The Modern Family Business

Transcription

1 The Modern Family Business

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3 The Modern Family Business Relationships, Succession and Transition Lorna Collins, Louise Grisoni, Claire Seaman, Stuart Graham, Dominique Otten, Rebecca Fakoussa and John Tucker

4 Lorna Collins, Louise Grisoni, Claire Seaman, Stuart Graham, Dominique Otten, Rebecca Fakoussa and John Tucker 2012 Foreword Martin Stepek 2012 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act First published 2012 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN ISBN (ebook) DOI / This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data The modern family business : relationships, succession and transition / Lorna Collins... [et al.]. p. cm. 1. Family-owned business enterprises. I. Collins, Lorna, 1958 HD62.25.M dc

5 Table of Contents List of Figures List of Tables Foreword Preface Acknowledgements Notes on Authors List of Abbreviations and Acronyms Introduction vi vii ix xi xii xiii xvi xviii Part I The Scholarly View of the Modern Family Business 1 The Family Business 3 Lorna Collins 2 What is the Contribution of the Family to the Modern Business 45 Lorna Collins Part II The Real Modern Family Business 3 Brothers in Arms: The Story of Thorntons A Study into the Relationships between Brothers Working in Senior Management in a Large UK Chocolate Manufacturer 83 Louise Grisoni, Lorna Collins and Peter Thornton 4 Daughters in Charge: Issues and Pathways of Female Leadership Succession in German Family Businesses 107 Dominique Otten 5 Fathers and Daughters 158 Lorna Collins, John Tucker and David Pierce 6 Brothers in Business: The Pakistani Family Business in the UK 179 Rebecca Fakoussa and Lorna Collins 7 Harmonizing the Family Business: Deconstructing the DNA of the Family Business 210 Stuart Graham and Claire Seaman Index 227 v

6 List of Figures 1.1 Successful succession Interpersonal conflicts Three circles model (adapted from Tagiuri and Davis, 1982) Seven roles within the three circles model (adapted from Kenyon- Rouvinez and Ward, 2005: 6) Family business life cycle (Kohlrieser, 2005: 128) Conceptual model of family business (adapted from Ward et al., 2005: xxi) Possible pathways to leadership of the family-owned business Taking over in a crisis: call to duty (Case 4) Taking over in a crisis: against the odds (Case 7) The daughter as the chosen successor if she wants to! (Case 1 and 2 and 5) The family business as a career move (Case 3 and 6) UK versus Pakistani culture ratings Developing models of the dynamic nature of families in business Governance patterns within family businesses Family business duality continuums 220 vi

7 List of Tables 2.1 International comparison of family enterprises Family businesses in Germany (adapted from Röhl, 2008: 11) Definition of a family business (European Commission, 2009: 10) The successor s phase matrix (Schwass 2005a: 94) Framework for the current study Summary of findings based on Salganicoff (1990) Summary of previous findings Case characteristics Summary of issues identified in stage L Summary of issues identified in stage L Summary of issues identified in stage L Summary of additional issues Comparison of previous and current findings: family Comparison of previous and current findings: ownership Comparison of previous and current findings: management Comparison of previous and current findings: individual Implications for future research Questions arising from issues in stage L1 learning business Questions arising from issues in stage L2 learning our business Questions arising from issues in stage L3 learning to lead our business Questions arising from additional issues Aspects of family socialization Grouped construct Family case profiles 164 vii

8 viii List of Tables 5.4 Family business typology (adapted from Fletcher, 2002; Litz, 1995) Family profile Summary of findings Culture ratings (adapted from Browaeys and Price, 2008: ) UK versus Pakistani country data Details of the family the brothers Business profile Bi- polar categorization Illustrative business and management dualities Family business dualities 221

9 Foreword The people closest to family businesses are their key advisors: their lawyers, accountants and bankers. Most of these will have started their long path in their chosen profession while at university or college. And yet there has been an absence of education about family businesses in universities; the same is true for colleges. The result is that any wouldbe business advisor leaves full- time education with no knowledge of the most common form of business in the world. One would hope that this gap in their education and awareness is filled in their professional life but this is not often the case. Starting in 2009, my organization the Scottish Family Business Association has delivered talks, research or education programmes in Scotland for three of the most important and prestigious professional groups in the country: the Institute of Chartered Accounts of Scotland (ICAS), the Association of Chartered Certified Accountants (ACCA) and the Law Society of Scotland. Before this there had been very little exposure for professionals to education and training about their family businesses clients within the professions. The situation is similar, if not worse in the rest of the UK. While the environment and support for family business advisors in the US is totally different and very patchy, most places in the world share a similar situation as the UK. I became the first member of a family business to deliver a talk at the inaugural event of the Business Families Group of the Society of Trust and Estate Practitioners (STEP) in London in October The point to note is that no family business owner had previously spoken about the challenges of family businesses to this influential and important group of advisors. It is my passionate belief that all professional advisors to family businesses must be educated about their unique complexity and challenges, trained in the subtle people skills which are required to best advise a family business, and taught the best practices for advisors to family businesses. Coupled with this is the need to provide compelling stories about the issues, challenges and successes of family businesses from the point of view of the family as well as the business. If I was still in business with my siblings and had inherited my father s advisors, as was the case when we succeeded our parents as owners and directors at J Stepek Ltd, one of my first actions would be to ix

