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<strong>FAMILY</strong><br />

The Briefing Series<br />

Vol. 2 No. 4<br />

Effective governance:<br />

wearing diff e rent<br />

HATS<br />

S<br />

Capital gains tax:<br />

a threat to wealth<br />

S u rv i v a l<br />

t h ro u g h<br />

v a l u e s<br />

Jointly sponsored by: <strong>Grant</strong> <strong>Thornton</strong> Kessel Feinstein and the Wits Business School’s Centre for Entrepreneurship


C O N T E N T S<br />

2<br />

MANAGEMENT<br />

Effective governance of family businesses<br />

4<br />

TAX<br />

Capital Gains Tax - a threat<br />

to family wealth<br />

5<br />

CHANGE<br />

Create a culture of change<br />

6<br />

PROFILE<br />

Sound values ensure survival<br />

7<br />

BRIEFS<br />

Family dynamics<br />

FA M I LY BU S I N E S SBR I E F is published by Business Brief<br />

(Pty) Ltd<br />

Editorial Board: Pamela Grayman, Tony Balshaw,<br />

Tanya Venables, André van Niekerk<br />

Cover: Jonathan Davis<br />

Contact details : Tel: (011) 788 0880<br />

F a x : (011) 788 2807<br />

Email: e d i t o r @ b u s b r i e f . c o . z a<br />

A d d re s s : 57a Second Avenue, Inanda, Sandton<br />

P O Box 1546, Parklands, South Africa, 2121<br />

D e s i g n / L a y o u t : Red Raven Designs (011) 462 6699<br />

Printed by: C reda Communications<br />

EX E C U T I V E BU S I N E S SBR I E F SU B S C R I P T I O N HO T L I N E:<br />

Te l : (011) 788 0880 F a x : (011) 788 2807<br />

Family BusinessBrief is published as a source of inform a t i o n<br />

for family contro l l e d / o w n e -managed r businesses and other<br />

i n t e rested parties. It is intended to provide practical and<br />

technical information which is of use to you in your<br />

business. Please be advised that the information contained<br />

h e rein is for general guidance only. Any reader intending to<br />

base a decision on information contained in this publica -<br />

tion is advised to consult a professional before pro c e e d i n g .<br />

Editorial contributions are welcome, but the publishers<br />

cannot accept responsibility for unsolicited material. The<br />

editor reserves the right to alter or cut copy. Copyright:<br />

Business Brief (Pty) Ltd. All rights reserved. Requests to lift<br />

material should be made to the editor.<br />

The family is a dynamic system that<br />

is emotionally driven and has certain<br />

patterns of b e h a v i o u r, whereas the<br />

business system is task based and operationally<br />

driven. All too often one finds<br />

the family caught between these two<br />

systems without fully understanding the<br />

developmental pre s s u res that arise over<br />

time, which can trigger a major crisis.<br />

Also, families often lack adequate mechanisms<br />

to cope with these pre s s u re s .<br />

Development Cycles<br />

The family and the family business go<br />

t h rough specific stages of development.<br />

Over time there are changes in the<br />

business itself in the family, and in the<br />

distribution of ownership. These developmental<br />

changes necessitate a<br />

redefinition and adaptation of<br />

existing roles and structure s .<br />

For example, no individual<br />

will have the same influence,<br />

power and control as an<br />

o w n e r-manager in the startup<br />

phase of his business.<br />

As the business expands and<br />

management control is distributed<br />

across the organisation, so<br />

relationships become more complex,<br />

and it becomes more important to balance<br />

the needs of the family and the<br />

b u s i n e s s .<br />

G rowing successfully<br />

If the family business is to continue<br />

g rowing successfully, the loose methods<br />

of the start-up business must give way<br />

to a more disciplined and pro f e s s i o n-<br />

alised environment. Similarly, families<br />

need to establish appropriate boundaries<br />

so they can enjoy both the<br />

benefits of the business and the joys of<br />

n o rmal family life.<br />

Creating formal structures<br />

M A N A G E M E N T<br />

EFFECTIVE GOVERNANCE OF<br />

<strong>FAMILY</strong> BUSINESSES<br />

By Tony Balshaw, Partner, <strong>Grant</strong> <strong>Thornton</strong> Kessel Feinstein<br />

