Leading the Family Business August 02, 2013

Group LFB 05
Amol Kotkar 0036/49 Samip Supe 0351/49 Surbhi Kant 0352/49 Suyog Abnave 0356/49 2002 IBM Corporation

Bob Reardons Family Business

Reardon Supply

Acquisition or Dividends???

$100-mn-a-year manufacturer Owned equally by Reardon Siblings No Debt, High liquidity Slowing growth rate Competition squeezing margins Customers going overseas Need of extensive capital expenditure to stay competitive

Question on Table Accumulated cash for acquisition or for dividends? Bob in favour of acquisition for further growth of business Siblings concerned about their low liquidity & favour cashing out

Threats to Commitment in Family Business

Characteristics: Secrecy Lack of information Emotional Intelligence Low Little knowledge of business among at least few Reasons: Founding Culture Autocratic Leadership Belief in benefits of privacy Sense of inequity Stereotypical assumption significant family member involvement - sign of poorly run business.

National Family Business Survey Result Each additional family member in business is associated with at least $2000 increase in annual revenue

Stories of two very Different Family Cultures

The Binghams and the Louisville Courier-Journal Companies

Sold the company after years of bickering The sale of the company did not bring the family together as hoped Absent was :
1. 2. 3. 4. A commitment to family-business continuity A family trust catalyst A board with independent outsiders Family meetings

The Blethens and the Seattle Times Company

Continue to own and operate several newspapers in the fifth generation Present is:
1. A commitment to continuity (even in the face of a financially crippling strike) 2. Individual responsibility to the group 3. A sense of stewardship 4. Family unity 5. Frequent family meetings

Zero Sum Dynamics and Family Culture

Characteristics:
Absence of growth (and increased wealth and career opportunities) in the family business is fertile ground for zero-sum dynamics
Exchanges in which one partys perceived gain is the other partys perceived loss

Triggers:
Any perceived difference like: Male Female Active in management inactive Older Younger Richer Poorer

The Family Systems Perspective

Theory of Human Behavior

Issues

Family is a building block of emotional life Uses Systems thinking to understand the complex interaction between individuals in family Family Group level phenomenon Higher Order System Individuals Lower level subsystems

Blame game among the individuals at times of trouble

Sharing responsibility for difficulty and its remediation is more effective Argues compellingly for the tremendous influence of an individuals family of origin Patterns and processes set in motion from two or three preceding generations still matter The analysis of earlier generations is essential to understanding what ails or distresses a family in the present

Interdependence
Source of social / physical / intellectual / emotional rewards in the family leading to unmet expectations and personal distress Gives rise to conflicting needs, desires, and priorities as the family grows and ages

Bowens Family Systems Theory

Summary

Insights
Differentiation of the individual through thought and reflection, can promote an individual functioning above historic patterns, even under conditions of stress
Triangulation is the predictable emotional pattern among three people, with the third, the outsider, being triangled as a result of the emotional outpouring in the relationship between the other two family members Cutoffs are unresolved emotional attachments to parents that lead family members to distance themselves from their family of origin, sometimes only to repeat the sins of their past

A family is a system Family System transfer rules, patterns, messages or expectations about the behaviour of its members Learning behaviors and establishing new patterns is possible Individuals refer to the old patterns and behaviors learned from their family of origin

Genograms and its Significance

What is Genogram?

1. 2. 3. 4. 5. 6. 7.

Uses
To better understand the implications of family on issues like:
Business Succession Estate Plans

A cousin of Family tree that tells us:

Family names Relationships Ages Lineal descedants Critical events Quality of Relationships Important messages transmitted across generations

1. 2.

3.
4. 5.

Ownership Transfer
Likely Alliances Likely sources of Conflict

Genograms and its Significance

Family Emotional Intelligence

Capacity to recognize our own feelings and those of others and the ability to manage our emotions and relationships with others Seeks to increase the ability to handle feelings with skill and harmony even in the face of differences between family members, so that better decisions can be made and teamwork and family unity can thrive Importance of Emotional Intelligence gives rise to the use of Emotional Competence Inventories

Emotional Competence Inventories

Daniel Goleman & Richard Boyatzis 63 item assessment Emotional competence inventories with their 360-degree feedback process can be particularly helpful to nextgeneration members of a family in business Measures emotional competencies as perceived by others in family and in family business, a tremendous asset to all family members

10