporate lawyer, but she wanted to learn the ropes of the business. So when her father offered her the chance to work in the family firm, she agreed and split her time for two years between work at the law firm, the family business and getting her Masters in Accounting. After the two years, she fell in love with the beauty industry and decided to join the family business full time to expand the business. Some family firms are finding it a challenge to adapt and change and embrace the potential of digital technology, but you can’t say that of Luxasia. “We are constantly reminded that we needed to be insecure, especially in a fast-moving consumer goods market like beauty products. Digital is transforming the business model of our industry, and especially the role of the distributor. We have a huge advantage being located where we are because it gives us access to many dynamic markets. Not just China but India and the rest of South-East Asia. We offer international brands a proven platform to reach these consumers who are avid for their products.” “That said, the old style distributors in our region are struggling. So if you don’t adapt, you won’t survive. I believe the answer is to integrate either vertically or horizontally, and we’ve decided we have to do both – increasing our platform geographically and integrating downwards, into owning our customers and channels.” There’s a conventional retail aspect to that strategy, with the upmarket Essentials store chain, but increasingly it’s a digital platform as well. Luxasia has invested in various beauty-related technology companies, strengthened its systems, invested in training and education and upskilled its talent, to enable it to add value to its partners and consumers. Sabrina believes their family business model has actually helped them make these bold decisions. “Things can move at a faster pace in a family firm – proposals can get debated and approved faster, and the board and management work together as one. The beauty of a family business is the trust you have – the ability to be completely at one with each other. We get the whole leadership team together several times a year to brainstorm ideas and challenge ourselves on the strategy and direction. My father is very open to those new ideas – he’s always up to date with the latest technology, and constantly challenging us to come up with new ways of doing things.” So does Sabrina see herself taking over from her father one day? “At the moment, the more important task is getting our teams aligned towards where the company is going, and ensuring that we protect our values as we grow. It’s about who’s best for the job, and that might well be an external leader. The company has always been professionally managed and we are upscaling our teams as we push forward with our expansion plans. It’s about meritocracy – that’s the only way the company is going to be a success. You can’t put a family member in a CEO role unless they’re the best person to take that role.” “But am I ambitious? Of course I am, and I want to leave a legacy for my children. But that legacy doesn’t have to be in the form of the business, because who knows what it will look like in 10 or 15 years’ time. The more important legacy is the values we have as a family –that’s the gift we can pass on.”

Justin Burgess is the fifth generation of the Burgess family to take the helm and spoke to Paul Andrews about his journey. J.J. Burgess & Sons was founded as Funeral Directors in 1839 by James Burgess, however the family’s business roots in the Hatfield community can be traced to 1700 when the family were clock makers, beehive makers and timber dealers. The family business of Funeral Directors was passed through the generations and has developed through the years to the business that it is today. As Justin explains, “We strive as a family business to provide a personal service where we aim to use our skills and knowledge in the funeral profession to give the help and comfort needed at the time of a death.” “I am the fifth generation of my family to run the business and I guess it was a bit of a fait accompli when I joined. I did lots of other things but always migrated back to where my heart was and although my brother stepped into my Dads shoes, it was not right for him so I helped out over a summer with my Mum and 24 years later I am still here!” “As we are a family business and have to come to terms with our own family bereavements we feel that we are aware of the needs of people when they come into our office. We are proud to have been part of the local community for over 175 years. The family name brings with it quality service, caring staff and compassion for those who need it which is unsurpassed in the Hertfordshire area,” adds Justin. Irrespective of the sector in which the business operates, speaking to family business owners in all areas of business, from funerals to manufacturing, food production to financial services and transport, there is a common passion and inevitably, ‘family business is in the blood and certainly gets under the skin.” As Justin explains, “Family business gets under the skin, I love it and I guess like most family businesses owners, you have to love it to continue to do it successfully and introduce the necessary changes to help the business evolve over time too.” “Dad took the business to a level and I have been allowed to take it to the next stage, but as a business, we operate in a very traditional sector, so making step changes in development is not easy,” he adds. As an integral part of the business is Burgess Memorials, an established family owned stonemasonary business founded in 1839. As Justin explains, “We pride ourselves on offering a personal service to help choose an appropriate and fitting memorial for a loved one that will stand as a lasting act of remembrance. We offer a wide range of memorials which we can get engraved and erect as well as providing maintenance, repairs and cleaning services for existing memorials.” As statistics show, passing on the business to the next generation can be tricky and with less than 10% of family firms making it to the third generation, J.J. Burgess & Sons are in somewhat of a special group of family firms. As a fifth generation family run business, Justin is rightly proud of what the family has achieved, and continues to achieve and in his own words is “remarkably proud of the journey that the family and the business have been on. I am immensely proud, which I know can sound a little ‘naff’ but the pride courses through my veins and I get a real buzz every morning when I unlock the door and turn on the lights and see the pictures of previous generations staring back at me.” “It is a real honour and a privilege to do something I love and that my father, grandfather, great grandfather and great, great grandfather did before me. Don’t get me wrong – running a fifth generation family business is not easy and comes with certain responsibilities. With a history like ours I truly feel that I am the custodian of the business for the next generation and certainly don’t want it all to fall apart under my watch.” Justin has two boys, one just completing University and the other at sixth form and as yet it is not clear where their future lie. As Justin explains, “I would love them to come into the business at some stage, and they do help me out during the holidays. As I never got to work in the business with my father it is a real bonus for me when the boys are around.” “Going forward, I try not to put them under any pressure about coming into the business and want them to make their own way in the world. If they ultimately decide they want to take it on , that has to be up to them and in their hearts they need to love it as much, if not more than I do!” J.J. Burgess & Sons have been serving their community for generations and as such this provides the family with great pride. Not only do they have a passion for what they do, and have been doing for over 175 years, but as Justin concludes, “We can never take it for granted especially as anyone walking through the door is entrusting us to ‘look after the most precious thing they own’ at an emotionally difficult time too. It is an honour to provide comfort and to serve the local community, and like generations before me, to make a real difference each and every day too.”