Families in business are vulnerable to the potentially destructive relationships<br />

which can arise between family members.<br />

Efficient and effective communication,<br />

“it becomes<br />

more important<br />

to balance<br />

the needs of<br />

the family and<br />

the business”<br />

decision-making and governance structures<br />

are crucial to long-term family<br />

harmony and a successful business. As<br />

the family and the business get more<br />

complicated, with more people<br />

becoming involved, successful governance<br />

must be extended from a<br />

handful of people to several. For<br />

example, where cousins are involved,<br />

a much more complex ownership<br />

structure is needed, which in turn<br />

requires an effective forum for shareholders,<br />

a family council, and a board<br />

of directors.<br />

Instituting boundaries<br />

The creation of clear boundaries<br />

between the family, ownership and<br />

management is healthy for the family<br />

and the business. A wellstructured<br />

family controlled<br />

company typically provides<br />

for a clear separation<br />

between:<br />

● the family;<br />

● ownership; and<br />

● management.<br />

While the roles of family, owners and<br />

management are separate and distinct,<br />

they are also complementary.<br />

Tools for effective management<br />

By establishing boards and other<br />

forums, formal authority can be exercised<br />

more effectively. The following<br />

four structures promote better understanding,<br />

communication, co-operation<br />

and governance in a family business:<br />

● The family council<br />

● The shareholder's assembly<br />

● The board of directors<br />

● The management committee.<br />

Certain individuals may participate in<br />

m o re than one of these forums. It is<br />

important that these individuals behave<br />

2 <strong>FAMILY</strong> BUSINESSBRIEF


M A N A G E M E N T<br />

a c c o rding to the<br />

role they are expected<br />

to take in each<br />

forum.<br />

This is best illustrated<br />

by the story<br />

of the family<br />

whose owner-manager<br />

dons a different colour<br />

cap depending on which forum<br />

he participates in. In a family<br />

meeting a red cap is worn, in a<br />

board meeting a blue cap, and<br />

in a management meeting a<br />

green cap. The sale of shares<br />

by a family member is a red<br />

cap family council issue, the<br />

launch of a sales programme,<br />

or production bottlenecks, a<br />

green cap management issue,<br />

and the monitoring of executive<br />

management's performance<br />

a blue cap board decision.<br />

Unless formal mechanisms are<br />

in place to deal with complex<br />

family business issues in a preventative<br />

manner, the issues<br />

are seldom dealt with constructively<br />

in an open, orderly way.<br />

The family council<br />

This is a formal structure in<br />

which all family members have<br />

a voice. This forum is best<br />

used to:<br />

● resolve conflict between<br />

family members by encouraging<br />

open discussion<br />

● Delineate boundaries<br />

between the family and the<br />

business<br />

● Establish effective channels<br />

of communication.<br />

It is not a forum for making<br />

business decisions. Instead, it<br />

assists in bringing the family<br />

together to share goals, to learn<br />

about the business, and to preserve<br />

family values and<br />

traditions.<br />

The functions of the family<br />

council are to:<br />

● Address strategic issues relat-<br />

“Healthy families<br />

create clear<br />

boundaries<br />

between the family,<br />

ownership and<br />

management”<br />

ing to the family's<br />

involvement with<br />

the business<br />

● Build unity and<br />

u n d e r s t a n d i n g<br />

● Determine common<br />

goals<br />

● Address concerns<br />

and provide clarity on issues<br />

affecting family members<br />

● Preserve family values, culture<br />

and traditions<br />

● Educate the family on family<br />

business matters<br />

● Promote an understanding of<br />

the role of non-family executives<br />

and independent boards<br />

● Discuss philanthropic activities<br />

● Discuss and demonstrate the<br />

family's commitment to perpetuating<br />

the family business<br />

● Debate the public profile of<br />

the business and of the family<br />

as a unit<br />

● Discuss the family venture<br />

capital fund, and investment<br />

opportunities for the family.<br />

Family members must bear in<br />

mind that the council is there to<br />

help not hinder the family and<br />

the business. While<br />

d i ff e rent families are<br />

comfortable with<br />

d i ff e rent levels of<br />

d i s c l o s u re, the<br />

forum is a vital tool<br />

for managing the<br />

complexities of family<br />

and business<br />

relationships. Over time the<br />

family council should become<br />

part and parcel of the family<br />

c u l t u re .<br />

The shareholders’<br />

assembly<br />

Depending on the size and<br />

development phase of the family<br />

and the business, it may be<br />

appropriate to establish a separate<br />

shareholders' assembly to<br />

convey the views of family<br />

members to the board of direc-<br />

“The family council<br />

is a vital tool<br />

for managing<br />

family and business<br />

relationships”<br />

There is nothing in the constitution that says a member of the board can’t<br />

tell the chairman to wear a pullover.<br />

tors on ownership issues, and<br />

to raise broad questions regarding<br />

the board's performance<br />

and plans.<br />

Ownership that speaks clearly<br />

as one voice to the board is<br />

key to the future success of the<br />

family business.<br />

The board of directors and<br />

management committee<br />

The board provides a forum to<br />

focus on business issues and<br />

strategies, whilst the<br />

management committee<br />

deals with<br />

operational issues.<br />

In both instances<br />

the business needs<br />

take priority, in as<br />

far as is possible,<br />

over the needs of<br />

the family.<br />

The "emotion based" family<br />

system and the "professionally<br />

orientated" business system<br />

need to give way to a professional<br />

business approach.<br />

Effective communication and<br />

decision-making structures are<br />

required to cater for the<br />

incresingly complex roles of<br />

individuals in a family business,<br />

and to ensure the survival and<br />

prosperity of the family and<br />

family business. ■<br />

<strong>FAMILY</strong> BUSINESSBRIEF 3


T A X<br />

DOES CAPITAL GAINS TAX<br />

THREATEN THE WEALTH OF YOUR<br />

<strong>FAMILY</strong> AND YOUR BUSINESS<br />

This article explores the impact of Capital Gains Tax (CGT) on trusts, and the interplay between<br />

