Succeeding for generations - EY Family Business · 2013-09-23 · 2 Succeeding for generations Succeeding for generations 3 Family businesses contribute significantly to economies

Succeeding for generationsStories of the world’s most enduring family businesses

Succeeding for generationsStories of the world’s most enduring family businesses

Succeeding for generations2 3Succeeding for generations

Family businesses contribute significantly to economies around the world — but they are often content to stay out of the limelight. For the

leaders of these businesses, the most important stakeholders are not shareholders or markets, but their family and the next generation. Through prudent investment and steady growth, they seek to pass on a stable, dynamic legacy to their children and grandchildren.

Succeeding for generations celebrates these exceptional companies. Through in-depth interviews and stunning photography, we trace the histories of some of the world’s most enduring family businesses as they navigate through wars, recessions and market revolutions.

By always keeping their eyes on the horizon, and with the experience of many decades — or even centuries — behind them, family businesses are better equipped than most to deal efficiently and successfully with both internal and external challenges. But while family businesses have much in common, each one is as individual as a fingerprint. The selection in Succeeding for generations reflects this.

Spanning 14 countries and 2 continents, our featured companies range from wine merchants to banks, and from manufacturers to publishers. Some maintain an all-family management board, while others have handed over the day-to-day running of the company to outsiders. Some have remained in the sector in which they were originally founded, while others have diversified into a number of different industries. Some have been passed down through many generations, while, in others, the third generation is only now making its first foray into the business.

Longevity is a key trait of family businesses — many of our featured companies have been in existence for well over a century. But these businesses are not trapped in the past. Constant innovation is crucial to surviving and competing in a rapidly globalizing world. Long-running family businesses know this better than anyone.

Ernst & Young is no stranger to the unique challenges these companies face: our global organization is the result of the merger of two long-running family businesses. We are therefore pleased to have brought you Succeeding for generations. It’s our tribute to a special breed of business.

We hope you enjoy their stories.

The history of Ernst & Young 4Bankhaus Spängler Austria 7Rothschild France 15Obeikan Investment Group Saudi Arabia 21 Esteve Spain 27Oras Invest Finland 31 Avantha Group India 35De Agostini Group Italy 41 Prym Group Germany 47 WICOR Switzerland 53Barceló Spain 61Berry Bros. & Rudd United Kingdom 65Papadopoulos Greece 73

Contents

Arvid Nordquist Sweden 77Van Oord The Netherlands 83GMR Group India 89The growth DNA of family business 92

Introduction

Timelines Banking 12 Cosmetics, fashion and luxury goods 24Media and publishing 38Automotive 58Food and drink 70 Shipping 80


Ernst & Young

Ernst & Young was born out of two family businesses. To this day, it retains the spirit and determination of its founders

Roots intertwined Companies like Ernst & Young mature rather than grow. They thrive in the rarefied air of big business, becoming an integral part of corporate

life and part of the fabric of commerce and industry. Today, the organization employs more than 140,000 people, operates in

more than 150 countries and has combined global revenues of US$21.3b. The figures can be overwhelming. Indeed, with such reach and scale, it is easy to forget Ernst & Young’s humble beginnings.

It’s hard to pinpoint the exact moment Arthur Young’s career began in earnest. Like that of so many great ambassadors of business, his story is peppered with unforeseen twists and unexpected turns, with the catalyst for his success conspicuous by its absence.

The young Scot certainly didn’t set out to become one of the world’s most influential businessmen. In fact, his earliest ambitions were modest to say the least. “I was interested in sports, being particularly active in rugby football,” he noted in memoirs written at the behest of his partners. “As part of the science course … I competed with other boys in preparing a collection of specimen insects and received a certificate for the best collection in my class.”

His competitive spirit would see him become captain of the rugby team while studying for a master of arts degree at the University of Glasgow, and his steely determination would ensure he attained a bachelor of laws degree while serving an apprenticeship at a Glasgow law firm. But while these achievements accurately illustrate his aptitude for sports and learning, they do little to explain his remarkable ascent in the world of business.

