Inside the Mind of a 23 Year Old Indian NextGen

Kanishka Arumugam is the perfect example of the kind of NextGen this blog is all about. Young entrepreneurial people with a can do aptitude; an authentic leader that knows what he wants from life and goes for it. In this interview, this young NextGen surprised me with his maturity and wisdom. Kanishka Arumugam shares his family story and hopes for the future. Please, enjoy it!

1. Kanishka Arumugam tell me about you and your family business, Deccan Pumps Group, in India

I am from Coimbatore, an industrial and entrepreneurial city in south India, dubbed as pump city of Asia, known for its world class Pump Manufacturers, Textile Industries, International Educational Institutions, and also an emerging IT hub.

I am fortunate to be a second generation member of the Deccan Pumps Group. I grew up around the business and decided to be an entrepreneur from a very young age and this passion drove me to learn from organizations around the globe. Thanks to my prestigious alma maters of Sheffield, Leeds and Stanford Universities, that groomed me in many ways.

My father P. Arumugam and his uncle K.K. Veluchamy founded Deccan Pumps 32 years ago with a mission to make the life of farmers better by manufacturing superior reliability pumps. Today Deccan is a closely held conservative group with an annual turnover of around Rs 100 core focused on pumps also with its presence on Fluid Handling Distribution, Real Estate and Education. The brand is one among the Top 5 manufacturers of submersible pumps in the country and it remains Asia’s largest producer of vertical open well submersible pumps.

My father is a keen philanthropist. He runs a home for elders, has a desire to turn his ancestry farm into a model agricultural unit, and spends time in upgrading the basic infrastructure of his home village.

He believes not in chasing numbers but in giving back to society in as many ways as possible. Recently, he undertook a not-for-profit initiative and incepted the Info Institute of Engineering, along with his friends, mainly for the first generation learners of the country.

One can have simple living and be content but when it comes to business I believe one should never think twice about making it bigger. And this is what my dad and I often argue about. However such arguments help me evolve and I get to know the perceptions of the previous generation and absorb whatever is suitable in the current scenario.

Last year, after my graduation, I spent time with a few European family owned manufacturers and also had a short stint at Xylem, a non-family owned American company, the world’s largest producer of pumps and systems. Its major competitor was a Danish family owned company.

I was awestruck to learn how a family tradition could bloom into an industry that gives its competitors a tough time.

2. What’s your thoughts on building a Socially Responsible Company?

As mentioned earlier, a few years ago I often wondered why my father started a not- for- profit engineering college, a home for the elderly, rural development programs and similar activities instead of just growing the business. But now I realize that companies which are long lasting have a broader outlook and contribute to society in crucial fields such as education, healthcare, women empowerment and for a lot of other important social causes. The Forbes, Godrej, TATAs, Thermax and Wadias, are all living examples of this in India.

Last month when I was in Germany I visited my friend’s family owned company VIEGA, a fifth generation company which is into pipes and systems. It was interesting to learn how the family and business have involved the small town of Anttendorn in a larger way and how the feeling of goodness has been spread across from the taxi drivers of the company. Also the spirit of entrepreneurship and drive for growth is clearly seen in the fifth generation more than in the previous generations.

It is very essential for all the next generation family members to involve the society and community at large, in which they operate, and also to help the underprivileged and make the world a better place. A company’s purpose is just not to acquire wealth and markets but also to contribute to the society in which they live. This is an important value in creating long lasting organizations.

What do you think about Value system in a family operated company?

Care for the members (employees), humility, simple living with high thinking, involving the society, respect and care for the underprivileged, professional management with family members on board and taking part in participative management are important to the company.

The role of family business leadership can no longer be authoritative; only an all inclusive leadership model with the best value system works in today’s business organization. To put it in a nutshell, the secret behind a successful business is long term thinking, highly ethical practices strong values of family spirit, integrity, value delivery to customers and developing an entrepreneurship attitude in every employee. Keeping the company financially stable and risk-proof, safeguarding and adding value to the business: these must be the goal of a Next Gen member who wishes to grow his company in leaps and bounds.

Kanishka brief me about your opinion on Ownership, Management and Family.

Ownership, Management and Family should be viewed differently among the next generation members.

