1. Family Constitution
The Senior and the Next Generations – Together or apart
Ken McCracken
May 2016

2. 4 areas to think on when starting the process towards agreement in a family.
You already have a family business constitution
What do you think the other generation want?
Are the generations of your family in synch?
Who starts the conversation?
Is the outcome good enough?

4. Why have you been successful?

5. “The way we do things around here”
Natural governance
The family business craves a balance among the competing interests and demands of family, owners and business
“The way we do things around here”
Ownership
Family
Business

6. Natural governance Shared purpose Boundaries
Decision-making structures
Roles

7. Shared Purpose
Your version of success that shapes and influences everything
Weaves together the individual, the family and the business
A combination of economic success/security and other returns on investment to which the family attribute value

8. …other ROI Stewardship and/or Entrepreneurship
Keep the family together – the business is what we have in common
Provide careers for the family
Being an employer
Attachment to a type of business (construction) or product (wine) or location
Reputation and status of the family
Put something back into the local community or wider society

9. Boundaries
Ownership
Family
Business
Where do we draw the lines?

10. Boundaries Who is ‘family’? Who can become an owner?
Crossing boundaries
Spouses?
Who is a spouse?
Offspring
Kinship groups?
Family
Outsiders?
Working and non-working?
Family joining the business

11. Structures – how we make decisions
Shadow governance

12. Structures – how we make decisions
Bank
Auditors
Asset
Allocation
Investment
Strategy
Lawyers
Board
Family
member
Liquidity
Staff
Family
Leverage
Benefi- ciaries
Trustee
Distributions

13. Succession Plan A Asset Bank Auditors Allocation Investment Strategy
Lawyers
Board
A N Other
family
member
Staff
Family
Liquidity
Leverage
Benefi- ciaries
Trustee
Distributions

14. Plan B - adapt the model
Team of equals
First among Equals
Silos

15. Roles – the way we behave to uphold the balance of interests
The family business is a circuit board of anxiety
Confli ct
Have occasional arguments
Dista ncing
Stay out of each others way/not talk about it
Recip rocity
I’ll put up with this, but I’m not happy
Trian gling
I’ll speak to someone about it

16. Natural governance How are decisions made and can this continue?
What is your shared purpose as a family in business?
Where do draw the lines (boundaries)?
How are decisions made and can this continue?
Are people willing to uphold the system and cope with the behaviours that are likely to happen (roles)?

17. Family business constitution
Fair structures, processes and policies that achieve transparency and organised accountability among the owners, the family and the board in service of a clear shared purpose

18. What do you think others want?

19. Young adults – creating a structure
Experiment as a novice in the adult world
Explore and gather experiences
Form identity independent of family
Making preliminary choices of career, love, and social network –will this include the family business?
Becoming one’s own man/woman
(Based on Levinson, 1996 and Hudson, 1999)

20. Mid-life – around 45 Taking stock
Review choices and decide whether or not to address flaws
Launching children (if any)
Commit to life as is or change direction
Acquire new skills
(Based on Levinson, 1996 and Hudson, 1999)

21. Later life – 65 onwards Now what? Finish major projects
Reflect on unfinished business and what to do about it
Mentoring and giving back
Next career?
Settling your affairs – what legacy?
(Based on Levinson, 1996 and Hudson, 1999)

22. The succession challenge
Depends on how fate has set up the life cycles of the generations
Succession conversations are easier when the generations are at the age and stage of looking for answers (are in synch) because….

23. The succession challenge
…the answers you need are tied up in the lives of your relatives

24. Preparing for a good conversation
Thinking about the other generation(s)
What are the main issues at their stage of your life?
What do you think is concerning them?
What would you like to ask them?

25. Who starts the conversation?
© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Document Classification: KPMG Confidential

26. Who starts the conversation?
Seniors
Next generation
Outsiders – advisers, non-family executives
Any other ideas?

27. Is the outcome good enough?

28. Is the outcome good enough for me?
Is it right for me?
Will it suit the family?
Is it feasible in
the real world?
Is it feasible in
the business?

29. Is it right for me? Is it appropriate for my age and stage?
Can I be a director at age 24 or 74?
Is it consistent with what I want for my life?
Is a role in the business what I want now in life?
Am I doing what I want or what others want me to do?
Is it easier to do what others want?
Will it have an unwanted impact on my other needs?
E.g. joining or leaving the business and its impact on relationships and social networks?

30. The dilemma of balancing individual aspirations and family harmony
Will it suit the family?
Does this fit with our family’s values?
Am I going with the flow or against the grain?
Will it help foster healthy family relationships?
Does my decision help others to get on with their lives?
The dilemma of balancing individual aspirations and family harmony

31. Feasibility in the real world
Do I have the personal resources for this role?
Can I cope? Do I need to learn and experience more?
Degree of support v isolation
What indifference or opposition will I need to overcome?
My capability and willingness to develop
Am I up to the role? Am I excited about putting my energy into this as opposed to doing something else?

32. Feasibility in the business
Is there a viable opening/role?
Or is this job creation?
Are required resources being made available?
Time, money and support (training)
Is there political support for success?
Are key family and non-family for or against me?
Does this fit with the needs of the business?
Is my role part of the strategy and plan?

33. Ken McCracken Head of Family Business Consulting
KPMG LLP t: e:
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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