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©2008 Craig Aronoff tel. 678-277-9865 L’Dor V’Dor: Business Transitions Arison School of Business IDC Hertzliya, Israel September.

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Presentation on theme: "©2008 Craig Aronoff tel. 678-277-9865 L’Dor V’Dor: Business Transitions Arison School of Business IDC Hertzliya, Israel September."— Presentation transcript:

1 ©2008 Craig Aronoff tel L’Dor V’Dor: Business Transitions Arison School of Business IDC Hertzliya, Israel September 16, 2008 Craig E. Aronoff, Ph.D. Founder and Principal Family Business Consulting Group, Inc

2 ©2008 Craig Aronoff tel TRANSITIONS FOCUS ON FIVE KEY DOMAINS: The strategic challenge requiring that family firms adapt to market, competitive, and technological changes occurring with ever greater speed in our dynamic global economy; The succession challenge requiring that capable and willing leaders be developed among family members and leadership be transferred in a timely and constructive fashion; The governance challenge requiring that mechanisms be developed to assure accountability, communication, planning and conflict resolution in and between the business and the family; The family challenge requiring constructive and reasonably harmonious relations among members of the business-owning family; The financial challenge requiring ownership transfer responsive to business, family and individual needs.

3 ©2008 Craig Aronoff tel CORRELATES TO FAMILY BUSINESS LONGEVITY* Significant correlations with number of generations business has been in the family: –Strategic Planning –Boards of Directors –Frequent family meetings No Correlation: –Succession Plans * MassMutual Survey Of American Family Business

4 ©2008 Craig Aronoff tel “There is but one archetypal mythic hero. The founder of something... A new age... A new city... A new way of life... To found something new, one has to leave the old and go in quest of the...idea that will have the potentiality of bringing forth that new thing." Joseph Campbell The Power of Myth

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6 KEY CONCERNS OF ELDER GENERATION CHIEF EXECUTIVE OFFICERS Financial Security - Business, spouse, family Identity; Activity; Reason to be; What does it all mean? Control of Family - Fear of conflict among family members –Fear Works Against Letting Go CHIEF EMOTIONAL OFFICERS Financial Security - Independence, burden, knowledge Spouse - Concern for and impact on her Family Conflict - Building unity, managing conflict Advocate for spouse (appreciation), for family, for legacy, for progeny

7 ©2008 Craig Aronoff tel SUCCESSION PLANS’ ACHILLES HEEL  Failure To Plan For Older Generations Financial Security  Parents Require Clear Financial Future  Gracefully Give Up Control  If Not: Parents Continuously Tempted To Step In  Children Grow Risk-Averse So As Not To Jeopardize Parent’s Well-Being Financial Plans:

8 ©2008 Craig Aronoff tel EXHIBIT 1 The Flow of Funds in a Family Business ROLE CONFUSION Gifts Bequests Salary/Wages Benefits Perks Dividends Stock-Price Appreciation A RATIONAL SYSTEM Family Members Family Members EmployeesOwners

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10 “I’M RETIRED MORE OR LESS...” Retirement Can Be A Dirty Word Survey of 3,860 Family Businesses Revealed CEO Retirement Plans: Never Retire10.8%Over 1/3 Will Semi-Retire23.3% Stay Involved 1-5 Years24.2%In Their 6-10 Years18.5%Businesses 11 or More23.2% Years American Family Business Survey 1995 Arthur Andersen, Loyola University Chicago, Kennesaw State University

11 ©2008 Craig Aronoff tel THE INCUMBENT LEADER'S ROLE Organize and focus development process Assure adequate resources Get out of the way Listen, give advice when asked, guide in goal-setting Resist overly controlling, giving too much advice, overly criticizing, solving problems for youngster Use mentors, consultants, non-family executives, trusted and knowledgeable outsiders

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13 WHAT FATHERS WOULD SAY TO SUCCESSORS “Try to have some compassion and understanding for the guy who’s foot is on your neck.” * * * “I’m trying to change my way of doing things. Old dogs may be able to learn some new tricks, but it is very difficult.” * * * “I’ve always been the solution. Now I feel like I’m the problem.” * * * “What I thought were answers are now all questions.” * * * “Who am I? What is the meaning of life? What is worthwhile? How can I be recognized and appreciated? I thought those questions were for teenagers. I now find that they are for me.”

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15 TRANSITION OF LEADERSHIP Passing the baton - a non-event Five to 15 years Step-by-step with finish line Exchange at nearly full speed

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19 It is hard to find your place in the sun when you sit in the shade of the family tree.

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21 COACHING TECHNIQUES FOR PARENTS When you see a problem, don't take steps to fix it. Wait for a private time and talk to the successor about it. Set regular meetings with your successor to discuss progress and problems. When the successor asks a question or shares a thought, respond only to the subject that has been raised. Don't dredge up other issues. Keep in mind that teachers--and great leaders-- are known more by the success of their followers than by what they do themselves.

22 ©2008 Craig Aronoff tel The successor must prepare for a job that doesn't yet exist, in an era no one can fully foresee.

23 ©2008 Craig Aronoff tel PREPARATION IS A LIFELONG PROCESS Work habits, attitudes toward the family business, values and relationships all take root in childhood’s fields Learning business at the dinner table Work habits through household responsibility Enthusiasm for business from parent’s expressions Leadership from child’s activities (sports, scouts, etc.)

24 ©2008 Craig Aronoff tel STRONG SUCCESSOR DEVELOPMENT PROGRAM Maximizes potential of new generation Improves retention of talented family members Provides management depth Helps to develop and retain key non-family managers

25 ©2008 Craig Aronoff tel SUCCESSOR AS REVITALIZER Transforming entrepreneurial vision into shared mission to inspire and empower the next generation team Preserve as much tradition as you can Make change your tradition Strategic reinvention Strategic experimentation Strategic evolution Family support for change

26 ©2008 Craig Aronoff tel ANOTHER KIND OF HERO - THE REVITALIZER OF TRADITION "This hero reinterprets the tradition and makes it valid as a living experience... instead of a lot of outdated cliches. This has to be done with all traditions." Joseph Campbell

27 ©2008 Craig Aronoff tel NEXT GENERATION’S SENSITIVE AND THOUGHTFUL INITIATIVE Joint efforts between generations Dr. Livingston

28 ©2008 Craig Aronoff tel WHEN FAMILY BUSINESSES DO IT RIGHT uCarefully cultivated family values include stewardship, discipline, responsibility, accountability. uWhile business is recognized ultimately as serving family goals, uFamily is committed to maintaining healthy enterprise uRecognition of need for continuous change uReinvest and Reinvent uCreates structures to govern business and family promoting values and sound judgment uInvests in building stronger family and maximizing individual potential

29 ©2008 Craig Aronoff tel WHEN FAMILY BUSINESSES DO IT WRONG uNepotism uConflict uDistraction from business uMilking the cow uSlaying the golden goose uPreoccupation with status and lifestyle uUnwillingness to reinvest and reinvent uDemise of enterprise

30 ©2008 Craig Aronoff tel Businesses can provide the resources to make great families Families can provide the resources to make great businesses The goal is: Create families and businesses worthy of each other


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