Doug Brown Paradigm Associates...passions beyond the business VII Recognize that conflict is a natural part of any meaningful relationship VIII Plan for continuity, succession, retirement,

Preparing Your Family's Firm Next Generation of Leaders

Doug Brown Paradigm Associates

One thing that family business has in common with other organizations is that you will eventually leave the business one of three ways: retire, quit, or pass away. This session addresses the non-financial areas that are often overlooked when transitioning the business to others who are already working there. It only makes sense that the people you are entrusting the business to are fully prepared to continue your legacy.

2020 HPBExpo Education Sponsored by:

Breakthrough Thinking for Your Real World www.ParadigmAssociates.US

Preparing Your Family Firms'Next Generation of Leaders


Family Business Life Cycle

?Wonder

IBlunder

IIThunder

IIIPlunder

IVSunder

VRe-Wonder

Focus onBusiness

SlumberMaintainFocus onFamilyHard

Work

You

Own

Your

Job

Creation

of

Myths

Renewal

or

Slow

Decline

You

Own

A

Company

T i m e

G

r

o

w

t

h

Start-up Growth Professional MatureRe-birth orDecline

Focus on Owner Focus on Family


Family vs. Business Conflict

Family Side

Family issues areEmotionally-based

Families share based onneed, fairness, andequality

Families strive for stability

Business Side

Business issues areRationally-based

Businesses share based onperformance andcontribution

Businesses thrive on growthand change

The inherent Conflicts between the two sides formthe basis of nearly all family-owned business

problems

Breakthrough Thinking for Your Real World • www. ParadigmAssociates.US

OWNER

-Wealth Creation

-Estate & RetirementPlans

-Buy/SellAgreements

-Board of Advisors /Directors

People Have Many Rolesand Conflicting Issues:


MANAGER

-Performance Levels

-Growth and Change

-Outside Managers

-Strategic &Business Plans

-Contingency Plans

-Conformance/Stnds



FAMILY

-Fairness & Equality

-Stability

-Philosophy & Values

-Personal Wealth &Estate

-Family Council



People Have Many Roles andConflicting Issues:

OWNER Wealth Creation Estate & Retirement Plans

Board of Advisors/Directors

Buy/Sell Agreements

MANAGER Performance Growth & Change Outside Managers in Place Key Executive/Contingency Plan

Strategic & Business Plan Conformance to Policies & Procedures

FAMILY Fairness & Equality Stability Family Philosophy & Values Personal Wealth & Estate Planning

Family Council up & running

Problems Arise in the Overlap


Suggestions for Families

I Regardless of age, train next gen to beindependent and think for themselves

II If younger, can next gen apprenticesomeplace other than the company?

III Have rules for entry into the businessIV Have a key employee, coach or mentor to

objectively appraise performanceV Treat family members as employees and

employees as family members


Suggestions for Families

VI Encourage Owners to have interests andpassions beyond the business

VII Recognize that conflict is a natural part of anymeaningful relationship

VIII Plan for continuity, succession, retirement,estate taxes, and long term business strategy

IX Provide development and training for thesuccessor generation

X Remember that business is business andfamily is family


The Role of Every Executiveis to THINK, CHANGE andOPERATE.

Peter Drucker


THINK & CHANGE

Each family Business is unique however all have similar needs:

• Owner’s Plan

– Overall Plan - What’s the Family commitment to thebusiness and how do they create wealth from it

– Estate Plan - How the negative financial impact of a keyperson’s passing will be mitigated.

– Succession Plan - Who will be the new boss and how willthat person be prepared

• Strategic and Business Plan

– Knowing your markets, customers and resources whilemeeting the objectives of Family and Management


THINK & CHANGE


The future is an extension of the past

The Logical Future


We can plan for a different future

The Willed Future


Suggestion for Consensus

At decision time in a meeting, each person is to raise their hand andextend their fingers in proportion to how they feel about the issue.

Number ofFingers

Level of Support

5 I Strongly Support This Decision.

4 I Support This Decision.

3 The Decision Is OK.

2 I Am Uncomfortable With This Decision, But ICan Live With It.

1 I Am Uncomfortable With This Decision, ButDeferring To The Wisdom Of The Group, IPromise Not To Sabotage The Decision.

FIST I Veto This Decision. We Definitely Need ToDiscuss The Matter Further.

Any proposal isaccepted if morethan 75% of thepotential votes(fingers) arecast AND thereare no fists.


THINK & CHANGE


THINK & CHANGE


Keys to Managing Change

Work Hard to Get the New Vision Right

Communicate for Buy-In

Enable Actions

Create Short Term Wins

Don't Let Up

Make it Stick


OPERATE


Successful Family Businesses

• Write a combination Business Plan and Family Plan

• Create an outside Board of Advisors

• Divide the Turf Explicitly

• Formalize Regular Meetings

• Use the Same Accountant for Company &Individual Taxes

• Allow Other Family Members to Offer Perspective

• Annual Retreats to Revisit the Mission

• Remember What’s Important - This is Business


Suggestions for Ownership

Disaster Management PlanFamily Mission Statement & Beliefs DoctrineFamily Business Participation RulesLeadership Development PlanRegular Family Council Meetings


OPERATE

Running the day-to-day


Position Contract Worksheet

Get agreement & Signatures for eachposition / function in your organization -whether held by family or not:

1. Accountabilities to be achieved by this function.

2. The specific work the occupant of the functionmust accomplish.

3. The standards by which results are to beevaluated.

4. The authority necessary to perform this function.


OPERATE

Running the day-to-dayGoals Achievement relatedLeading People


Understand People

Understanding How People Process information &Human Motivation:

-Natural talent for Judgment & Decision Making

-HOW they tend to ACT- Understanding HumanBehavior

-WHY they do things- Values, Attitudes & Beliefs


OPERATE

Running the day-to-dayGoals Achievement relatedLeading PeopleEmbrace Business Process Improvement


Replacing the Irreplaceable You

• Your Outlook:– Monarch - Dies in the Office– General - Says “I’ve let go” but really hasn't– Ambassador - Unobtrusive mentor– Governor - Creates Continuity of Command

• Easing Your Transition– Find another Mission– Outside Board– Sharing the Hiring Process– Get Help From Advisors to Quit

Documents

Doug Brown Paradigm Associates...passions beyond the business VII Recognize that conflict is a natural part of any meaningful relationship VIII Plan for continuity, succession, retirement,