10 x Foreword meet separately with each of these advisors and ask them what they had learned regarding family businesses or what training they had undertaken in how to advise family businesses. I suspect the typical answer would be that they had no such formal training or education, but would bluster on about their long experience of advising family business owners, My next action would be to search for legal, banking and accounting advisors who could prove they had the skills and knowledge I now know they require to adequately help a family business client. It is my hope that within the next decade in Scotland and in the rest of the UK this is how the next generation of family business owners will choose their advisors. This book attempts to shed light on the changing nature of family businesses. The Modern Family Business is a book of stories about relationships, transitions and successions. It highlights areas that have been less well investigated in the past and shows that changing families in modern times need to consider how the way they relate and work together might change. If you are an advisor, you will find this book useful as it gives insights into how family members think. If you are a scholar, it will hopefully encourage and stimulate your thinking about the modern family business. The contribution this book makes is that it gives a voice to some neglected family members and that alone makes it worthwhile. Martin Stepek CEO, Scottish Family Business Association

11 Preface This book has been compiled by a family of family business researchers. We decided to produce this book because we felt there were a number of gaps in the work that had been produced on family businesses and we felt we wanted to engage with some of these neglected subject areas. We knew that relationships is a topic that has been seldom investigated in family business study, yet relationships are at the core of family and hence the family business. The idea of discovering some hitherto neglected areas of family business was also attractive. During the course of the two years when this book was being incubated, we discussed a number of possible options for case studies. In the end we found colleagues who had been looking in the very dark corners of family business study and realized that their work needed to be brought to light. This book is a result of many conversations that took place over a period of about two years. Our conclusion from these many discussions was that there were some interesting stories to tell and some important issues to highlight. This is what we have sought to do in this book and we hope that family business owners, practitioners and academics will find the stories about relationships, transitions and successions to be of interest. We also hope that it will shed light on some areas where darkness has long reigned! xi

12 Acknowledgements Authors do not work alone and many people have contributed to this book in small ways and in large. We would like to acknowledge the contributions of all those who have helped us in our work. Thank you to Peter Thornton and David Pierce for your contributions. Thank you to all our colleagues at The International Centre for Families in Business and the many clients who have for over 20 years been willing to share their stories. We would also like to thank Martin Stepek, CEO of the Scottish Family Business Association, who helped to shape much of our thinking around family businesses. Our thanks go also to all the businesses with whom we have worked, talked and learned. A special thanks to our editor Paul Milner who has been invaluable in getting this book to completion. xii

13 Notes on Authors Lorna Collins is Associate Head of Department, UG Marketing and Enterprise Programmes, and the leader of the Family Business Research Cluster and also the Social Enterprise and Innovation Research Cluster at Bristol Business School. Her research interests are family business succession and social innovation. Lorna is co- founder of the UK Family Business Alliance set- up in November 2009 to promote family business research within the UK. She has also founded the Association of Family Business Educators, a global research consortium interested in education for family businesses. She is also the co- editor of the Journal of Family Business Management, a fully refereed academic journal first published in April 2011, which is dedicated to advancing management research in family business and aimed at practitioners, family business owners and academics. Rebecca Fakoussa is currently writing her doctoral thesis and is a researcher at Southampton Business School. Her main research interests are cross- culture issues for family businesses, women and boards of directors in family businesses. Her career path includes strong entrepreneurial tendencies, starting up several companies, and a franchise and a failed family business in Germany before embarking on an academic path in the UK. Stuart Graham is a senior academic member at Queen Margaret University, Edinburgh, cognate division of Business, Enterprise and Management. A primary research area of interest to him is the manner in which strategizing takes place in family businesses and the management of strategic developments and interventions. Another is the dynamic interplay which is often formed around the family, the business and the product relationship, particularly where provenance is an important factor in the marketing and branding strategies of family businesses. Stuart is the co- founder of the Scottish Forum for Family Business Research (SFFBR), established to promote growth, business development and learning through research, teaching and business support. Through the SFFBR, he works in close collaboration with other agencies contributing to the sustainable development of the family business sector. xiii