Your father might have been a great product designer who helped the company grow, but that doesn’t mean the next generation could follow or repeat the same. There is no point in just holding positions, adding value to the business is more important.  Perform else take a back seat.

Family involvement in a company definitely helps it grow at a much faster pace since the outputs are going to benefit their whole generation. More than money, emotions and attachments drive individuals towards better growth.

I believe family owned companies and the next generation should clearly differentiate between ownership, management and families. When these collide it gets complicated outside of the office too. It is simple when said, but I’m sure it is difficult to practice. My father and I might have a disagreement inside the office room, but that should not hinder the father-son relationship. My style of working is different from my dad’s. It doesn’t mean one is right and the other is wrong; we have to find our own strengths and contribute.

Is there any family structure in Deccan Pumps Group? Your group recently announced a Spin off.

Its sad we had to do this, we tried our best but was too late. Also the chief emotional officer my grandfather was no longer there . There was no issues for money or business.

In India sometimes families grow faster than businesses and so we are forced to draw agreements for securing the future of the business and the brand value of what our previous generations have created. We, at the Deccan Pumps Group, are currently working on ownership and brand sharing methods with the next generation members. The ultimate goal is to secure the business, brand value and at the same time allow every member of the family to pursue their interests.

Every next generation family member should be on a stewardship / trustee role. I find myself not as a maverick, but as a star in my own way. Gen-next entrepreneurs are fortunate to be born in privileged families and should be thankful for their education and resources that not many are fortunate to have in a country like India. So we should add value to what the previous generations have created, protect it and pass it on to the next generation.

Brilliant. What’s your future Goals?

I’m just 23 years old and have a long way to go and I am sure my thought process and learning will evolve as I observe, learn and grow. I strongly believe that every next generation member should spend time in at least two companies briefly before joining their family business. It gives one a great learning curve of how business families work across the globe, which elevates the thought processes and enhances entrepreneurial skills.

I’m looking forward to creating a great family owned company with strong values and best practices that I have seen and learnt in the last few years across the globe and act as a trustee to the future generations. One thing I have learnt from the west is that family companies are held by Foundations and work on the model of investing all profits back into the company where the family is allowed only a small percentage of profit. I shall try working out a similar model.

The next ten years is very crucial for the country. I’m sure there can be a lot of globally competitive family owned companies from India across all sectors, if family companies practice the best processes and systems. I hope to put myself to work and add value to what my father has created. I’m sure every next gen member is talented, unique and can contribute in their own way – be it CSR, Marketing or Research.

The internships I went through, systems I worked in, diverse cultures I experienced and talented individuals I met, have left an indelible mark in my life.

I’m currently working on a project setting up a state-of-the-art new plant with the experiences and processes I have seen across the globe. Though not a mega plant, I aim to make it a very efficient one. I found the brand Deccan Pumps strong only in certain segments. So my new Brand extension line would help create a new perception among customers and drive towards growth.

The products are being designed and upgraded to world-class standards with a great emphasis on manufacturing systems and process technology. The new plant is a small test that I’m putting myself to. It will also increase our productivity in one product line up to five times.

My Professors in Stanford and Sheffield have always been good mentors and when I shared this idea they felt that this startup would help me learn quickly all aspects of business and if I perform well I will be ready for a bigger role.

Perform and Preserve, else Perish. Also, if one fails to safeguard the business and grow, it’s a crime. With a strong support of the previous generations and the wide global exposure that we have access to, it’s time we next gens create history!

Kanishka Arumugam

Deccan Pumps Private Limited

How Strong Family Values Can Keep your Family Company Successful Over Generations

It is a windy Friday afternoon at the lovely Marina del Rey. I’m meeting Gilbert Devlyn to learn about the keys behind the success of his family business, Devlyn Optical, which is now in the 3^rd generation.

The Devlyn family is from Mexico, and they are the owners of  a 77-year-old company that first started as the only optical service in the town of Ciudad Juarez in Mexico. When it first opened, it had just two employees: Mr. Frank Devlyn and his wife Nelva Mortensen. Today, it has more than four thousand employees, 829 branches in Mexico, which makes it the largest optical chain in the country, and the brand has even expanded to Guatemala, El Salvador, the Dominican Republic and the USA. The company has also expanded its services into ophthalmology clinics.