CGT and estate duty.<br />

On the 23rd of February this<br />

year, Finance Minister<br />

Trevor Manuel proposed the<br />

introduction of a Capital Gains<br />

Tax. Though no CGT legislation<br />

has yet been passed by<br />

parliament, it is sure to happen,<br />

and CGT will come into<br />

effect on 1 April 2001.<br />

Are trusts still a viable<br />

vehicle for wealth<br />

preservation<br />

Family businesses often use<br />

trusts as a means of protecting<br />

assets from creditors, and as a<br />

vehicle to ensure that the<br />

growth of assets does not vest<br />

in the hands of the owner-manager<br />

directly, but rather in<br />

another legal entity, the effect<br />

being that estate duty is minimised.<br />

At present, a natural person<br />

will pay estate duty at a rate of<br />

25% on the net value of an<br />

estate in excess of R1 million.<br />

The increase in the value of the<br />

assets owned by a trust will<br />

not, under current legislation,<br />

be subject to the 25% estate<br />

duty.<br />

CGT, as proposed, will result in<br />

the trust paying the tax on<br />

assets sold by it at an effective<br />

rate of 16 to 21% of the gain<br />

realised on the disposal of the<br />

asset - for example, shares and<br />

immovable property. If, on the<br />

other hand, the assets were<br />

owned by an owner-manager<br />

directly, the CGT rate would<br />

range from 0 to 10,5%, the<br />

effective rate for natural per-<br />

sons (the rate being dependent<br />

on the level of taxable<br />

income), which is cheaper than<br />

that payable by a trust.<br />

It is difficult to give a hard and<br />

fast rule and state<br />

that, in order to<br />

secure a reduction<br />

in capital gains tax,<br />

all assets owned by<br />

a trust should be<br />

awarded to the<br />

owner-manager or<br />

family member(s)<br />

before April 2001.<br />

Family businesses should<br />

explore this issue in the context<br />

of the protection that trusts<br />

offer from creditors, and the<br />

ability of the trust to ensure<br />

that growth in the value of the<br />

assets falls outside the estate.<br />

Double taxation: the<br />

interplay between CGT and<br />

Estate Duty<br />

In the event of the death of the<br />

owner-manager who is possessed<br />

of assets, and where<br />

under the will the assets are<br />

awarded to family members,<br />

these members will take the<br />

assets over at the base cost<br />

attributable to the deceased in<br />

accordance with the Guide to<br />

Capital Gains Tax issued by the<br />

Commissioner of the South<br />

African Revenue Service<br />

(SARS).<br />

The heirs will not pay CGT on<br />

the date on which the assets<br />

are inherited, but will pay CGT<br />

on the date on which the<br />

assets are finally disposed of.<br />

“trusts offer<br />

protection from<br />

creditors,<br />

and ensure that<br />

assets fall outside<br />

the estate”<br />

CGT will be due on the difference<br />

between the price realised<br />

and the base cost attributable<br />

to the deceased.<br />

At this stage it is unclear<br />

whether the estate<br />

will be allowed to<br />

deduct, for estate<br />

duty purposes, the<br />

CGT liability attributable<br />

to those<br />

assets awarded to<br />

the deceased’s heirs.<br />

In the event that<br />

such a deduction is denied it<br />

will mean that the deceased<br />

will pay estate duty on the<br />

assets awarded to the heirs,<br />

and that the heirs will inherit a<br />

CGT liability together with the<br />

asset from the deceased. This is<br />

clearly double taxation in that<br />

the same asset(s) will be liable<br />

to both estate duty in the<br />

hands of the deceased and<br />

capital gains tax when the<br />

heir(s) finally dispose of the<br />

asset to a third party.<br />

Should assets be held in a<br />

trust or a company<br />

If a trust currently owns a<br />

range of assets it may be necessary<br />

to determine whether or<br />

not the assets owned by the<br />

trust should be disposed of to<br />

a company, since a company<br />

will pay CGT at an effective<br />

15%, whereas a trust will pay<br />

the tax at a rate of 16 to 21%.<br />

Any proposed sale to a company<br />

would have to be carefully<br />

considered and weighed up,<br />

taking into consideration the<br />

anti-avoidance provisions to be<br />

4 <strong>FAMILY</strong> BUSINESSBRIEF


C H A N G E<br />

“Trusts are a useful tool in<br />

estate planning, and capital<br />

gains tax will not<br />

necessarily detract from<br />

their advantages”<br />

introduced under the CGT legislation.<br />

Should property be held by<br />

the trust or individual<br />

family members<br />

Under the proposed CGT, the<br />

primary residence of individuals<br />