14 xiv Notes on Authors Louise Grisoni is Head of Department, Business and Management, Oxford Brookes University. Louise is a specialist in organizational behaviour and organization studies. Her current research focus is on emotions and sibling relationships in family businesses and the impact they have on organizational dynamics and profitability. She is a member of the Bristol Centre for Innovation and Enterprise, Family Business Research Cluster. Drawing on her background training in group relations and psychodynamic approaches to understanding people in organizations, she has extensive experience of knowledge exchange work and consultancy which is focussed on leadership and management development in businesses. Louise supervises a variety of masters and doctoral students in the area of emotions and creative approaches to inquiry. Exploring creative ways of organizing, using arts- based approaches is a particular passion which has been presented at conferences including EGOS, SCOS EURAM and BAM. She has also published widely in book chapters and journals including Management Decision, Gender Work and Organisation and American Academy of Management Learning and Education. Dominique Otten is currently writing her doctoral thesis at the Witten Institute for Family Businesses in Germany as part of a research project investigating women in family businesses. Her research focuses in particular on the role of daughters. In 2003 she completed her BA in French Studies and Psychology at Lancaster University. Afterwards she worked as project manager in a family- owned retail business before graduating with distinction with an MBA from the TiasNimbas Business School in the Netherlands in Claire Seaman is a senior lecturer at Queen Margaret University in Edinburgh, where she co- founded the SFFBR and works closely with the Scottish Family Business Association. She has published extensively in the area of family business, including work on the strategies family businesses adopt to access networks, family businesses within Scotland s minority ethnic communities and the manner in which family businesses contribute to strategies for economic growth and development. Current research interests include the manner in which networks can be developed to facilitate learning and economic growth, the manner in which entrepreneurial learning can be fostered within university business schools and the role of business start- ups in poverty alleviation.

15 Notes on Authors xv John Tucker is Director of the International Centre for Families in Business and a senior lecturer in Family Business at the University of the West of England. He is one of the leading experts in the field of family business in the UK, and is the founder of the UK s first MBA for Family Business and the UK s first Post- Graduate Certificate in Family Business Advising. John has an interesting career history that contributes to his understanding and ability to work creatively with families in business. His original training was in sociology, when he spent ten years working with families. In 1978 he started his own family business and for 14 years was Managing Director and major shareholder of this organization. He has an MSc in Organizational Development from the University of Bristol and since 1996 he has worked exclusively in the field of family business.

16 List of Abbreviations and Acronyms BAME BIS CEO DNA EI ESE F-PEC GDP GEEP Black Asian Minority Enterprises Business Innovation and Skills, a UK Government Department responsible for business support in the UK Chief Executive Officer Dual Needs Alignment Emotional intelligence Entrepreneurial self- efficacy Family Power Experience Culture Scale (F-PEC) used to measure family involvement in a business Gross Domestic Product European Group of Owner Managed and Family Enterprises (GEEF) ( GLOBE project Global Leadership and Organizational Behavior Effectiveness project is a recent large development which combines interrelationships between societal culture, organizational culture and organizational leadership, and involves approximately 170 social scientists and management scholars from 61 cultures/ countries working together GNI Gross National Income GVA Gross Value Add IFBPA The International Family Business Program Association, an active start- up organization for five years from 1993 through 1998 IFERA International Family Enterprise Research Academy ICFIB International Centre for Families in Business MSCI Morgan Stanley Capital International (MSCI). MSCI is a leading provider of investment decision support tools, ranging from large pension plans to boutique hedge funds xvi

17 List of Abbreviations and Acronyms xvii MandA NLS Ph.D. RBV SBA SandP SME USASBE Mergers and Acquisitions National Longitudinal Surveys Doctor of Philosophy degree The resource- based view seeks to explain what are the internal sources of a firm s sustained competitive advantage. Its main proposition is that if a firm is to achieve a state of sustained competitive advantage, it must acquire and control valuable, rare, inimitable, and nonsubstitutable (VRIN) resources and capabilities, and have an organization in place that can absorb and apply them (Barney, 1991a, 1994, 2002) Small Business Act. The European Commission adopted the Small Business Act on 26 June Family-owned businesses are mentioned in the introduction of the Small Business Act and in the first (of ten) principles of the SBA: The EU and Member States should create an environment within which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded Standard and Poors Small and Medium- Sized Enterprise United States Association of Small Business and Entrepreneurship (USASBE). USASBE s parent organization is the International Council for Small Business