What I find really interesting about this company is that, unlike most third-generation companies, which tend to keep the family out of management and focused on ownership, the Devlyns have managed to retain 11 family members working in the company and they are the 3^rd generation in charge of operations.

There is definitely no sense of entitlement here, as Gilbert explains. When he was a little boy he asked his father to buy him a toy car. His father offered him the opportunity to work in the family company and earn the money he needed to buy the toy for himself instead. Gilbert was very disappointed when, after a week, he got paid just 140 pesos (the standard salary for the work he did at the time). He learned a lesson about how hard it is to earn enough money to buy what you want and that his family was not just going to hand him everything on a plate.

Gilbert is down to earth, kind, polite and oozes love and admiration for his family. He is also well educated, intelligent, ambitious and driven. After working for a few years outside the family company and completed an International MBA, he has recently joined Devlyn Optical. His desire to contribute, make a difference and find his place in the organization for himself is evident. With people like him in the family, there is definitely no need to look for talent elsewhere.

This is what Gilbert has to say about values, emotions, family business and making a difference.

Written by Carmen Lence, Executive Coach at NextGen Consulting & Coaching LLC. Contact Carmen  at carmen@nextgenfamilybusiness.com

About Transitions West Conference and Changed Lives

I just got back from the Transitions West conference at Marina del Rey, which was organized by The Family Business Magazine and Stetson University’s Family Enterprise center. This is a conference “created for family companies by family companies!” and, once again, we enjoyed some great, honest presentations by some outstanding family business members, non-family executives and family business experts.

Among my favorites were the opening keynote by Jim Ethier, Chairman of the Board of the Bush Brothers & Company, during which he described the experiences his family company had as they built their family governance. Also, the panel of non-family executives made up of James B. Wood, Senior Vice President and Chief Strategy Officer of The Clemens Family Corporation, Robert J. Underbrink, President/CEO of King Ranch, Inc., David Yale, President, Just Born, Inc. and Ross Born, Co-CEO of Just Born, Inc., where I realized how difficult it is to find the right non-family CEO and the time and effort involved in the process; and the panel about how family councils foster engagement among family members, where Ashley Levi, Board Member at H.G. Hill Company, and Meghan Juday, Family Council Chair and Director at IDEAL INDUSTRIES, shared their experiences about how useful their families council has been for them. And finally the presentation from Mark Peters, CEO of Butterball Farms Inc., who underlined the risks involved in not having succession planning in place. Thanks to all for sharing their experiences and being so inspiring!

This was my second year at the conference and I was happy to see that many families came back and brought along quite a few more family members. I would say that the number of participants doubled from last year. Congratulations to the organizers!

I also meet Peter Begalla, Adjunct Professor and Program Manager at Stetson University’s Family Enterprise program, who I interviewed last year about the unique Family Enterprise program that Stetson University offers (Read interview here http://wp.me/p1tGmG-2n) and Professor Greg McCann, founder and Director of Stetson University’s Family Enterprise Center. I was interested in gaining the perspective of one of its students and when I meet Emily Dudley, senior at the Stetson University’s Family Enterprise program and second-generation partial owner of Dudley’s Auction Inc., at the Transitions West conference, I couldn’t miss the opportunity to interview her.

Please check what Emily has to say about how Stetson University’s Family Enterprise program has “changed her life.”

Written by Carmen Lence, Executive Coach at NextGen Consulting & Coaching LLC. Contact Carmen  at carmen@nextgenfamilybusiness.com

What Happened to What Was Once the West’s Greatest Industrial Power? Dr. Henry M. Kaiser shares his family story and what he learned from it

It is a cloudy Tuesday afternoon in San Francisco. I’m having lunch at the Embarcadero with Dr. Henry M. Kaiser. I met Dr. Kaiser a couple of years ago when I joined his lead in creating the FFI Northern California Chapter. Our shared passion for family business has made for a few interesting conversations in the past. Today is not an exception.

I’m listening to Dr. Kaiser’s explanation about what motivated him to write his book “Inheritance Lost, Heritage Transformed,” where he relates his life and the events that lead a Fortune 500 family-owned company to enter voluntary liquidation just seven years after the passing of its founder and his grandfather, iconic industrialist Henry J. Kaiser.

