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Family relationships roundtable

Roundtable Panel
Domingo Arochena sold his family's company, medical products manufacturer Laboratorios Indas, last year. He now oversees his family's investment company alongside his three daughters. However, he is now looking to retire.  

Alvaro De la Serna founded his family's holding company, Enkidu Inversiones, in 2000. Miquel y Costas & Miquel, the number three cigarette paper manufacturer in the world, was founded by his great-great grandfather in 1879 and remains partially in family hands. Alvaro was recently appointed to the Board.

Albert Jan Thomassen from the Family Business Consulting Group is a consultant and educator on strategic planning, governance and succession topics for family-owned businesses. He is also executive director of the Family Business Network Netherlands.

Edouard Janssen is a next generation member of the Solvay family, owners of the Belgium-based chemicals company of the same name. Until July 2008, he was Deputy Treasurer, active in Solvay's Finance Department.

Ignacio Osborne is CEO of Grupo Osborne, a sixth-generation family business active in the food and drink industry, notably Spanish wine, sherry and pork products. He used to be a mechanical engineer before entering the family business in 1994.

Panikkos Poutziouris is associate professor of entrepreneurship and family business at the CIIM Business School (Cyprus) and President of IFERA. He lectures, researches, publishes and consults internationally on entrepreneurial management and strategic financial developments for families in business.

We know how important childhood is and what you learn/experience when you grow up affects what you do in later life, but how important is your childhood to the success of the family business?
De la Serna: I don't think the future success of the family business has anything to do with when you were younger. There are as many successful businessmen who had nasty childhoods as unsuccessful who had an idyllic one, so I don't think there's a correlation. If you become completely unstable because of your upbringing then that's different, but it depends on the person and the education you have received. In my case, I don't think I had the perfect childhood, but I also did not know that we had a family business until I was 18.

Thomassen: From psychology we know that the most important values are established within the first five years, so in that sense childhood is important. But if that means a definite or positive correlation between family history and family business success then I'm not sure. I believe that there are important things in the way you deal with issues, the way you relate to others that are grounded in the first five years. What Alvaro said is quite typical. I see a lot of families where the parents don't tell their children about the business. Others know there is a family business but they only knew the positive things. I am convinced that talking about a family business in providing experiences in a "playful way" in childhood is important.   

Osborne: In our case the family business was quite close to where we lived and the company was a very big company in comparison to the town. The family name is also on the products we sold so we knew about the family business from an early age. My family is so big that it was almost impossible to be guaranteed work in the company. When I was at school my grandfather's generation was running the company. At that time, they thought there were too many family members working in the business. In fact, they decided to cut the number down to four or five from about 20, and my father was one of the family members to leave. The important thing I learnt from this as a child was that there were no special rules for family members. When I was called to join the company it was a surprise for me, and I didn't know if I wanted to do it or not because I had been working outside the family business for 15 years.

Was the fact that it was a surprise an advantage or a disadvantage?
Osborne: Definitely an advantage, because now I feel much more like a professional businessman as opposed to just a family member. I also know that if the board finds someone who is better than me then it will tell me to go away, which actually gives me a lot of freedom.

Arochena: I tried to show my three daughters the family business as much as possible when they were children. By force even, I made them study subjects related to the family business. Between the ages of five and 10, I taught them our values and showed them the "pretty side" of the money – I didn't show them the profit and loss accounts. Three years ago my brother died unexpectedly and, in my opinion, his children were not ready to take over because they hadn't been educated about the business. We sold the business last year but without my nephews' input, so getting children involved from an early age is vital.

Janssen: My dad has a charismatic personality, and he was an influential businessman in Belgium, both in the business and political arena. My two brothers and I were brought up with an obvious pressure to perform and to continue our family business tradition. Of course, we are thankful for all the advantages that it provided to us! Before joining Solvay, I worked for Morgan Stanley in London and I am now studying the INSEAD MBA, which is a great opportunity to step back and reflect.

