1. Deschênes Group SUCCESSFUL SUCCESSION TO SEVERAL CHILDREN
Luis Cisneros, Mircea-Gabriel Chirita, Bérangère Deschamps
Family Enterprise Research Conference
11 May 2012
Luis Cisneros , Mircea-Gabriel Chirita & Bérangère Deschamps 11 May April 2012

2. Content Case Description Deschênes Family Genealogy
Organizational Chart
Conceptual Framework
Analysis
Findings / Theory built
Contribution to Theory and Practice
Next Steps

3. 1. Case Description Deschênes Group:
A 72-year-old, third-generation family-run business
The 3rd largest wholesale distributor of industrial plumbing and heating supplies, air conditioning, refrigeration, water, sewer and fire equipment in Canada
Annual sales exceeding 500 million dollars.
8 operational centers, over 98 outlets across Canada
More than 1,300 qualified employees.

4. 2. Deschênes Family Genealogy
Timeline
1940  François Miville-Deschênes acquires Langelier & Fils (founded in 1936) a plumbing and heating wholesaler located in Old Montréal.
1954 Jacques Deschênes (son of François) joins the team. His brothers (Pieerer and Gilles) had already joined the company few years before.
1973 Jacques acquires his brothers' shares. He then becomes President General Manager and invites Deschênes & Fils' two main managers to join the shareholding.
2000 Jacques Deschênes hands over the torch to his oldest son, Martin, who is appointed President and Chief Operating Officer. Jacques maintains the responsibilities of Chairman and Chief Executive Officer.
2004 The Board of Directors names Martin Deschênes CEO. Jacques Deschênes retains the function of Chairman of the Board.
2009 Mr. John LeBoutillier is appointed Chairman of the Board. Mr. Jacques Deschênes remains as Honorary Chairman of the Board.

5. Dechênes Group’s structure

6. 2. Deschênes Family Genealogy
Shareholder

7. 3. Organizational Chart

8. Deschêne Family Business Evolution
Ownership development
Maturity
Expansion /
Formalization
Family successors working together
Family Enters The Business
Working Together
Passing The Baton
Founder
Start-up
Family development
Controlling Owner
Sibling
Partnership
Today
Cousin Consortium
Business development
Gersick, K., Davis, J., McCollon Hampton, M. & Lansberg, I (1997). Generation to Generation: Life Cycles of the Family Business, Harvard Business School Press.

9. 4. Conceptual Framework Contextual variables
Industry: In Canada, the beneficiary margin of the plumbing and heating wholesale industry has continued to increase in the last ten years (the pre-tax profit margin was 5.7% in 2009 compared to 4.8% in 2000).
National Culture: Group Deschênes is a company deeply rooted in the province of Quebec’s traditions and values.
Organizational culture: Participative (consultative) management where employees are encouraged to contribute ideas towards identifying and setting organizational-goals, problem solving, and other decisions that directly affect them. According to Aktouf (1990,1991), this form of management style draws its roots from the Catholic religion in Quebec society.
“Familiness” and resources pool : The Deschênes family leadership; their networking and family culture; the reputation of the company; the excellent communication among family members, their entrepreneurial spirit and their experience are a source of competitive advantage (Habbershon, Williams & MacMillan, 2003; Pearson, Carr &Shaw, 2008)
Family Life Stage: According to the developmental model (Gersick and al.,1999), the stages of a family business are Controlling Owner, Sibling Partnership, and Cousin Consortium. Deschênes Group has gone beyond the Controlling Owner stage, to enter in a phase of Sibling Partnership which will probably evolve into a Cousin Consortium​​.

10. 4. Conceptual Framework Conceptual variables
Forms of sibling successions:
the siblings own equal amount of voting shares but one of them acts as the lead sibling, and this individual adopts the role of “first among equals” (Gersick et al., 1997; Lansberg, 1999; Cater & Justis, 2010);
“shared leadership” where siblings share ownership, which is evenly divided, and they also share the power with no single individual as the leader (Gersick et al., 1997; Lansberg, 1999; Cater & Justis, 2010);
and lastly, one of the siblings owns more than 50% of the voting stock and adopts the role of “quasi-parental leader” (Gersick et al., 1997).
Succession process 4 stages: Incubation, implementation, joint management, predecessor disengagement [Handler, 1990; Hugron & Dumas, 1993; St Cyr et Richer, 2003; Cadieux et Brouard, 2009]
Family context (harmony, family dynamics, family council, …) and Business context (governance, skills, competencies, ..) [Lebreton-Miller, Miller et Steier (2004)]

11. 5. Analysis Sample Population and Data Collection Instruments ✔
Family members
Non-family
Board Members
Owners
2nd and 3rd Generation
Top Management
Middle Management
Interviews ✔
Conferences
Press articles

12. disengagement of predecessor
Family Business Context
Quality of the relationship between processor and successors
Triggers (predecessor’s motivation)
Heirs’ skills and competencies
Board of directors/advisory board
Guidance from advisers
Transfer of social capital
and transfer of ownership
Father keeps control shares
Continues to be
present in the firm
Desire to transmit equal shares and successor choice
Desire to
transmit
Shared
leadership
Disengagement
Predecessor
Making innovations Growth
Learning how to
work together
New leadership
At least one child is interested and works for the firm
Inclusion of the other children invited by father or sibling; some of them do not participate
Successors
Family context
Family values
Mother‘s influence
Family council
New leadership and
disengagement of predecessor
Incubation
Implementation
Joint management

13. 6. Findings / Theory built
Propositions
Influence of the cultural context
A family with a long history in the country has a set of traditions and values that are rooted in the national culture.
The management style of the family business follows the evolution and transformations of Quebec society in the last 70 years.
Succession
The leader’s intention to start the process of succession to family members is enhanced a) by participation in seminars, workshops and conferences; b) by the desire of the spouse to transmit leadership; c) by the fact that network contacts have changed.
The mother’s roles as “defender of family values” and mediator between the father and the children, as well as between the siblings themselves, enhances the likelihood of success.
The lack of preparation of the wife’s departure from the firm may lead to her slowing down the disengagement of the predecessor.

14. 6. Findings / Theory built Propositions
The implementation of a family council enhances the likelihood of a successful transition to several children.
Having external and neutral advisors (for the predecessor and the successors) during the succession process is one of the key success factors.
The implementation of Advisory Boards or Boards of Directors is another factor which contributes to a successful transition.
When ownership is shared equally between the children, the designation of one child as leader (first among equals) enhances the success as long as all the heirs agree with the distribution of roles and responsibilities.

15. 7. Practical implications
Our research shows that a management style strongly embedded in the national culture may have a positive influence on the company’s sustainability. Employees can also more easily identify with their organization’s values.
Our study case also brings to light the important role of external advisors, family councils and mother/spouse’s influence to succeed in this type of family business transfer.
We highlight the fact that the predecessor/father plays a critical and essential role during the succession process.

16. 8. Next steps
We would like to interview Jacques Deschêne’s spouse in order to validate some of our findings regarding the mother’s influence on the company’s management and how she can impact the succession process.
We would also like to interview other (non-family) management team members and the key business advisors for Groupe Deschênes.