While I’m listening to Dr. Kaiser’s story, I cannot help but notice his candor, strong curiosity, drive to be better and his fight to be relevant and make a difference. I can almost feel his passion about helping others to avoid the pain, powerlessness and disappointment that he experienced when the family empire dissipated in front of his eyes. Within Dr. Kaiser’s story there are certainly some important lessons to share that may inspire others to take the actions needed to achieve a more positive outcome with their own family companies.

In this short interview, Dr. Henry M. Kaiser, former director of Kaiser Hospitals and Health Plans, explains the events that led to the voluntary liquidation of the family business and shares some words of wisdom about what he believes he, and those around him, could have been done better.

Written by Carmen Lence, Executive Coach at NextGen Consulting & Coaching LLC. Contact Carmen  at carmen@nextgenfamilybusiness.com

How to Make It Cool to Work for a Family Business

Let’s face it, working for a family business isn’t considered by most professional managers to be a great career move. Many managers believe the career prospects will be limited, as the top jobs will most likely go to family members. Also, many picture themselves in the middle of a medieval court full of intrigues and fights between rival heirs, struggling to keep themselves impartial. So, no wonder family businesses have a tough time attracting talent!

So, how to make it cool to work for a family business?

Outstanding company values, great leaders, a challenging job, attractive performance-based compensation and a culture of empowering and developing people, these are the keys to attracting and retaining talent for any company including a family business.

Take, for example, Roche. The Swiss Pharmaceutical giant employees more than 60,000 people; yet it is still controlled by the founding family. “There is a culture at Roche that nurtures talent,” says Alexander Zehnder, at the moment seconded to Genentech in the US, a member of the Roche Group. “This culture gives employees the opportunity to develop knowledge and skills, on- and off-the-job, and to gain international experience.”

Another example is the Bonnier Group, a Scandinavian media conglomerate of over 200 privately owned companies and currently in the sixth and seventh generation. Here, to make it more attractive for non-family managers, the governance structure is shared with non-family executives, with a non-family member either holding the chairmanship or the presidency.

Some of you may be thinking- these are huge companies you are talking about, they can afford to have all these systems in place and they will attract good people anyway. Well, this is a bit like the question “What comes first, the chicken or the egg? I believe that these are big, successful companies because they have put these systems to work in the first place.

So, let me sum up the must dos for making your company attractive to talented executives independent of its size:

– Great Values
People want to work for a company that cares about its people and that has a mission that motivates them.

– Great Leadership
People choose companies for their leaders. Great leaders do treat people with trust and respect. They build the capacity to achieve results, knowing that they do this by unleashing the talents of their people

– Performance-based culture
The combination of a strong performance ethic and an open and trusting environment achieves great job satisfaction.

– Attractive Compensation and promotion policies
Your company will get the best from your family and non-family executives if key management positions are open to non-family members, assigned based on competence, and utilize performance-based compensation.

I suggest making the promotions criteria a bit harder for family members, the reason being that as family members they will be in the spotlight. If they are clearly better no one will object.

– Family employment policy
While having members of the family working in the company is in the company’s interest, because they have stronger commitment and loyalty to the company (after all they own it), having family members that are not up to the job is dangerous and irresponsible.

A transparent family employment policy, which establishes the criteria for family members to join the company, will help you to avoid a tough time with your sister desperately wanting to get his dropout son into the business. Also, it will show non-family executives that jobs are not awarded on family merits, but on actual capabilities and performance.

If you link the points above with the flair of working for an innovative entrepreneurial company, able to adapt and respond quickly, with long-term vision and strong commitment to their customers and employees, all characteristics of family business, Wooow! It really sounds cool to work for a family business!

Written by Carmen Lence coach and Consultant at NextGen LLC

Dennis Jaffe on How to “Make it Happen” for the Next Generation Owners of Family Business

For 40 years, Dennis has helped families manage the personal and organizational issues that lead to successful and fulfilling transfer of businesses, wealth, values, commitments and legacies between generations. He is professor of Organizational Systems and Psychology at Saybrook University in San Francisco. Dennis received his BA in Philosophy, MA in Management and Ph.D. in Sociology from Yale University.