Oddly enough, it was his faltering hearing that set the wheels in motion towards the creation of Arthur Young & Company, the firm he formed with his brother, Stanley, in the US in 1906.

After having traveled to Switzerland and Algeria in search of refined air to aid his failing senses, and then being confronted with the realization that his handicap would prevent him from following a career in law, Young sought his fortune in the United States, joining J. Kennedy Tod & Co. — an international bank set up by another Scot and managed by an old classmate — in 1890. The experience was invaluable and bore fruit when Young set up his first accountancy venture with Charles Stuart in 1894 — with funds of just US$500. Twelve years later, the partnership dissolved and Young began again with his brother. In its first year, the ensuing firm secured fees of nearly US$100,000. It took a further six to reach US$125,000, but Arthur Young & Company was off and running and soon developed a reputation as a safe pair of hands.

Around that time, in about 1903, Cleveland-born Alwin C. Ernst, at the tender age of 21, started a small public accounting firm with his older brother, Theodore. Ernst & Ernst flourished and soon took on more partners, who benefited in particular from the US’s permanent introduction of income tax in 1913 and the resulting surge in demand for accountants.

Although his timing proved to be flawless, Ernst had to start at the bottom, beginning his bookkeeping career straight out of school. He was a quick learner and soon started cultivating his own ideas about how accountancy could produce information that would not only help

businesses, but also control and direct them. While this notion is widely acknowledged today, at the turn of the last century it was, at best, speculative and, at worst, fanciful.

In its first year, the company recorded a total income of US$9,831.33. By 1911, this figure had grown to US$250,000, thanks in part to Ernst’s progressive approach, but also his belief in promotion and business development. He was quick to recognize the merits of his workforce, stating in Ernst & Ernst’s 1920 operating memorandum that “the success of Ernst & Ernst depends wholly upon the character, ability and industry of the men and women who make up the organization.”

With foresight and resolve, Ernst built his company on these guiding principles. He persisted with his idealism, but also became acutely aware of the significance of the team he had created. Perhaps as telling as any other anecdote is that, during his 45-year management career, only a handful of people left.

Alwin Ernst and Arthur Young, whose names have become synonymous with modern business, had much in common. Both started family accountancy firms with their siblings and both found success during a period of great change. With so many similarities, it seems ironic that the two never met, dying within days of each other in 1948.

Forty-one years later, however, their legacies combined when the two companies merged to make Ernst & Young. The union brought together the spirit and determination that helped shape two of the great international companies of modern times. Arthur and Alwin would have been proud.

1860s 1930s1920s 1980s

1849 Harding & Pullein is founded in England. Frederick Whinney joins.

1939 Thomas Clarkson joins forces with Woods Gordon & Co. to expand into management consulting.

1881 Alwin C. Ernst is born.

1930s Arthur Young & Co. is the first firm to recruit from university campuses.

1903 Theodore (left) and Alwin Ernst (right) form Ernst & Ernst in Cleveland, Ohio.

1948 Alwin Ernst and Arthur Young die within days of each other. They had never met.

1944 Clarkson Gordon & Company allies with Arthur Young & Co.

Alwin C. Ernst Arthur Young

1859 Frederick Whinney is made a partner.

1863 Arthur Young is born.

1864 Thomas Clarkson starts a trustee and receivership firm in Toronto.

1894 Young starts his first firm, Stuart and Young, in Chicago. In the same year, Harding & Pullein is renamed Whinney, Smith & Whinney.

1890 Arthur Young moves to the US to pursue a career in accounting.

1906 Arthur (right) and his brother Stanley (left) form Arthur Young & Co. in Chicago.

2000 Ernst & Young unveils a new, integrated global organization.

1924 Arthur Young allies with Broad Paterson & Co., England, while Ernst & Ernst teams up with Whinney, Smith & Whinney.

1979 Ernst & Whinney forms and becomes the fourth-largest accountancy firm in the world. Arthur Young’s European offices join several large local European firms.