is not subject to the tax.<br />

H o w e v e r, it is unclear whether<br />

houses owned by trusts and<br />

occupied by individual family<br />

members will constitute a primary<br />

residence. It may be<br />

p referable for family businesses<br />

to acquire such pro p e r t i e s<br />

in personal capacities rather<br />

than in a trust - failing which<br />

CGT would become payable<br />

when the house is disposed of<br />

to a third party. The downside<br />

to this is that transfer duty,<br />

which is not insignificant,<br />

would become payable on<br />

such a transfer. In the event<br />

that government decides to<br />

exclude homes owned by<br />

trusts, companies or close corporations,<br />

family businesses<br />

should consider allowing such<br />

p roperties to be transferre d<br />

back to the natural person,<br />

which would be free of transfer<br />

duty within a certain time<br />

period if the authorities heed<br />

the calls made by various business<br />

org a n i s a t i o n s .<br />

Trusts are a useful tool in<br />

estate planning, and capital<br />

gains tax will not necessarily<br />

detract from the advantages of<br />

this mechanism. Family businesses<br />

would, however, do<br />

well to consider the implications<br />

and options well before<br />

CGT comes into effect. ■<br />

CREATE A CULTURE<br />

OF CHANGE<br />

Change poses many challenges for family-owned businesses.<br />

John L. Ward tells you how to cope.<br />

The years ahead promise even<br />

faster and more fundamental<br />

change for family firms.<br />

Industry consolidation, shrinking<br />

strategic life cycles,<br />

e-commerce, global competition,<br />

and revolutions in<br />

supply-chain management and<br />

logistics are just some of the<br />

well-known forces.<br />

Change is a threat<br />

Rapid change threatens familyowned<br />

firms more than other<br />

companies, for several reasons:<br />

● Family firms have<br />

deeply entrenched<br />

traditions<br />

● Leaders typically<br />

serve long terms<br />

● Family firms often profess<br />

cultures of loyalty, stability, and<br />

paternalism<br />

● Long-time owners tend to be<br />

risk-averse<br />

● Successors are reluctant to<br />

challenge predecessors’<br />

philosophies and ways.<br />

Beyond business skills<br />

More than any business skill,<br />

future leaders of family firms<br />

will need to be leaders of<br />

change - without sacrificing the<br />

family’s values or the reputations<br />

of previous family<br />

leaders. No texts on leading<br />

change address this dilemma of<br />

protecting the past but changing<br />

the future. The key idea is<br />

to recast or reinterpret the past<br />

to emphasise that historic success<br />

was more a result of<br />

embracing change than it was<br />

the fruit of any particular strategies.<br />

To do so, some family<br />

firms have adopted and<br />

“Tradition is eternity,<br />

not history.”<br />

preached mottos celebrating<br />

change. A few examples:<br />

● “Our tradition is change”<br />

● “Innovation is our tradition”<br />

● “Tradition is eternity, not history”<br />

● “We believe in new ideas<br />

and old ideals.”<br />

Reinforcing change cultur<br />

Once the firm’s tradition is portrayed<br />

as a culture of change,<br />

then that culture needs to be<br />

reinforced for the future. Ideas<br />

for doing so include the following:<br />

e<br />

● Celebrate new<br />

ideas, even more so<br />

than loyalty and<br />

tenure<br />

● Stress dissatisfaction with the<br />

status quo<br />

● Tinker constantly with management<br />

systems and practices<br />

● Charge an independent<br />

board of directors with the<br />

responsibility to challenge<br />

strategic assumptions<br />

● Share financial information<br />

with as many managers as possible.<br />

Finally, leaders of family firms<br />

need to reassure the organisation<br />

that the future will be<br />

exciting. Emphasising an inspiring<br />

vision and a compelling<br />

philosophy of management<br />

gives employees confidence<br />

that change is possible, that it<br />

will lead to a better tomorrow,<br />

and that it is worth taking risks<br />

to accomplish. ■<br />

John L. Ward lectures at the<br />

Kellogg Graduate School of<br />

Management at Northwestern<br />

University in Illinois.<br />

Printed by permission of the publisher of Family Business (Autumn<br />

1999), Family Business Publishing Company, www.fambuspub.com<br />

<strong>FAMILY</strong> BUSINESSBRIEF 5


P R O F I L E<br />

SOUND VALUES ENSURE SURVIVAL<br />

Visionary, role-model, mentor, teacher and worker - these are the qualities that describe Omar Motani,<br />

Chairman of The House of Motani, a successful third-generation family business.<br />