As both an organizational consultant and clinical psychologist, he is one of the architects of the emerging field of family enterprise consulting. As a founding member of the Family Firm Institute, he has presented at many of their annual conferences, served on their board, written frequently for their journal Family Business Review, and was awarded the Richard Beckhard Award for contributions to practice.

In this interview, Dennis Jaffe share his experience in helping next generation members of family business to create a future for themselves and the keys to succeed at succession.

Do you want to gain control of your family Business? Buy it!

Jamie Calvetti, President of James Calvetti Meats in Chicago

After 32 years working in the family business and running it before his father’s passing, Jamie Calvetti found himself as an equal co-owner with two more siblings that were not involved in managing the business. The situation got to a point that he had to buy his own business to gain control. In this interview, Jamie Calvetti, President of James Calvetti Meats, one of the USA’s leading purveyor’s of prime quality meat products, shares how to go about buying your family business and what he learned from his father’s mistakes.

What were the main challenges that you faced working in your family business?

In family business, there is a lot of jockeying back and forth. My father was aggressive, charismatic and well known around the country. He slowly allowed me to manage some pieces of the business.

I had been gainfully working and managing in the business since I started. I learned everything that I could about the business. I bought computer into the business in 1982 for logistic and accounting functions. Email did not exist in 1982. I managed to processing, logistics, personnel, accounts receivable and payables and some purchases. I had my own sales, but of course there was many times that competition was a problem. I did everything an entrepreneur does in a business.  In 1986 I started up business in Japan (the country was too small for my father and myself to compete within). Shortly after that I started up sales in Europe. Between the time 1986 and 1991, I traveled, on business, to Japan and or Europe about 15 times.

In 1991 I was able to manage the large multinational business customers we had because of the change in technology. That was the advent of email.  Major customers starting using email to communicate, which I was very proficient. My father’s style of communication did not work for the new younger buyers/managers.

My father felt that I was taking him away from the business. There was a competition between my father and I and competition between the siblings.

Was there any succession planning?

There was no formal succession planning. My father’s accountants came to him and said he needed to move some of his shares to his children for tax purposes. He wanted to split it equally. The accountants, unbeknownst to him and me, gave me a tenth of 1% more than my other siblings.

Were you the only sibling working in the company?

One sibling was. He was in charge of the newspaper for the first 15 years and then in charge of Internet marketing the last 15 years.

Do you think that equal is not always fair?

It wasn’t. The accountants set it up. When my father passed away there was jockeying for position. At that point, my father was 89 years old, and I was running the business.

My dad was very good at running a business and did not melt the company. Because of that, the company was and is very well financed. We left quite a bit of cash in the business.

I had to buy both my siblings out over three years and both were major negotiations. There were bad feelings involved and it took a very aggressive attorney to take care of things on my side.

In the meantime, we had to run a business. I could see down the line that with all these buyouts I was going to need to start growing the company again. We were in the airline and food service business and we stopped growing after 9-11 and didn’t diversify. I tried to diversify a couple of times and it failed. Ultimately, I went back to my core business. I reduced my salary and reduced expenses where it was necessary to generate the cash for the buyouts.

What were the keys to raise capital to buy your siblings out?

You have to make a profit, have good cash flow, and show and prove that to the bank. Handle your personal finances properly and correctly. Be conservative with the money that you do have. I had my  broker contact the bank and give a referral. I come from a place where my dad wanted to pay everything in cash. We paid cash for a building, and in about 17 years the value of the building doubled and there are no loans against it.

You just have to play it right and you can’t be the guy that has a $1 million dollar house with an $800,000 mortgage. You will not get the financing even though that is your personal stuff they are going to look at it. They are going to see that you are too much of a risk taker or you don’t know how to run your money.

I also look at my cash position every day. I know what my accounts receivable, accounts payable, loan, and my cash positions are. I also know what my estimated payouts are for the following week. In the meat business, you have to pay your bills in seven days because we buy a perishable product. You should also follow the markets. When we made a lot of money, instead of taking it out, I loaned it back to the company. It was advantageous to me because I could pay myself interest more than market rates.

It also showed the way that you ran the company.

Right. I had stable employees. You bring the banks in show them the business-that is not normal. You show everything to them and show them you can make money in various economic conditions.

When your father passed away there was no real succession plan. What would you do differently for your children?

I don’t have any children but I do have a stepdaughter. I would never burden her with this. What I would do different than my father is I would determine who was most interested in the business and most capable. I would move those assets upon or before my passing to that person. Then, I would compensate the others.

How is your relationship with your siblings now?

We have a strained relationship.

Do you think that all this pain could have been avoided with proper planning?

Maybe. Entrepreneurs are a special type of group – they are very competitive at least my father was. He was competitive with his children. I can remember a couple times, that he wouldn’t be so happy  that I would bring in a huge order. It was a strange situation.

What advice would you give next generation members that are considering buying their Family Business?

• You first have to know how to run the business profitably and conservatively. You should not take a $500,000 salary, take cash out the business, and expect the bank to finance the business.

• Have to have your own money in the business too.
• Have a great reputation in your industry, better reputation than everybody else.
• Pay your bills on time or early. That gives you power to do the things you want to do or at least it helps you.
• Then you have to run your personal life properly. Don’t have a $1 million house with $800,000 loan.
• You have to be and work at the job. You can’t be on vacation all the time.
• You have to have stable employees, be a good manager, and a good communicator.

What about you? Have you ever been in a similar situation? What other resources could have been used to take control of the company? Are banks the most likely founding source for family business buyouts? Please, share your experience, we can all learn from it!

Written by Carmen Lence, Coach and Consultant at NextGen Consulting and Coaching LLC. www.nextgenfamilybusiness.com

How to Survive and Thrive Despite the Lack of Succession Planning

How Do You Eat an Elephant? Dr. Lee Hausner explains her six-step transition model for succession in family businesses at the FFI Northern California event.

Dr. Lee Hausner, Author of "Hats Off To You 2...Balancing Roles and Creating Success in Family Business Succession"

Last week the FFI NCAL Chapter Formation Team hosted the first event of a series that is aimed at raising awareness of the San Francisco Bay Area Chapter for the Family Firm Institute. Dennis Jaffe, Susan Ott, Henry Kaiser, Doug Kennedy, Leslie Simon, Timothy Swords, Louis Wellmeier, David Kelly and myself, Carmen Lence, are currently leading the efforts to create better networking and educational opportunities for family business professionals in the Bay Area.

The conference was a huge success and this was predominantly down to the efforts of Susan Ott and Henry Kaiser, who did a fantastic job of organizing the event. Thank you very much for your hard work!

It was also great to see Carmen Bianchi and Mary Gust at the event and the FFI NCAL Chapter Formation Team really appreciated the fact that they took time to attend and show their support for our work.

Thanks to the efforts of Susan and Henry, we were fortunate to gain the support of Dr. Lee Hausner, who was the first speaker of a series to come. She gave an inspiring insight into her succession planning model, the highlights of which I would like to share with you now.

Dr. Lee Hausner is an internationally recognized clinical psychologist, business consultant, author and family wealth adviser. During her presentation, she explained how to approach the daunting endeavor of eating the big elephant that is succession in family business. In her own words, the best approach is: “bite by bite.” To help us to tackle the huge meal ahead, she advises that we start by dividing the elephant into six parts before starting the “feast.”

The six-step transition model for succession in family business was first introduced in Dr. Hausner’s book “Hats Off To You 2…Balancing Roles and Creating Success in Family Business Succession.” It involves a multidisciplinary approach to succession planning in which the founder and the family are involved throughout the process of succession implementation. The first and second steps, focus on founder and family but their involvement in the process continues as it goes through the next steps of dealing with the business, management, ownership and estate transition phases.

Interestingly, in Dr. Hausner’s model, estate planning is the last step in the process, despite the fact that, in most family businesses, it is actually sometimes the first and only step they take with regards to succession planning. In her opinion this is a big mistake because it does not address the sustainability of the business or the family’s “health.”

In Dr. Hausner’s model, the first step involves the founder’s transition, in which it is essential to address any resistance to let go. When discussing this phase of succession planning, Dr. Hausner pointed out that the transfer of power should be a slow process, during which she advises founders extend their limits of authority gradually, expect mistakes and don’t hope or demand to have a clone as a successor.

The second step involves the family transition, in which she recommends family members put on a different “hat,” depending on the situation they are dealing with. For example, members may wish to wear one “hat” when they are conversing as father and son or dealing with a family issue, and a different “hat” when dealing with a business issue. She also stressed the importance of setting clear expectations and transparency to avoid suspicion and the opportunity for “physiological cancer” in the family.

When dealing with the next generation during succession planning, it is important to lay out clear responsibilities, avoid entitlement and promote achievement. Dr. Hausner also mentioned the value of supporting the next generation’s development through coaching and mentoring.

The following step involves business transition, and Dr. Hausner outlined the need for a strong board of directors with independent advisors that can provide objectivity and accountability during the transition process.

Following this, during the management transition step, the family should decide what their future role should be. Should they get involved in the management of the business or would they be better overseeing the business as owners?

The 5^th step of Dr. Hausner’s model involves ownership and, in her presentation, she pointed out that “fair and equal are not the same.” This is something that is important to take into account when deciding who is going to own what of the company and family’s assets.

Finally, regarding estate planning, it is important to set clear expectations and aim for a lifetime transfer. Dr. Hausner also stressed the importance of involving the family in philanthropy and any educational opportunities that can be used to develop the younger next generation.

Succession planning is a big elephant to eat and digest, but with the right process, tools and guidance it may become the most rewarding “meal” you have ever had!

Bon appetit!

Written by Carmen Lence coach and consultant at www.nextgenfamilybusiness.com

Six-step transition model for succession in family business

Where Do We Come From? What Are We? Where Are We Going? Next Generation Goes to Stetson University to Get Answers

Peter Begalla, Outreach Director of the Family Enterprise Center, Adjunct Professor at the School of Business Administration at Stetson University

Stetson University is the first school in the USA to offer a degree in Family Business. The program focuses on next-generation members of family businesses, and one of its goals is to encourage them to take ownership of their own lives and careers.

Peter Begalla is the Outreach Director of the Family Enterprise Center, Adjunct Professor at the School of Business Administration at Stetson University and an expert in next-generation leadership development. This is what he has to say about the next generation, leadership and making things happen for oneself.

What, in your experience, is the main problem that next generation members of family businesses face?

It tends to be credibility: within the family, within the enterprise, as well as marketability of their skills in either the family enterprise setting or out in the real world. So the idea is that because they have a family business they may not be as they have to be in their own right. They have to be recognized as credible and marketable themselves separate from their family so that their own identity can be established.

The program stresses the need for the next generation to be proactive and create their own future. How does the program support its students to help them to achieve that?

The introductory course kind of sets the tone for the whole program. It’s the one that’s the most intensive. The course is divided up into thirds. The first part of the course is a whole segment devoted to who you are: personality assessment, values assessment, and a discussion about what you know about yourself from a personality dynamic. What you believe about yourself.

The second section of the course is what is your family story. So there’s some gene gram work, some work on the family values, there’s an interview process in which the students ask their family members, their mom and dad, why did they choose the career that they did. What kind of family dynamics. What was important for them in terms of their business or their career choice. How has that affected the family. By doing that, the student works with the family to determine what kinds of messages have been important to the family, for a couple of generations. What their family story is and how it might impact the student.

There’s also some identification in that same time period as to what role they play in the family in terms of birth order and everybody’s influence to birth order.

And then the third component is what do you want to do. Now that you understand a little bit about who you are and what your script is, what do you want to do with this? Is it work within the family business? Is it work outside? How does your plan match up with reality? How does it match up with the reality of the family? How does it match up with you as a person? Are your values in line with what those plans are? Is your personality in line?

One more piece is that all three of those segments are then collected into what we call the Life Plan. It tends to be about 50 pages long. It’s designed for the student to essentially define success as they see it within the family business or outside. It basically changes how they view themselves and what they are going to do and how they are going to go about doing it in the world.

Do you have more students going to work in the family business or outside it after finishing the program?

It’s different for each person. I can’t say that the rule of thumb is that they all go back to their family businesses and I can’t say that they all bail out. It’s a fairly decent mix. However, it tends to lean more towards the student going outside the family business for a period of time. I can’t say we’ve done any research to support what I call “Gut Check.”