1989 Arthur Young merges with Ernst & Whinney to create Ernst & Young.

1850s 1890s 1940s 2000s1931 Alwin Ernst (by the fireplace, with his wife) celebrates his 50th birthday.

Succeeding for generations6

Bankhaus Spängler

7Succeeding for generations

In the past 180 years, economic crises have come and gone. Through it all, by staying true to its key principle of self-discipline, Austrian private bank Bankhaus Spängler has thrived

The long view

Heinrich Spängler was given a mysterious wooden cigarillo box when he succeeded his grandfather at Bankhaus Spängler in Salzburg,

Austria, in 1970. He had seen the box before, while working alongside his grandfather, Carl Spängler, a senior partner in the bank. It was a Dannemann cigarillo box, but Heinrich knew it held something besides his grandfather’s tobacco. Always eager to use any chance to pass along his ideas to the next generation, Carl Spängler presented his grandson with the box and said: “Don’t open the box until I die.”

Six months later, in 1971, Carl Spängler passed away and Heinrich became the sixth generation of the Spängler family to join the bank’s management. According to his grandfather’s wishes, Heinrich carefully reached for the box, flipped open the lid and lifted out 50 small pieces of paper. The piece on top said: “Fifty years of banking experience.” Below that, Heinrich found that each sheet contained a kernel of wisdom about the family’s banking philosophy. One sheet said: “A loan is only good business when it is being paid back.” A second said: “The government or the church is not necessarily a better debtor.” A third stated: “If somebody starts to build a house, as constructive as this is, be careful.”

Looking back, Heinrich says his grandfather probably didn’t want him to open the box earlier because its contents were so simple. However, the banking truisms captured there illustrate the conservative style of the generations of Spänglers who have led the bank. To nurture that philosophy and ensure that it is adhered to, the Spängler family has written a mission statement and formed a family council. The council holds two

formal meetings a year to discuss the family’s business and succession plans and allow members to exchange information. “What’s important is that our family identifies itself with the firm, holds up its values, communicates what’s going on and avoids quarrels,” says Heinrich, who is now Chairman of the bank’s supervisory board.

The Spänglers captured some of their key goals for the bank in the mission statement, including the desire to remain independent. At the same time, they acknowledge that remaining independent means being content with only moderate growth. Bankhaus Spängler consciously avoids investments that are too risky, and the bank generally uses about two-thirds of its customers’ deposits for loans to other customers. “Our customers know that the family wants the company to last for the long term and is not speculating in order to have a bigger profit,” says Heinrich. “During the financial crisis of 2008, when people did not know where to put their money, the deposits at Spängler grew by double digits.”

To keep risk down, for instance, all interbank counterparties are subjected to a credit assessment procedure and a limitation, depending on the party’s specific credit standing, and Bankhaus Spängler does not hold any credit derivatives. The bank also pays particular attention to liquidity risk, something it sees as critical for safeguarding the bank’s independence. This risk is consistently monitored with capital tie-up analysis and other early-warning indicators.

Another approach codified in the mission statement is the goal of remaining family owned and family controlled, but not necessarily family

Above Alois Spängler (1800–1875), father of the bank’s founder, Carl Spängler. Alois was the first family member to enter the banking world and was later mayor of Salzburg

Opposite Chairman Heinrich Spängler on the roof of Bankhaus Spängler in Salzburg


Overleaf Heinrich Spängler on top of the world

9

Bankhaus Spängler

Succeeding for generations

managed. “The best-qualified members of each generation should represent the family owners on the board,” says Heinrich. “If the family cannot agree or nobody can be found from the family to take over a position, then the family should focus on its role as the company’s owners, leaving the open position to a non-family member. Being family managed is a goal, but not the most important one.”

For 166 years, the bank operated as a partnership run by four family members. As of 1994, Spängler became a joint stock company with all its shares owned by the family. The corporation has since been overseen by a management board and a supervisory board, a structure typical in Austria, Switzerland and Germany. The bank’s current staffing of those positions is fully in line with the family’s mission statement. Two family members serve on the eight-member supervisory board: Heinrich Wiesmüller, the son-in-law of the late Richard Spängler, who was a senior partner with Carl Spängler; and Heinrich Spängler himself. Franz Welt, the grandson of Richard Spängler, also serves on the four-member executive board, acting as the bank’s risk manager. “This is something we learned during our decades of business,” says Heinrich. “Mixed boards are the best possible way to manage the company if you want to take advantage of both the family’s insight and the best talent available on the market.”

The roots of Bankhaus Spängler go back to a medieval trading business that started with the transport of salt to the south and the import of wine, silk and spices from Venice. Originally, the Spänglers were winegrowers and innkeepers in southern Tyrol. Then, two cousins set out — one to Salzburg and the other to Venice — and began to supply the archbishops who ruled Salzburg at the time with wine and silk. The bank emerged from

that trading business in 1828 and moved into its present-day headquarters on Salzburg’s Salzach River at the beginning of the 20th century. Built in 1881, the building is a former bazaar designed by Salzburg architects Valentin and Jakob Ceconi. On warm days, employees can be seen strolling between the building and the riverfront during the official lunch break, for which the bank closes.

Proud of its history as a family-owned company, Bankhaus Spängler supports other family-owned businesses with its banking services and with training sessions and discussion symposiums. A recent forum, for instance, featured Karl Weisskopf, the head of the German family-owned manufacturing group Liebherr International, speaking about the differences between listed companies and family-owned businesses. Bankhaus Spängler also teams up with the Institute for Management to offer custom-tailored courses for people running family businesses. Classes are offered on 13 days throughout the year in the rococo Leopoldskron Castle in Salzburg.

The company’s long survival was made possible because it has been carefully handed down from one generation to the next. Today, the seventh generation, represented by Markus Wiesmüller and Carl Philipp Spängler, works at the bank in its family management department, which provides personal and comprehensive service to wealthy private clients and families. It advises on challenges specific to family companies, such as the transfer of wealth, successor selection and risk management.

Officially called Bankhaus Carl Spängler & Co., the bank operates at 13 locations, has a staff of 240 and focuses on two primary areas of business: interest-bearing business such as deposits and loans, and securities, asset

management and family-office services. It also owns a capital investment company, Carl Spängler Kapitalanlagegesellschaft, which employs 30 people and has issued more than 100 investment funds. Close to half are publicly offered in Austria, Germany and Switzerland.

Of course, the banking sector has changed tremendously since Bankhaus Spängler was founded 183 years ago, but the bank’s conservative philosophy has seen it through several banking crises and two world wars. “We face new challenges and opportunities in a world changing faster than ever before, but we believe we can cope with these changes due to our manageable size, speed to market, understanding of our own goals and skillful organization,” Heinrich says. “Our business model shows that this is possible if you take the right approach, combining optimism and the necessary modesty.”

He describes the bank’s business model as one based on responsibility, business awareness, positive thinking, humanity and, above all, decency toward partners, employees and customers. And exercising these character traits is a message that Heinrich relays to the next generation of Spänglers, who will be taking over in the coming years.

So far, however, Heinrich is not planning to leave that advice in a wooden box on his desk like his grandfather did. That’s because the next generation of the family already knows the story of the cigarillo box very well. “It all goes back to what my grandfather taught me: the value of self-discipline. The next generation should stick to the bank’s philosophy, deciding on given situations with responsibility, awareness and the necessary open-mindedness,” he says. “My grandfather often quoted Gustav Mahler as saying: ‘Tradition is not to conserve the ashes, but to hold up the flame.’”

Above, from left Carl Spängler (1825–1902), the founder of Bankhaus Carl Spängler & Co.

Carl Spängler (1894–1971), grandson of the bank’s founder. He gave his grandson, Heinrich, the cigarillo box of banking truisms

Franz Welt is the grandson of Richard Spängler and serves on the four-member executive board

Markus Wiesmüller works in the bank’s family management department, which provides a service to wealthy private clients

Carl Philipp Spängler and Markus Wiesmüller represent the seventh generation of the family

Above, from left Heinrich Spängler (left), Chairman of the supervisory board, and Dr. Heinrich Wiesmüller, Honorable Chairman of the supervisory board

Members of the executive board, (from left): Dr. Rudolf Oberschneider, Dr. Helmut Gerlich, Franz Welt and Dr. Werner Zenz

Right Carl Spängler (1864–1902), son of the bank’s founder. He was married to Katharina Mayr, whose father owned the tavern Zum Goldenen Schiff in Salzburg


Bankhaus Spängler

Succeeding for generations 11


Timeline: Banking

The history of banking runs from gold lending to electronic transfers — and everything in between

BankingThe engine of the global economy

1811

1953

1828

1953 Edmond de Rothschild, of the French Rothschild family, establishes the self-named Swiss private banking group.

1889 The Hong Kong and Shanghai Banking Corporation is founded in 1865 to finance the growing trade between China and Europe. The founder, Scotsman Thomas Sutherland, wants a bank operating on “sound Scottish banking principles.” Still, the original location of the bank is considered crucial and the founders choose Wardley House in Hong Kong.

1100 1200 1300 1400 170016001500 1800 200019001800BC 400BC

1983

1948 Akbank Haci Omer Sabanci founds the Sabanci bank as a

shareholder. Today, the Sabanci Group is an industrial and

financial conglomerate, still 60.6% owned by the family.

1690 First incarnation of Barclays Bank

400 BC Banking becomes more sophisticated in ancient Greece, when credit transfers take place in different geographical locations without physical money changing hands.

Early 19th century Mayer Amschel Rothschild’s five sons set up businesses in Frankfurt, London, Paris, Vienna and Naples. They develop systems to exchange coded market information and build a successful business that remains in the family today.

1784 The Bank of New York is founded on 9 June 1784, making it the oldest bank in the US. Alexander Hamilton, founding father and US Treasury Secretary under George Washington, writes its constitution. A little more than 220 years later, the bank merges with the Mellon Financial Corporation to become the Bank of New York Mellon.

Bankhaus Spängler is founded in Vienna — but its roots go back to a medieval trading business.

1800 BC It is common for people to keep their valuables in temples. Priests begin lending gold to those who need it and so the concept of banking begins to develop.

1100 During the third century AD, banks in Persia and other territories in the Persian Sassanid Empire issued letters of credit known as sakks. Fragments found in the Cairo Genizah indicated that, in the 12th century, checks similar to today’s were in use.

1472 The oldest bank in the world, Monte dei Paschi di Siena, is established in February 1472 by the General Council of the Siena Republic to grant loans to “needy persons” at a minimal interest rate. The bank moves beyond its charitable role in the 16th century and assists farmers and city institutions.

1587 The first public bank is set up in Venice as a state scheme to keep merchants’ money safe

and allow financial transactions without the physical transfer of coins.

1661 The first bank notes to be issued in Europe are created in Sweden, some time behind China, where paper currency has been used since the seventh century. Stockholm Banco issues the notes because customers were demanding the return of coins that had been lent out. Instead, the notes can be used as currency and eventually exchanged for coins.

1770 Gurney’s Bank is founded by brothers John and Henry Gurney. It later merges with Barclays Bank.

1781 The first chartered bank is established in Philadelphia in 1781. By 1794, there are 17 more. At first, bank charters may only be obtained through an act of legislation. But in 1838, New York adopts the Free Banking Act, which allows anyone who meets certain legal specifications to engage in banking. 1967 The world’s first ATM

comes into public service in London. It works by matching

radioactive checks with PIN numbers. Inventor John

Shepherd-Barron plans to make PINs six digits but his wife can

only remember four, so that becomes the global standard.

1983 The first system to allow customers to access their bank accounts from home electronically, using a computer and phone line, is launched in Britain.

1993 France begins a trial of the chip and PIN system for credit and debit cards, which stores users’ information on a chip instead of a magnetic strip.

2008 The US and UK Governments provide billions to shore up banks in the midst of the global financial crisis. There follow a swathe of new regulations for banks, including a measure to force banks to hold more capital in reserve.

1994 The Stanford Federal Credit Union becomes the first bank to offer its customers internet access to their accounts.

1946 Fidelity Investments is founded in Boston, Massachusetts.


Rothschild

One of the world’s most famous families, the Rothschilds have maintained a focus on philanthropy and sustainable business for more than two centuries

Deep roots

The Rothschild dynasty began simply: with one man and his five sons. In the early 19th century, Mayer Amschel Rothschild sent his sons

abroad to establish a European network of banks. Salomon went to Vienna, Amschel to Frankfurt, Nathan to London, Carl to Naples and James to Paris. But little did he know that, 200 years later, the business empire that bore his name would be among the most respected in the world, having contributed to the industrial, financial, social and cultural history of many nations. Today, Rothschild is one of the world’s largest privately owned banks. Its 49 offices in 26 countries provide global financial advisory, corporate banking and private banking and trust services to governments, corporations and individuals.

Only the London and Paris branches of the family have survived the many upheavals of history, but the Rothschild philosophy remains as strong as ever. Baron Benjamin de Rothschild, descendant of dynasty founder Mayer Amschel, believes that the family’s motto, “Unity, integrity and activity,” has enabled it to survive and evolve. “Unity” refers to the family’s belief in emphasizing general interests over personal ones. “Integrity” points to ethics and mutual respect between a banker and his clients. “Activity” signifies a love for work and a passion for the banking profession. “Our values are just as important as our aims; they are the cornerstone of our identity,” the Baron says. “It is these values that have enabled us to ride out both present storms and those to come.”

In the 1860s, Benjamin de Rothschild’s grandfather, Baron Edmond, took over from his father, James, the founder of the Paris branch of

the Rothschild dynasty. Edmond believed that bankers could not create wealth in the long term if they were not fully involved in the society and country to which they belonged. In the 19th century, the Rothschilds helped the British Government finance its fight against Napoleon and later to build the Suez Canal. They helped the French state develop railways and they invested in land in Palestine, paving the way for Israel’s future industrialization. They funded schools, hospitals, museums and scientific research. They also made their art collections available to the public. “It is this kind of dedication that I strive to preserve and promote,” the Baron says. “There is no sustainable finance without fairness.”

His wife, Ariane de Rothschild, Vice-President of the Edmond de Rothschild group, is dedicated to this particular aspect of the family motto. She is responsible for helping the Maldives Government become carbon neutral by 2020 and for securing international finance and investors to implement wind farms, waste recycling plants and sustainable transport solutions — among other initiatives. At the core of the Rothschild values lies a special perspective on the banking profession: namely, that it must assist, anticipate and grasp the challenges of the modern era.

The Rothschilds strive to adhere to this philosophy even in their non-banking activities, of which there are many, from education to wine. The family, for example, produces brie at the Ferme des 30 Arpents in Seine-et-Marne just outside Paris. Ferme des Arpents Brie is currently the only French brie with an official farm label; the entire manufacturing process is

Above The Rothschild family’s newly renovated home in Judengasse, Frankfurt am Main, 1887

Opposite Ariane de Rothschild is committed to securing funding for various environmental initiatives


Rothschild

environmentally friendly. It also supports the regional economy by ensuring the continuation of one of France’s most famous products: cheese.

“Our non-financial businesses always bring us back to reality,” says Ariane de Rothschild. She believes that one of the causes of the recent financial crisis was the excessively large gap between the real economy and the financial economy: finance must be at the service of the economy, not the other way around. In the new world now taking shape, even if it takes some time finally to emerge, she believes that balance, sobriety and moderation will be key issues.

The current financial climate has been a testing one for family empires, with companies capitalizing on economic turmoil in order to make acquisitions and even hostile takeovers. For the Rothschilds, however, this sort of activity goes with the territory when you are involved in global economic competition. In their view, family businesses actually have a greater ability to withstand onslaughts of this sort by reacting quickly and battening down the hatches: by definition, they have much better control of their capital. This, combined with in-depth knowledge of their market, creates a solid footing for future growth and defense of the business.

