Berghmans Lhoist Chaired Professor in Entrepreneurial Leadership Founding Director, Wendel International Centre for Fam

1. Parallel Planning for the Professionally Emotional Family Businesses Professor Randel S. Carlock Berghmans Lhoist Chaired Professor in Entrepreneurial Leadership Founding Director, Wendel International Centre for Family Enterprise INSEAD – Asia, Europe and the Middle East

2. Why do Business Families Need to Plan? • Increased business complexity • Larger, multi-generational family • Separation of ownership and management • The conflict between family solidarity and the new nuclear families • The division of shares create less resources to support the family and the potential for ownership inequality • Divisions into branches and the loss of a shared purpose when making decisions • The loss of order and the possible chaos created when the matriarchs and patriarchs are no longer around

3. Planning: Addressing the Five Family Business Issues CAREERS Who holds leadership roles? CONTROL How are decisions made? CULTURE What values drives our behavior? CONNECTION How do we protect family relationships? CAPITAL How are resources invested? 2

4. Five Action Steps of the Parallel Planning Process Family Contribution Business Vision Family Values Business Culture Vision Family Engagement Business Strategy Values Plans Family Meeting & Agreements Board of Directors Governance Investment Family Human Financial Capital

5. Family Strategy is a Capable and Committed Family • Encouraging talent development • Family leadership talent development programs • Internships and career planning • Active roles in the family council and foundation • Family talent bank for boards and leadership roles • Building family commitment • Transmitting values based on performance • Fair Process to ensure family expectations are considered • Effective family agreements and family and business governance • Long-term estate, liquidity and ownership planning • Fun and social activities to strengthen family ties

6. The Professionally Emotional Business Family Families are about caring and businesses are about money; not a likely formula for a successful partnership. Yet those are the facts and successful family businesses around the world have found that using the Parallel Planning Process for aligning a family’s emotional commitment based on values and vision with sound strategic, investment and governance thinking creates a new model for the entire business community. We argue that the best family businesses outperform their widely traded competition because they plan and govern based on professional process but they lead based on passion and emotions; they are professionally emotional. This creates a unique and defendable competitive advantage because widely-traded firms by definition strive to eliminate emotions from their planning, decision making and actions.

7. Family Business Commitment Drivers

8. Professionally Emotional as a Competitive Advantage Family constraints have their benefits On Management Column By Philip Delves Broughton Randel Carlock and John Ward, professors at Insead and the Kellogg School of Management respectively, have studied family businesses around the world and report their findings in a new book, When Family Businesses are Best. The best family businesses excel at two things: balancing emotion and reason; and retaining a long-term perspective.

9. Porsche also makes great cars, remember? The global automobile industry is in a shambles with a share in Ford Motor Company selling for less than a Starbucks latte and GM and Chrysler discussing a merger that resembles two drunks hoping they can make it to the next lamppost (government bailout). Somewhere in all this chaos the Porsche family has managed to create two highly profitable automobile firms that are the world leaders in designing, manufacturing and marketing cars. The family's values and vision are the foundation for a planning process where each critical factor adds synergy based on a unity of purpose between the family and the business. The Porsche family and specifically Ferdinard Piech, the VW Chairman, sees combining Porsche (the firm that bears his grandfather's name) with the much larger VW (founded by his grandfather) as making strategic sense and strengthening the family legacy. Campden Families in Business Magazine, No 41 November/December 2008By Randel S. Carlock

10. Did the Porsche Merger Make Business Sense for VW? Reuters, Oct 28, 2008 When you refer to VW and Porsche as two highly profitable firms, I am not sure how much that will apply going forward given that Porsche, and to some extent VW, produce high-end cars that are going to take a big hit in the ongoing crisis (and this is what the hedge funds were betting on). As for whether a tie-up makes sense, here's an excerpt from a recent FT article: More crucially, on the car making side analysts have long described the tie-up as an unequal match, benefiting Porsche far more than VW. “There’s very limited industrial synergy between the two companies,” said Philippe Houchois, analyst at UBS.

11. VW Blows its own Trumpet on Recovery By Chris Bryant in Frankfurt and John Reed in London19 December 2011 Financial Times When Martin Winterkorn, the 64-year-old engineer, took over as chief executive in 2006, VW sold just 6.3m vehicles. The carmaker was struggling to make a profit with its flagship VW brand and had to ask workers at some of its German factories to work longer hours for the same pay. Five years later, VW now has more than 90 plants building 200 different vehicle models for its portfolio of 10 brands. Its revenues jumped by 26 per cent to €116bn in the year to September, and its €13.6bn net profit underscored the carmaker's new regard for financial discipline. Competitors increasingly view VW as the car industry's benchmark for profitability and manufacturing efficiency - a spot formerly claimed by Japan's Toyota. As the year draws to a close, industry forecasters are describing VW as the world's largest carmaker, ahead of General Motors and a disaster-weakened Toyota. While it was Mr. Winterkorn who took the floor in Wolfsburg, VW owes its rapid growth mainly to the obsessive vision of another man: Ferdinand Piëch, its powerful chairman and family patriarch. The grandson of Ferdinand Porsche,Mr. Piëch is widely regarded as the sharpest strategic mind in the car industry and the driving spirit behind VW's ascent. "VW is his life's work, he's absolutely driven to create the biggest car company in the world."

12. Defining Emotional Commitment -A belief in family values and vision -Willingness to invest talent and resources -A desire for a family connection or legacy -Expectations of personal and family rewards

13. Parallel Planning Process: Systemic Planning Family Planning Questions What will the family contribute? How is family human capital invested? What values drive our family? How do we prepare the family? How do we align the family actions? Vision Investment Strategy Governance Values What culture drive our firm? What kind of business does the family support? How does the business remain competitive? How do we ensure stewardship? How is family financial capital invested? Business Planning Questions 12