18 Introduction Family businesses are all around us but they are not well understood as a business phenomenon. Family- owned and managed firms dominate the economies in most nations in terms of number of enterprises. The family cannot be divorced from the business and if you choose to ignore the influence of the family upon the business you are missing many of the important nuances that make family businesses unique and distinct. Not all families are the same. Not all businesses are the same. I feel that as the world of business is changing, so is the family. The subtle and complex ways in which family and business interact and relate is less well understood than you might think. The thing is that family business involves us all in some way. You may not be directly involved in the family business but you may be working for one or know one that your customer, supplier, client, colleague or creditor is a part of. There is no escaping a relationship with a family in business. The Modern Family Business seeks to highlight just how interesting and dynamic is the phenomenon of the family in business. This book is divided into two parts. Part I presents the academic view of the family in business. In Part II we provide case studies which highlight neglected aspects of the family in business looking at relationships, transitions and succession. Chapter 1 seeks to illuminate the nature and characteristics of the modern family business and through an exploration of the relationships within the family and business focus on aspects that make them special, unique and challenging. The first chapter provides an overview of current academic thought about family businesses. Chapter 2 discusses in detail the nature of the family aspect of family businesses. Families have changed dramatically in composition and outlook, at least in the UK and US in the past decade, and the resulting social changes mean that the nature of the family has evolved. This chapter seeks to contextualize the nature and scope of these changes. It will also attempt to explain the contribution that family makes to family businesses. In Part II we present four different case studies which highlight seldom investigated relationships within family businesses. Chapter 3 provides an in- depth look at how brothers engage in emotional labour using the case of a third generation family business. The lens for this xviii

19 Introduction xix investigation is emotional labour, a concept seldom applied to the work of family members in family businesses. The case serves to highlight the complexities of family hierarchies that can operate within businesses and shows that in this particular case, Thorntons, there is no such thing as a sweet deal. Chapter 4 explores the relationships between daughters who take over a German family business. The German family business holds, in some ways, a privileged position in the world of family business and is itself quite unique. The German context is usefully described in this chapter. This case study sought to provide female successors with guidelines for successful succession in the family business and is based on first- hand accounts of others who have decided to lead their family businesses. It is an interesting case because it highlights the commonalities between and particularities of a number of women which will hopefully give a clear picture of the issues relating to the challenge of leading a family s business. Chapter 5 presents a case study of women who succeeded their fathers to take over as CEOs of second and third generation family businesses. This is an interesting chapter as it presents discussion about the nature of socialization of children who have grown up within the family business. The chapter describes the first stage of a two- part study that sought to explore the nature of the socialization process that daughters go through taking the view of the process from the family s perspective where the unit of study is the family. In the chapter the authors consider the processes by which the daughters of male business owner- managers are socialized into the family business, what and how they learn about the family business and how that learning impacts upon their eventual succession or not and suggest a model for the family social process in the family business. Chapter 6 discusses the phenomenon of ethnic minority family businesses and in particular immigrant family businesses. The chapter outlines the findings from a pilot study which is part of a larger ongoing study that is considering the nature of family dynamics in ethnic- minority- owned family businesses based in the UK. Ethnic minority entrepreneurs including those of Asian and Caribbean descent are making significant contributions to UK economic development. Previous studies (Barrett et al., 2001; Waldinger et al., 1990) have shown that in the UK the number of ethnic minority start- ups is comparatively high compared to other groups of start- up entrepreneurs. However, the contribution of migrant entrepreneurs has largely been neglected by researchers (Williams et al., 2004; Keeble, 1989) and also appears to have been overlooked by family business researchers. This chapter

20 xx Introduction explains the cultural theoretical framework for the study and highlights the cultural aspects of the Pakistani family business discovered and explored in the pilot study. The final chapter, Chapter 7, brings together the relationships discussed and considers the complexity of the overview they offer. The chapter seeks to provide an overview and conceptualization of family business relationships which draws on the metaphor of DNA. The conceptual representation of such businesses by means of a metaphoric analogy, the DNA of the family business, allows both the complexity of family business relationships to be considered and also their capacity for change. References Barney, J. B. (1991a). Firm resources and sustained competitive advantage. Journal of Management, 17: Barney, J. (2002) Gaining and sustaining competitive advantage. Prentice Hall: Saddle River, NJ. Barney, J. and Zajac, E. J. (1994) Competitive Organizational Behavior: Toward an Organizationally-Based Theory of Competitive Advantage. Strategic Management Journal 15 (S1: ) John Wiley & Sons, Ltd. Barrett, G. A., Jones, T. P. and McEvoy, D. (2001) Socio-Economic and Policy Dimensions of the Mixed Embeddedness of Ethnic Minority Business in Britain, Journal of Ethnic and Migration Studies 27(2): Waldinger, R., Aldrich, H. and Ward, R. (1990) Ethnic Entrepreneurs: Immigrant Business in Industrial Societies. Newbury Park, CA: Sage. Williams, A. M., Balaz, V. and Ward, C. (2004) International Labour Mobility and Uneven Regional Development in Europe: human capital, knowledge and entrepreneurship, European Urban and Regional Studies, 11(1): Keeble, D. (1989) High Technology Industry and Regional Development in Britain: The case of the Cambridge Phenomenon, Government and Policy, 7: