A challenging perspective:

Australia has been founded on the concept of Family Business and there is more than 800,000 of these businesses nationally. They make up 65% of the entire Australian economy and employ approximately 72% of the total workforce.

A Family Business is defined as being operational for two (2) or more generations and can vary in turnover, asset base and structure depending on industry.

One of the major issues associated with the collapse of a Family Business has been the lack of a “succession plan” and the 2013 survey by KPMG indicated that only 28% of all Family Businesses have a “succession plan” and of this group approximately 75% felt that a Will is this plan. Sadly, this is as far from reality as it could possibly be.

Why did we place parentheses around “succession planning”? This is because I do not consider the process of Family Business continuity and inter-generational transfer as a succession planning process as it is so much more than this. While the family has to have a plan, they also need to have flexibility as these businesses are normally very creative, innovative and responsive to the business environment, which is why they achieve longevity.

This process of family business longevity has traditionally been the domain of legal and accounting professionals. However extensive research has revealed that the most successful and long standing Family Businesses have also engaged the services of non-traditional advisors to assist with the understanding of areas such as;

  • Leadership
  • Emotional management
  • Family and group dynamics
  • Competency identification

Over the past 25 years the rapid onset of globalization, technology and higher regulation has placed additional stress on business, which has coincided with the “Baby Boomer” generation coming to the twilight of their working lives. This combination of non-financial and non-legislative stresses within Family Business is now part of the driving force behind the demand for a collaborative approach to servicing the inter-generational transfer of family businesses.

Family Business is an intricate trilogy of business complexity, asset accumulation and family dynamics that makes this sector one of the most unique to service. Given this complex interaction between three intertwined variables it is the assertion of TCB Solutions that the traditional approach to “succession planning”, which focuses on the business and asset “legs” of the trilogy then applies “structure and governance” in an attempt to “control the people leg”, is now completely outdated. This does not say that structures and governance are unimportant however it is clear that these are a consequence of thorough and robust consultation with the family members and not the predecessor of the process.

TCB Solutions also asserts that Family Business Continuity and Inter-Generational Transfer is domiciled is “attachment and behavioural theory” rather than “business theory”. This is clearly evidenced throughout history when analysing why Family Businesses are successful, stagnant, dysfunctional or have collapsed. It has always “boiled down” to attachment whether real or perceived.

This attachment drives the formation of family values, develops the family legacy and has enabled the Family Business to arrive at the current point in its cycle. It is also this same attachment that causes stress within the family and tensions between individuals.

It is because of this attachment that leads us to question why so many “succession plans” that are developed through traditional methods have failed. Traditionally the older generation is asked to hand over to the younger generation which is interpreted by the brain as being asked to be separated from the business which has been their life for such a long time. In addition, we are challenging the younger generation’s brain to become attached to the business in the same way as the “parent”. This is completely counter intuitive as these people are individuals, different generations and have different drivers purely because of their age demographic.

Commencing the engagement with a Family Business with the understanding of the attachment paradigm is the premise that TCB Solutions has developed its framework and methodology to add value to all Family Business clients.

 

TCB Solutions methodology:

It is recognised that in Family Business “one size does not fit all” therefore TCB Solutions has developed a methodology that facilitates the development of an Inter-Generational Transfer framework that is unique to each individual client. There are standard phases that must be followed however these are for information exchange that is then utilized to develop and implement to main process.

 

Phase one – Initial scoping:

  • Meet with the family business decision makers to scope expectations, barriers and blockages, family dynamics, business history and cycle, previous attempts, family readiness and potential fears of individuals
  • High level overview of methodology and purpose for each phase.
  • Get an understanding of the family and family business “genomes” including structures
  • Development of engagement proposal and execution
  • Provide the family business core information document for completion by all family members
  • Scheduling of commencement

 

Phase two – Individual interviews:

  • Conduct confidential interviews with all family members to inform them of the engagement’s purpose, the methodology and the process.
  • Seek and gather information related to the three arms of the Family Business trilogy
  • Understand the family “genome” from their perspective including where they fit
  • Explore their attachments to and perceptions of each trilogy arms
  • Gain insights into their understanding of the Family Business and its supply chain
  • Understand the family business “genome” from their perspective including where they fit
  • Discuss their preferences and fears in relation to each trilogy arm
  • Identify their values and drivers as a family member and business person
  • Attempt to identify goals and aspirations as a family member and business person

 

Phase three – Group meetings:

  • Set the group “rules of interaction” – Documented
  • Deliver the findings of the group meetings in a safe and non-identifying manner
  • Document the common areas and the areas of difference
  • Commence the discussion regarding the social cognitive drivers behind the common areas and differences
  • Review and refine the family “genome”
  • Review and refine the family business “genome”
  • Set expectations and discuss fears / concerns

 

Ongoing phases – Based on the review of previous phases:

  • Tailor the program stages for progression
  • Include “break points”, “breather points” and process milestones

 

 

Workers In Family Business Standing Next To Van Smiling At Camera
Workers In Family Business Standing Next To Van Smiling At Camera