Issue One 2013 - Issue #18
Keeping it in the family
Story by Carolyn Boyd
Family businesses form the backbone of the Australian economy – around 70 per cent of the nation’s companies are family owned and operated. However, when the time comes to hand over the reins to the next generation, things do not always go smoothly.
“Often there is a fair degree of secrecy and non-transparency around succession planning,” says Michael Gilding, Executive Dean of the Faculty of Business and Enterprise at Swinburne. “It is something that family businesses consistently struggle to deal with. The more they put it off, the more difficult it becomes.”
Gilding is one of five researchers conducting a two-year study into how families decide who to pass their businesses to and when to make the transition. Working with national accounting firm Pitcher Partners, the team has interviewed 43 Australian family businesses, ranging in age from less than two decades to more than 160 years of family operation. The researchers haven’t just spoken with CEOs, who are typically male, but have also interviewed their spouses and other family members to get a more in-depth understanding of succession planning.
The influence of wives
“Wives of family business CEOs are often deeply overlooked and we think that they are very underestimated,” says Gilding. “Wives have a unique outlook on the whole succession planning process and they often have a huge influence on whether the planning process works or it doesn’t work.
Unless you have an understanding of all the different players in the process, you haven’t got a very good model.”
PhD candidate Barbara Cosson conducted the spouse interviews and says the hardest part was hearing the stories of families who were “completely riven by trying to sort their relationships out”. “I have spoken to numerous families where they don’t speak to different arms of the family, and actually haven’t for many years,” she says.
Despite the difficulties involved in handing family businesses to the next generation, postdoctoral research fellow Dr Sheree Gregory says continuity is vital to many families. “Having a family continue on in the business is quite important, so is keeping the bloodline going and keeping a legacy,” she says.
The research goes global
The researchers are now conducting a global survey, in conjunction with Pitcher Partners, to compare the way families approach succession planning in 40 countries. The Family Business Succession Survey is being run in several languages, including Spanish, Korean and Mandarin. In Australia, the team is hoping to garner at least 1000 responses.
“When you do a survey in Australia it is interesting but it is not as deeply insightful as comparisons with survey data from other countries. Once you have that data, you can then say what’s unique about us,” says Gilding.
The research team recently had a paper based on their research accepted by one of the world’s top entrepreneurship journals, Entrepreneurship: Theory and Practice.
With Angela Ciliberto turning 60 at the end of this year, she is keen to hand management of the business she launched in 1978 to her two children. Even though she has insider information on best practice as the state chair for Family Business Australia, Ciliberto knows it will be tough.
“I define myself as this business,” she says. “So, if I am not this business, who am I? There is that journey for the incumbents to take. That’s a really difficult one and I think if you don’t get an answer to that, you never want to leave.”
Ciliberto began a photographic shop in 1978 to create a job for herself after quitting the public service. Soon one store became six and her husband Peter joined the business.
In the 1980s, the couple spotted a niche for wholesale distribution and launched C-Direct, which now provides sales, marketing and warehousing of products ranging from pre-paid mobile to movie tickets. The Melbourne business services 4000 clients, turns over about $30 million a year and employs 30 people.
Angela says she and Peter always had a code of behaviour for when they were at work, so when their daughter and son, now in their 30s, wanted to join the business there was a framework in place.
As she nears retirement, Angela has been gradually stepping out of the business, and the Cilibertos have engaged a business psychologist to guide them through succession planning for management of the company.
“My belief is you need to see it as a journey – a process rather than an event,” says Angela. “You can’t just suddenly say, ‘I will be 60 this year, see you later, I am going’. The reality is that the successors have to feel comfortable that they’ve got all their ducks in a row.”
Handing over to the next generation
- Create transparent rules for joining the business.
- Create structures that facilitate communication and consultation.
- Get help if in doubt. Outsiders are able to ask the ‘naïve’ questions that families need to answer.
- Procrastinate – it doesn’t get easier, it gets harder.
- Be secretive – it creates mistrust.
- Play favourites – it creates resentment.
Source: Michael Gilding, Executive Dean of the Faculty of Business and Enterprise at Swinburne University of Technology.