The House of Motani was<br />

born from humble beginnings,<br />

and is steeped in a<br />

history of trade, retail, and<br />

manufacturing.<br />

Today the business is managed<br />

by Omar’s eldest sons Zahir<br />

and Farid, who are joint managing<br />

directors, while his other<br />

two sons hold directorships in<br />

the company.<br />

The rise of the House of<br />

Motani<br />

Omar was first exposed to<br />

business in his father’s general<br />

trading store in Pretoria, where<br />

at the age of 14, following his<br />

father’s injury in a car accident,<br />

he assumed responsibility for<br />

the family business. It was his<br />

experience here that helped<br />

form his vision for his business<br />

in the future. Omar says: “I<br />

developed a vision of gro w i n g<br />

my father’s business to a point<br />

w h e re it would enable my family<br />

to be financially independent<br />

and free from poverty.”<br />

In gratitude for his son’s successful<br />

managing of the<br />

business, Motani Snr rewarded<br />

Omar with a shop of his own<br />

in the Asiatic Bazaar. Over time<br />

Omar diversified the business<br />

and was joined by his brothers<br />

Anver and Sattar.<br />

The business began to focus on<br />

manufacturing, and after years<br />

of hard work, trial and error,<br />

and the assistance of an old<br />

friend, the business flourished.<br />

Omar says the friend, Mr<br />

Shankman, “directed us on the<br />

path to whatever success we<br />

subsequently achieved.”<br />

After almost leaving the business,<br />

Omar and his bro t h e r<br />

decided to split it, and Omar<br />

began to develop Motani Lounge<br />

as a “vehicle for his sons”.<br />

Today, The House of Motani is a<br />

multi-million rand intern a t i o n a l<br />

manufacturing concern with a<br />

reputation for quality, consistency<br />

and integrity.<br />

Values sustain family<br />

businesses<br />

While Omar’s vision has been<br />

integral to the growth of his<br />

business, it is his unwavering<br />

commitment to his value system,<br />

instilled in him by his<br />

parents, that has<br />

united his family<br />

and formed the<br />

foundation for the<br />

business’ success.<br />

“My value system is<br />

the legacy I will<br />

leave my family. It is value, not<br />

profit, that drives the business,<br />

because without a strong family<br />

there can be no business.”<br />

Equipping the next<br />

generation<br />

Omar understands the importance<br />

of intellectual capital in<br />

today’s business environment,<br />

and to that end has ensured<br />

that all his children are well<br />

educated and equipped to<br />

grow the concern.<br />

He comments: “It was always<br />

my desire for my children to<br />

enter the business, but I<br />

believed that they should pursue<br />

their own academic<br />

interests, and hoped that their<br />

education would in some way<br />

be ploughed back into the<br />

company.”<br />

Omar believes that a family<br />

business offers his children a<br />

“without a strong<br />

family there can be<br />

no business”<br />

“wonderful base for growth<br />

and learning,” and adds “if they<br />

so wish, my children are free<br />

to go elsewhere.” He cites the<br />

example of his 17-year-old<br />

daughter who is currently<br />

studying IT, and while being<br />

mentored by her brother, will<br />

in all likelihood pursue a<br />

career outside of the family<br />

business. She will nonetheless<br />

provide input into the concern<br />

through the family.<br />

A team philosophy<br />

While Omar’s sons have<br />

entered the family business<br />

with good academic qualifications,<br />

they have<br />

had to work<br />

through its ranks.<br />

Each son has an<br />

area in which he is<br />

specifically proficient,<br />

and while Omar believes<br />

that the “correct sibling must<br />

be matched to the right position,”<br />

he is adamant that “there<br />

is no room for specialists. Each<br />

individual in the team must<br />

understand the entire process<br />

