Transcript Document

Family business in Italy
Transferring the Control of Business to the relatives in the Family business:
how to make it effectively
Moscow, February 7, 2013
Dott. Francesco D’Aprile, Italy
Scenario: World
35% = Family Business
Scenario: USA
80% = Family Business
50% of total US employers  Family Business
Represent 50% of the US GDP
Scenario: Europe
66% = Family Business
17 M. companies with 100 M. employers
Represent 40%-60% of the EU GDP
25% of the first 100 EU co.  Family Business
Scenario: Italy
93% = Family Business
43%  Boss older then 60s (Founder)
42%  2nd Generation involved in the company
25-30%  dies at starting the 2nd Generation
4,9%  survives after 3rd Generation
Scenario: Structure of Italian companies (year 2010)
Companies
Employers
Revenues
80.000 Italian entrepreneurs
are yearly involved in
family business transfer
Structure of Italian companies (year 2010)
Size of Italian Companies (n.
employers)
1-9 (Micro)
10-49 (Little)
50-249 (Medium)
≥ 250 (Big)
Total
Source: ISTAT
N.
Companies
%
N.
Employers
%
Revenue
€ /Mil.
%
5.024.657
95,24
8.133.573
47,00
780.351
26,84
221.522
4,2
3.512.555
20,29
672.031
23,11
25.359
0,5
2.110.525
12,20
572.517
16,69
3.977
0,06
3.549.081
20,51
882.996
30.36
5.275.515
100,0
17.305.734
100,00
2.907.895
100,00
Focus to: Family Business and Succession Planning
A challenge everywhere

USA: “Shirtsleeves to shirtsleeves in three
generations”.

Mexico: “Padre bodeguero, hijo caballero,
nieto pordiosero”. (Father merchant, son
gentleman, grandson beggar).

Brazil: “Pai rico, filho nobre, neto pobre”.
(Rich father, noble son, poor granson).

China: “Fu bu guo san dai”. (Wealth
survives three generations).

Italy: “La prima generazione crea, la
seconda conserva, la terza distrugge”.
(The first generation creates, the second
preserves, the third destroys).

Russia: …
Succession Planning in Family Business
• Succession is not only a merely leadership replacement,
but it is a learning and regeneration process;
• Several researches show how Succession Planning in
Family Business is the key time to re-think and re-design
the
–
–
–
–
ownership
strategic model
operational model
management
of the company
Succession Planning in Family Business:
Individual
and Psychological
level
Father
–
–
sense of loss
afraid to leave out
Family dimension
–
–
Heirs
–
–
Management/staff
–
continuous
confrontation with the
father figure
Entrepreneurship is
something that you
can not inherit
familiar with the
charismatic style,
difficult to change.
Main Issues
–
Corporate culture
and
managerial style
lack of objectivity in
the evaluation of the
Heir
difficulties in
sharing knowledge
–
It is quite impossible
to play a real
leadership
–
–
paternalistic
poorly delegation
oriented
–
opposing risks: risky
and not so rational
management
management under
the shadow of the
father, inability to
self-manage
–
resistance to change
LONG TERM ORIENTATION
L
H
Succession Planning in Family Business: Main Issues
SUCCESSION WITHOUT ABDICATION
SUCCESSION WITH ABDICATION
The founder manifests a reluctance to delegate
gradually his powers, which means, as a result, a
sudden entry of the heir in the company. The
success of the process is subject to the capacity
of the emerging generation to manage the impact
with the responsibilities of corporate governance.
The founder has an high inclination to the
delegation and a remarkable ability of
adaptation, with an orientation to long term. The
training of heirs is accurately programmed and
they are gradually involved in management
activities, until there is the succession from the
father to the son/daughter.
ELUDED SUCCESSION
Low propensity to delegation, and collaboration,
together with a poor orientation to the future.
This attitude leads fathers to evade the issue of
succession and to send it back to the future,
keeping the decision-making system strongly
concentrated in their hands.
DEFERRED SUCCESSION
The founder has a collaborative attitude a
present - oriented mindset. The new generation
is gradually involved in the company and
acquires managerial responsibilities step by step.
The two generations coexist for a long period
and the problem of succession is postponed in
time, with an evident priority assigned to the
results of short-term.
L
COLLABORATIVE BEHAVIOUR
H
11
Succession Planning in Family Business:
1.
2.
3.
4.
The Family Act;
3 traps e solutions;
Balancing Family and Business;
The Succession Planning
Solutions
The Family Act
What the Family Act is:
A list of clear and accepted
principles, guidelines and rules,
useful to manage the relationships
between family and business,
designed in order to guarantee
a long term perspective
to
the business.
The Family Act
How it works:
-
It
It
It
It
is a Self Regulation Process;
Acts in advance;
is Approved by consensus;
is the starting point of the process, not the final goal.
Actors
- Actual shareholders members of the family;
- Future shareholders members of the family.
Timing
- Without existing problems;
- 10 years before the real need;
- when there is the need to manage a succession planning.
The Family Act
The content
In Italy, since 2006, recognized by the Law !
• Values and guide principles of the family
(ex. mission, philosophy,…);
• Rules that make those principles concrete
(es. Transfer of shares policy, profit
sharing policy, family members entering
rules, family members salaries policy,…);
• Governance: activities on how to manage
the above rules (ex. Estate plans, Family
plans, Succession plans,…)
3 Traps that can destroy the family business
1. “There’s always a place for you here!”
Working in the family company is not a right
!
How to avoid: preparing an appropriate training and recruiting plan.
(Stalk & Foley, 2012)
3 Traps that can destroy the family business
2. “The company can not grow so fast as to satisfy
needs of all family members”
the
Families grow faster then the companies !
How to avoid: managing the entrance of the family members. Opening the
doors only to the Talented family members.
The Ford Family
1909
(Stalk & Foley, 2012)
3 Traps that can destroy the family business
3. “Family members remain in silos according to bloodline”.
Family members often use to specialise themselves on the same skills of their
older relatives (Finance, MKT,…).
How to avoid: assigning a mentor out of the family
(Stalk & Foley, 2012)
Balancing Family and Business
ISSUES
BUSINESS FIRST
FAMILY FIRST
FAMILY
EMPLOYMENT
Qualification-Based Employment
Open-Door Policy for all family
members
COMPENSATION
Merit-Based pay
Equal pay for all
LEADERSHIP
Leadership granted to the right person
(family or non-family)
Leadership based on Seniority in
Family
RESOURCE
ALLOCATION
Business resources only used for
business purposes – separate family
reserve fund utilized for family needs.
Business Resources used for personal
needs (e.g., loans, grants)
DECISION MAKING
Mulit-lateral, based on Defined
Governance Structure (e.g., Executive
Committee)
Unilateral & Concentrated with Senior
Family Member (e.g., Chairman/CEO)
The Succession Planning
The main steps
• Starting Early;
• Create Career Development systems;
• Seeking advice: (external independent directors or senior
non-family members);
• Building Consensus;
• Clarifying the transition process
Contacts
Francesco D’Aprile
Partner
Mobile: +39 393 4142258
Mail: [email protected]
Web: http://www.pedconsulting.it