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Essential Factors for Succession Planning

Essential Factors for Succession Planning. Kevin Au Centre for Family Enterprising and Business Advising Asian Horological Trade and Industry Promotion Conference October 2012 . PUBLIC HEALTH. CLIMATE. ENVIRONMENT POLLUTION. POVERTY GAP. AIR POLLUTION. DRUG ABUSE. Problem.

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Essential Factors for Succession Planning

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  1. Essential Factors for Succession Planning Kevin Au Centre for Family Enterprising and Business Advising Asian Horological Trade and Industry Promotion Conference October 2012

  2. PUBLIC HEALTH CLIMATE ENVIRONMENT POLLUTION POVERTY GAP AIR POLLUTION DRUG ABUSE

  3. Problem • Consumption • Materialism • Globalization - Business • Capitalism but in its deformed way • Hegemony of market - Efficiency • Qualification, organs, uterus, sex, love… • Individualization • Deterioration of social values, ethics, identity

  4. Value differences Business systems Family systems Development and support Personal, Informal expectations Family position, seniority Rewarded for who they are, unconditional on lover & support Death, divorce, or illness Inter-generational; based on identity to family • Profits, revenue, efficiency • Impersonal, formal procedures • Formal position in organization • Conditional on performance, fired if needed • Retirement, promotion, departure • Short-term horizon

  5. But, The Evidence Demonstrate A Lack Of Sustainability In Family Businesses 100% • Sale of the business • Loss of family interest • Unpredictable challenges • Industry changes • Missed opportunities • Family conflict • Succession problems • Mismanagement 75% 50% 25% 0% 3rd Generation 三代 4th Generation 四代 1st Generation 一代 2nd Generation 二代

  6. The Key To Family Business Sustainability Is An Organizational / Cultural Strategy And Not So Much A Business Strategy • Business strategies deal with business trend over the next 5-10 years • Business sustainability / Family business sustainability strategy deals with how the organization can maintain internal and external alignment to successfully adapt to change over the long term  it is an organizational strategy / an organizational culture strategy In Order To Sustain Long Term, Organizations Need To Have: Then The Organization & Its People Will Manifest: • Culture & Philosophy Aligned To Sustainability • Primacy of sustainability • Clear sense of purpose & role • Etc. • Healthy & Prudent • Consistent good decision making • Operational efficiency • Stable quality income • Strong people/ organization Beliefs & Action That Are Guided And Directed They Will Be Mindful & Disciplined • Creativity • Able to change • Able to deal with change • Development & Growth For Org & Individuals • Constantly upgrading & renewing skills & capabilities They Will Be Innovative & Strategic They Will Be Competent & Able To Lead, To Manage, To Change / Adapt

  7. The Tsao Family – IMC Family Business ModelA Potential Way To Address The Family Business Challenges The Family System The Business System Family Charter Business Mandate Family Trust Board Business Trust Board Family Trust Business Trust Reps Reps East West (Non-Profit) Social Enterprise & Entrepreneurship + Family Business Learning Center Family Members Take Role In Biz Based On Merit

  8. Separate Family Trust System And Business Trust System 1. Family & Business Each Has Its Own Trust / Fund The Family System The Business System • Description: • The Family will have it own Family Trust • Family Trust will be governed by the Family Charter and administered by the Family Trust Board & Family Office • Clear and transparent policies, expectations & standards for family members to access & benefit from the Family Trust • A safety-net for family and support for worthy initiatives by family members • The Business will have it own Business Trust • Business Trust governed by IMC Sustainability Business Mandate and administered by Business Trust Board • Transparent business re-investment, dividend & executive reward policies • Targeted Impact: • Prevents the Family from being overly dependent on the Business financially – removes the family’s financial motivation / conflicts of interest in leading the Business • Ensures Business will have adequate capital for grow and reinvestment Family Charter Business Mandate Family Trust Board Business Trust Board Family Trust Business Trust Family Business

  9. Joint / Cross Stewardship Of The Family And The Business 2. • Description: • Family Trust administered by the Family Trust Board comprised of representatives from the Family, the Business and outside experts as appropriate  protect the Family Charter • Business Trust administered by the Business Trust Board comprised of representatives from the Family, the Business and outside experts as appropriate  protect the IMC Business Sustainability Mandate • Only the willing and able will lead and steward  with clear rules, clear processes, clear responsibilities • Cross-Joint governance allows close coordination / collaboration between Family and Business w/o formal control • Targeted Impact: • Clear governance of the culture of Family & Business  guided by Family Charter & IMC Business Sustainability Mandate • Clear governance of expectations & performance for Family & Business  Performance Mentality, help prevent Family Conflict from disrupting Business • Professionalization / Transparency / Meritocracy  Diminish Family’s focus on control in favor of Stewardship, able to attract & retain outside talent • Sustained & positive Family-Business engagement • Senior Business leaders can continue to steward after retirement  long-term management alignment The Family System The Business System Family Charter Business Mandate Family Trust Board Business Trust Board Family Trust Business Trust Reps Reps Family Business

  10. Joint / Cross Stewardship Of The Family And The Business 2. The Family System The Business System Family Charter Business Mandate Business Trust Board Family Trust Board Family & Business Engage In Stewardship Of One Another Family Trust Business Trust Reps Reps Family Business

  11. Family Participation In Business By Choice And By Merit 3. The Family System The Business System Family Charter Business Mandate Family Member Participation In Business By Choice And By Merit Family Trust Board Business Trust Board Family Trust Business Trust Reps Reps Family Business Family Members Take Role In Biz Based On Merit

  12. East West Also Contains The Learning Center To Help Family & Business Members To Acquire The Awareness, Skills & Mindset To Lead And Contribute 4. The Family System The Business System Family Charter Business Mandate Family Trust Board Business Trust Board Family Trust Business Trust The Learning Center Provides Training & Coaching To Help Family & Business Members Enhance Capabilities Reps Reps East West (Non-Profit) Social Enterprise & Entrepreneurship + Family Business Learning Center Family Members Take Role In Biz Based On Merit

  13. 齐家 治国 The Family System The Business System Family Charter Business Mandate Family Trust Board Business Trust Board Family Trust Business Trust 平天下 Reps Reps East West (Non-Profit) Social Enterprise & Entrepreneurship + Family Business Learning Center Family Members Take Role In Biz Based On Merit 修身

  14. Our job is to take on new challenges

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