Another key issue for family businesses, and Rothschild is no exception, is succession. It can be a complicated process, particularly in a long-running company with an international profile and a sprawling family tree.

The key word is preparation. For more than 200 years, the Rothschilds have been careful to plan for the handover to the next generation well in advance and to involve the younger generations in the family business at an early age. The Baroness sums up the Rothschild savoir-faire in transmitting the business from one generation to another: “We have four daughters who, despite their young years, are completely au fait with our business affairs. They often accompany us and we frequently discuss family business with them. They are aware that, in later life, they must undertake duties and responsibilities, but we also attach a great deal of importance to their personal development. We want them to choose freely their lifestyles and their careers, bearing in mind that they have a name, a background and a memory to honor.”

For the Rothschilds, philanthropy and the arts have been inextricably linked to the type of capitalism they helped invent in the 19th century. From the very beginning, they have felt that their privileged inheritance brought with it solidarity, social responsibility and a duty to contribute to universal knowledge. Today, the Rothschild family runs 12 foundations, which focus on education, medical research, intercultural dialogue, culture and social entrepreneurship. It is a global endeavor, with bases in Geneva, Paris, New York, London, Jerusalem, Barcelona, Mumbai and Cape Town.

Above, from left The Rothschild coat of arms shows the family motto: “Unity, integrity and activity”

The five sons of Mayer Amschel bring their goods to the Elector of Hesse, in pastel, by Moritz Daniel Oppenheim, 1861

Opposite, from left The five brothers were sent abroad in the early 19th century to establish a European network of banks

An oil painting of Baron James de Rothschild, also by German painter Moritz Daniel Oppenheim


Rothschild

While the Rothschild bank is a modern business in every sense of the word, the family behind it is keenly aware of the weight of both history and their responsibility to future generations. For Benjamin de Rothschild, the past 25 years have shown that too many companies have had short-sighted and single-minded aims; too much external growth with too little thought behind its implementation. Good business, he believes, requires loyalty, foresight and looking beyond whatever is trendy or profitable at the time. But this conservative approach does not mean that a business must forsake growth in the name of stability. Benjamin de Rothschild likes to quote the economist Joseph Schumpeter, who said: “Motorcars travel faster than they otherwise would because they are provided with brakes.” Family groups can travel fast, but they rarely have accidents. The Rothschilds’ advice to future generations is to introduce changes so that nothing really alters — to maintain the features that have created and sustained the company’s success over the centuries.

Prudence, responsibility and a keen eye for judging the ways of the world, coupled with a rare independence, are the main assets that have kept the Rothschild brand thriving for more than 200 years.

This page, from left Interior courtyard of a gothic palace with a falcon attacking a duck and a peacock, School of Altichiero. The artwork uses coloured ink on parchment and is part of the Edmond de Rothschild Collection at the Louvre Museum

Baron Edmond de Rothschild

Opposite Baron and Baroness Benjamin de Rothschild

The Rothschilds and artThe Edmond de Rothschild Foundations have a longstanding tradition of support for the promotion of arts and culture. Each generation has made its own contribution to building an exceptional philanthropic legacy, and our current initiatives continue to exemplify this commitment. One legendary example is the prints and drawings collection donated to the Louvre Museum by Baron Edmond de Rothschild; another is the launch of the Ariane de Rothschild Prize to recognize the talent of emerging artists from across Europe.


Obeikan Investment Group

Now in its second generation, this Saudi Arabia-based manufacturer is preparing for further expansion — and succession

The evolution of Obeikan

Abdallah Obeikan draws a parallel between business and Charles Darwin’s natural selection thesis, in which the 19th-century English

naturalist claimed that more evolved species were better equipped to adapt to certain environments. Considering that his own enterprise, the Obeikan Investment Group (OIG), has accrued US$1.3b worth of assets, it is a subject that he is well placed to comment on. In his mind, a successful company starts out as a baby and goes through teething, childhood and its teenage years before becoming an adult. The businesses that make it this far, he believes, have evolved and adapted to their environment and have emerged as the strongest survivors. In his mind, you are either a lion or you get eaten.