What would be your advice to those next generation members living in “golden cages,” meaning, working in the family business with a good job title, good salary but no real responsibility, accountability and lacking preparation to take over the leadership of the company. Living in fear about what is going to happen in the future when their parents are not around anymore.

First is to “know thyself”; know exactly what your skills are. Know what you have to bring to better the situation. That way you know where to start and you shop on your technical skills or on your soft skills. For example, if you’ve got an accounting issue, or if you’ve got a marketing issue or a financial issue, you can always ask for help. Although the responsibility in that situation is ultimately yours, know how much guidance you need in order to make the right decision, know your capacity, know your abilities and your strengths and weaknesses so that you can call for help when you do have to make the decision (because again, you’ve got the title, you’ve got the responsibility) but you have guidance.

The other thing we stress with the program is that getting unbiased feedback is advice that often leads to a profound change in the individual. The feedback is such that it just kind of says “hey this is what I see” kind of holding up a mirror “this is what I see you doing”; it allows the student to make some choices about a different behavior versus “hey, you know what you should do?” which nobody really likes. If somebody who is in a position of responsibility within an organization doesn’t have feedback then they are kind of looking in a vacuum.

What is the profile of your students? What kind of family companies do they come from?

We have a mix of students; some have family businesses and some do not. One of the ways in which we talk about the program is that if you don’t have a family business, you still benefit from it because 90% of businesses in America are family businesses. So you’re probably going to work in one. The other thing we do is stress an advisory track as well towards the end of the program. We train students on some basic advising type of skills working with companies.

So in terms of the students we have that have family businesses, it spans  a pretty wide range. I’ve had students with international holdings that are fairly vast where their families come from two generations deep in South America and in the Caribbean. Everything from real estate to restaurants, mining, aggregates, and land family grocery store holders here in the States. It spans from annual revenue exceeding 1 billion to the little mom and pop jewelry store worth half a million a year or even restaurants.

They have been working for the family company or it’s a bit of both?

They definitely have exposure to it. The ones who don’t have exposure to it the parents are in a business that tends to be more advising. For example like financial services, a dad owns financial services and  he has 2 or 3 guys working with him like an insurance business; the student doesn’t work in it. If it’s the construction business, the student has worked in it. If its manufacturing, the student has worked in it. If it’s a distributor of some sort, the students have worked in it.

Is this a unique program in the U.S. that you are managing?

I believe so, it’s one of two majors in the world, its basically the first major in the world. We think we have something that is very promising. We essentially are having a dialogue about family businesses that no one else is having with students at a time in which they are forming identities and forming a sense of where they want to go in the world. And we promise them, what my college Greg McCann says and why he founded the program the way he did, “Look, you get a discussion with your peers and your family for four years about who you are and where you want to go. If that’s within the family business that’s great, if not that’s great too. But essentially you get to write your own story versus just being pushed along by the family history and by the family’s script of the business.” Especially if it’s a large successful business, it can override the identity of someone who is trying to form and carve himself out a sense of self and where he wants to go.

In your experience, what are the main traits of successful next generation?

They tend to want truth and honesty. They tend to want everything to be exactly as it is and for everybody to know it and what’s going on. So there’s this level of transparency that I think is required personally as well as about the organization, and about the older generation and the next generation. And again, it is to “know thyself.” What your strengths and weakness are and to be ok with that to say, this is what I bring to the table, this is what I don’t bring to the table, and how are we going to make this work.

Any tips or words of advice for next generation members of family businesses?

No matter what you do, start now. Start thinking about who you are, what you are about, what you bring to the table, and how that’s viewed by your family. Also, how it’s viewed by non-family members within the business. Start the dialogue A) with yourself then B) with your family about what you bring to the table and what you want to do next. How you can contribute to the business.

So, next generation, what are you going to do to make things happen for you?

For more information about the Stetson University Family Enterprise Center, please click on: http://www.stetson.edu/business/family

Written by  Carmen Lence, MBA
NextGen Consulting & Coaching
Web: http://www.nextgenfamilybusiness.com
LIKE us on Facebook: http://www.facebook.com/NextGenConsultingnCoaching