and complement the process.<br />

Where problems occur the<br />

team must resolve them.”<br />

Succession planning and<br />

management<br />

Omar says that “succession<br />

planning does not begin when<br />

you retire, but when you’re in<br />

business.” He explains that a<br />

family business, no matter what<br />

its size, is not a corporation,<br />

but rather a business which is<br />

about the people who run it.<br />

He comments: “The customer<br />

purchases the product from the<br />

family, and for this reason you<br />

must nurture your children and<br />

anchor your family to strong<br />

values so that you can retain<br />

6 <strong>FAMILY</strong> BUSINESSBRIEF


P R O F I L E<br />

The Motani family.<br />

the goodwill that is so much a<br />

part of your business.”<br />

Zahir Motani, Omar’s eldest<br />

son, has been groomed to take<br />

over the reigns of the family<br />

business. He currently manages<br />

the day-to-day operational<br />

issues, and provides strategic<br />

d i rection for the company.<br />

While Omar is officially chairman,<br />

he admits to “finding it<br />

d i fficult to step down,” and on<br />

occasion has been known to<br />

f o rcefully express his opinions.<br />

Omar comments that “succession<br />

takes place without<br />

anybody really knowing,” and<br />

concedes that in part this is due<br />

to the fact that his family is still<br />

a strongly traditional family.<br />

The management team comprises<br />

all active family<br />

members, who all have a say<br />

in the issues affecting the business,<br />

while the ultimate<br />

decisions lie with Zahir in consultation<br />

with his father.<br />

Zahir has not only been<br />

groomed to lead the family<br />

business but also, and for his<br />

father more importantly, to<br />

assume responsibility for and<br />

become head of the family. It<br />

is his onerous task to ensure<br />

continuation of the family’s<br />

value system. He is the one<br />

who will need to resolve disputes,<br />

as well as prevent a<br />

divide from developing<br />

between, on the one hand, an<br />

adherence to, and belief in, traditional<br />

value systems, and on<br />

the other, the views of the new<br />

generation.<br />

The next generation<br />

Says Zahir: “My father does not<br />

always understand how different<br />

the next<br />

generation is.” One<br />

difference Zahir<br />

points out is in part<br />

due to the fact that<br />

his community nowadays<br />

is far more<br />

integrated with other<br />

communities, and<br />

while this is certainly healthy, it<br />

is undoubtedly impacting on<br />

the strong traditional values<br />

held by both his community<br />

and his family. Zahir believes<br />

that some adjustment will be<br />

needed in order to retain family<br />

cohesion in the 21st century.<br />

Omar and Zahir agree that they<br />

“nurture your<br />

children<br />

and anchor<br />

your family<br />

to strong values”<br />

are uniquely positioned as<br />

leaders of the family and the<br />

business to serve as role models<br />

for their extended family<br />

and their community. They<br />

believe that the values they<br />

espouse, and the success they<br />

have achieved, encourages the<br />

family to stay in the business<br />

and commit to its continued<br />

success.<br />

Equity ownership<br />

The issue of equity ownership<br />

for family and non-family executives<br />

is always sensitive, and<br />

should be managed<br />

carefully. Omar says:<br />

“I believe ownership<br />

stakes must be controlled<br />

by the family.<br />

One cannot look at<br />

this in isolation. It is<br />

inextricably linked to<br />

the values and vision<br />

of the family and the long-term<br />

survival of the family, and thus<br />

the business.”<br />

Zahir sums up the approach of<br />

the Motani family when he says:<br />

“As long as the values we<br />

espouse are never compro m i s e d ,<br />

the success of the family and the<br />

business will continue.” ■<br />

<strong>FAMILY</strong> BUSINESSBRIEF 7


B R I E F S<br />

Source: "Traits of a healthy<br />

family" by Delores Curran,<br />

Harper and Row Clayton C<br />

Barbeau YPO workshop, 1995.<br />

<strong>FAMILY</strong> DYNAMICS<br />

TRAITS OF A HEALTHY FAMIL<br />

Healthy families:<br />

● communicate and listen<br />

● affirm and support one<br />

another<br />

● teach respect for others<br />

● develop a sense of trust<br />

● have a sense of humour<br />

● share responsibility<br />

● teach sound values<br />

● have a strong sense of tradi-<br />

tion<br />

● encourage a balance of<br />

interaction between members<br />

● share common religious or<br />

spiritual perspectives<br />

● respect one another's privacy<br />

● foster family conversation<br />

and family time<br />

● share leisure time<br />

● admit to problems and seek<br />

h e l p .<br />

"Meet the environment's needs today in a way<br />

that doesn't compromise the opportunity for<br />

future generations to do so"<br />

SIBLING DYNAMICS<br />

By the time they've started<br />

working in business together,<br />

siblings know each other well<br />

enough to know how the<br />

other one thinks, responds to<br />

pressure, and what it is that<br />

motivates him or her. In addition,<br />

they will usually have<br />

developed some conflict-resolution<br />

skills.<br />

But research suggests<br />

that birth<br />

"Elders always<br />

lament change - and order may have<br />

the young cannot wait implications for the<br />

for it" - Malcolm family enterprise,<br />

Forbes since it could provide<br />

for the range<br />

of personality traits which are<br />

needed to run a successful<br />

family business.<br />

Firstborn children:<br />

● tend to be seen as special<br />

● receive a great deal of attention<br />

● are often trained to take on<br />

leadership and responsibility<br />

● tend to protect and care for<br />

younger siblings.<br />

Y<br />

Sam Johnson of S C Johnson and Sons<br />

Youngest children:<br />

● are special because they are<br />

last<br />

● are usually in the company<br />

of others, and grow up seeking<br />

to be understood by others<br />

● tend to focus inwards<br />

● although competitive, know<br />

how to give in to someone<br />

older and more powerful.<br />

Middle children:<br />

● often become skilled at<br />

negotiating for attention<br />

● tend to look outside of the<br />

family for recognition.<br />

Only children:<br />

● often seek attention from<br />

authority figures<br />

● grow up less experienced in<br />

sharing resources and solving<br />

interpersonal conflicts.<br />

Based on these factors, the firstborn<br />

may contribute good<br />

leadership skills, the middle<br />

child negotiation skills, and the<br />

youngest may be the innovator<br />

in a family business.<br />

THE 12 COMMANDMENTS<br />

FOR OWNER-MANAGERS<br />

OF <strong>FAMILY</strong> BUSINESSES<br />

1You shall share your<br />

dream with your family<br />

2You shall inform your<br />

managers and employees,<br />

"this company will<br />

continue forever"<br />

3You shall develop a<br />

workable organisation<br />

and make it visible on a<br />

chart<br />

4You shall continue to<br />

improve your management<br />

knowledge, that of<br />

your managers and that of<br />

your family<br />

5You shall institute a professional<br />

accounting<br />

system, and make the data<br />

available to your managers,<br />

advisers and<br />

directors<br />

6You shall develop a<br />

council of competent<br />

advisers<br />

7You shall submit yourself<br />

to the review of a<br />

board of competent outside<br />

directors<br />

8You shall choose your<br />

successors<br />

9You shall be responsible<br />

for ensuring your successor<br />

is well taught<br />

You shall retire and<br />

10install your successor<br />

with your powers during<br />

your lifetime<br />

You shall settle your<br />

11estate plans now<br />

You shall apportion<br />

12your time to see that<br />

your commandments are<br />

kept. ■<br />

8 <strong>FAMILY</strong> BUSINESSBRIEF

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