Poza Chapter 2

1.
Build Institutional Governance and
Manage the Transfer of Power
2.
Promote Trust Among Family Members
3.
Develop the “Next Generation”
4.
Estate and Ownership Transfer Planning
5.
Promoting Strategic Growth
6.
Defining the Role and recruiting Critical
Nonfamily Managers
Family Business, First Edition, by Ernesto J. Poza
Copyright © 2004 South-Western/Thomson Learning
2-2

STAGE
CONTROLLING
OWNER
SIBLING
PARTNERSHIP
KEY RESOURCE CHALLENGE
Concentration of opwnership in controling owner
Develop other interested, empowered shareholders
Experience diversity of talent pool
Integrate sibling goals and styles
COUSIN CONSORTIUM Diversity from extended family pool
Representation of multiple, politicized family interests
PARTIAL PUBLIC
OWNER
Financial support Identification as a family business despite nonfamily interests.
2-3

BIZ
Family Management
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2-5

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Governance can include
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Advisory or statutory board with independent outsiders
Family meetings or family council
Family participation and employment policies
Key nonfamily executives
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Current generation CEO builds institutions for governance and then passes the torch

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CEOs must be architects of transition
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Transfer of power can be problematic when
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CEOs don’t want to leave
CEOs fail to prepare next-generation members for leadership
Succession is triggered by illness or death of CEO
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Transfer of power must be uniquely designed for each family and business

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Requires CEO committed to company rather than own agenda
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Enlist “right people” and strategies to create continuity plan for business
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“Right people” in top management team and governors of shareholder group
Complemented by board members and outside advisors

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Monarchs
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Don’t leave until forced out
Imagine no one could ever replace them
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Generals
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Leave office reluctantly and plot return
Hope next-generation leader proves inadequate
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Ambassadors
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Allow others to learn business and then manage it
Hold onto diplomatic duties for company

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Governors
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Lead for a limited term, then move on
Ensure successor will be trained and ready
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Inventors
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Return to development activities
Take a key position in another enterprise
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Transition czars
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Provide active leadership during succession process

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Monarchs and generals worst enemies of succession
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Monarch and general behavior may impact average tenure of family CEO: 17 years
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Other exit styles allow for orderly transition to be planned and executed