Poutziouris: There is evidence that children from family business backgrounds tend to be more entrepreneurial, but if you have three children, they are all likely to have different personalities.
So, what shapes the personality of a child? It's a combination of nature and nurture. Then you have to ask yourself how big is the family and how big is the business before you decide how to introduce them to the complex issues involved in a family business. It's often said that being a family member should not be a pre-requisite for joining the family business, but obviously that's not always the case. Ignacio, you said that your grandfather fired your father, so how do you manage those people who maybe aren't good enough to work in the family business?

Osborne: I think it's important to understand that each case is different. But in our case what I think has been wrong is that the family has been very quick to get involved in situations such as when my father was fired. Family is very important but business has to come first. I am not saying forget about the family but it's second to the business.

De la Serna: I joined the board of directors two months ago because we skipped a generation. I would guess that the in-between generation is not very happy about it, but my grandmother decided that it was not ready to be involved in the business. She decided that, in order to avoid a family fight over the estate, she would choose one person, which turned out be me. I am the only one that has had a professional career, first in banking and now at Egon Zehnder. This is interesting because the same thing happened with her – it jumped her mother's generation.

How did that affect the rest of the family?
De la Serna: As a family we don't communicate much. Anyway it is not a democracy, so nobody had anything to say about it. It just happened when my grandmother announced she had decided to leave the board. Miquel y Costas & Miquel is a public and extremely professional company, and with 20% ownership we are not in the majority any more.

Arochena: We had a written protocol but we never used it. It stated that the children had to go to university for five years, then work outside of the company for another five years, learn English and if they still wanted to come and work in the family family they would enter at a position similar to that they worked for outside of the company. If they are an executive they cannot be on the board, and if they are on the board they cannot be an executive. They have to separate the wealth, if they are good enough outside the company they will be good enough inside the company.

Thomassen: Being a family member is not a prerequisite but it has advantages. If it concerns the management of the company you need the best people. If a family member is not the best person for the job but can compensate that with the "family advantage" (eg, passion, dedication, tacit knowledge, visible and responsible owner) and the management team is the best team for the business, I don't see an issue selecting a family member. But it requires thorough discussions in the board and among the major owners.

Janssen: Few family members, actually only three of us, work within the Solvay Group. The only rule that I am aware of is the following: to join the business, a university degree or equivalent, combined with a fruitful work experience in a competitive work environment, is required. An effort is currently underway to allow more next generation family members to do internships within the company.

We've talked about childhood, we've talked about working in the business, so now we are going to talk about the psychology of retirement. Domingo, you are looking to retire soon and you said you wanted some advice?
Arochena: We have no protocol saying when you have to retire but I want to do so next year, which means splitting the management of the family wealth three ways between my daughters. I have been working for the last 37 years, which I have enjoyed, but I want to let go of that responsibility. I don't play tennis so I don't know what to do!

Osborne: In our family it used to be the case that when someone died, someone younger came to replace them in the business. However, as the family grew this became harder to manage. My cousin and I have professionalised the business so it runs similar to a public company; consequently we don't think succession issues will be a problem as we hire the best people to replace those who want to retire.

De la Serna: Being 36-years-old this issue is not one of my priorities yet, but we should eventually put it in our agenda. Traditionally, it has been up to each family member to decide when s/he retires but going forward I think we should plan ahead to give oxygen to the upcoming generations.

Poutziouris: Retirement planning should be part of a multi-level, multi-dimensional succession plan. A series of issues have to be considered from the perspective of the retiring person(s): their needs and expectations of the process itself, their post-retirement agenda, but also their leadership obligations and responsibilities with regard to the next generation. It is the renewal of the top management team that will ensure sustainable business success across generations. Therefore, it is essential that the business's professionalisation and governance practices evolve as the company grows. You can think of it as embracing corporate minds with ethical hearts that respect the balance between best market practice and enduring family values.

Campden Conferences run a series of events to meet the needs of owner managers, non-active shareholders and senior executives from significant privately-owned, multigenerational family businesses. The content is specifically designed to provide families with ideas and solutions ideal to their business environment and family community.

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