OIG’s own survival story, from inception to industry leader in the Middle East and North Africa (MENA), started in 1982 when Abdallah’s brother, Dr. Fahad Al Obeikan, launched it with their father. At the time, the business was just a commercial printing operation with few staff and a modest turnover. But the first shoots of growth started to appear three years later when Abdallah, a fresh-faced, 23-year-old electrical engineering graduate, joined the business straight from university.

By the time Abdallah arrived, OIG had 120 employees and was generating US$2m in sales; it was a solid start for a relatively new family business, but not enough to satisfy Chairman Dr. Fahad’s ambitious plans. Abdallah’s older brother believed that diversifying into other sectors, such as printing educational books and producing certain types of packaging, was key to the company’s ongoing evolution. Further expansion followed,

with profits made from OIG’s existing operations reinvested throughout the 1990s to establish a book store, food-container and product-packaging businesses, a paper mill and a technical fabric operation.

Growth was steady but sure, with Abdallah and his team convinced that the group’s success hinged on a number of factors. The first was to offer a total solution in both the packaging industry and educational services, Obeikan’s main businesses. Establishing strategic alliances with businesses operating in the same industries has also contributed to the group’s expansion. Since its inception, OIG has formed partnerships with companies in the packaging and education industries throughout Saudi Arabia and the MENA region.

Finally, exporting has made a big contribution to OIG’s growth, with 60% of its products and services sold throughout the MENA region, as part of the company’s strategy to establish a customer base beyond Saudi Arabia. Its network outside of its home country is growing rapidly, with more than 16 offices and 500 employees across the region.

According to Abdallah, these strategic moves have built OIG into a large-scale business. It has a total of 5,000 employees, including Abdallah’s brothers Mohammed and Omran, product distributors in more than 70 countries and nearly US$1b in sales since inception.

Continuing that development, and maintaining the group’s steady 20% year-on-year growth, is the main objective for the coming years, according to Abdallah. Anything more, and OIG’s expansion will become uncontrollable. “Managing the speed of growth is beyond our capability

Opposite Abdallah Obeikan in the Bastakiya quarter, one of the few historic areas in Dubai and home to the emirate’s oldest building


Obeikan

without the right level of control,” he says. “It is much more difficult to deal with surprises when driving at 200km an hour than it is at a lower speed.”

Having been at the helm alongside his brother, Dr. Fahad, for many years, Abdallah is accustomed to the skills and qualities needed to manage a growing business. But with plans to retire in eight years’ time, the 47-year-old Abdallah realizes that he must eventually find a worthy successor with similar attributes to take up the reins.

With this goal in mind, he has attended Family Business Center courses — held by international business school IMD — on developing long-term succession plans and the typical challenges executives face when handing companies over to the next generation. Of the lessons learned during the courses, the most important, Abdallah says, is to make sure the right people are in place to “manage and control” the business, months or even years before the handover.

As part of the group’s handover plan, Abdallah has also held informal talks with the board about finding a natural leader to take over the company. “You have to be gifted to be a leader,” he says. “You have to have charisma, leadership skills and the ability to manage disagreements and encourage people. A leader is not something you can describe; you just know it when you see it and it must be in your DNA because you cannot learn it. Some people are born to be a number two, while others are born to be an administrator; not everyone can be a leader.”

He says that he and his brother are likely to handpick a top-level executive who has climbed the ranks and worked with the group for several

years. It remains to be seen whether that person will be a family member, but Abdallah believes nothing is more important than appointing someone who upholds the company’s values. “You must have the right people with the right values and vision to make a successful business,” he says. “With the right human capital plan in place, you can grow your people and establish an excellent relationship between them and the management. To do this, everyone has to believe they are part of this family and part of this company, which helps create good leaders.”

Abdallah adds that it is essential to build a platform to nurture young leaders and find fresh blood to drive the business forward. