FAMILY - Grant Thornton
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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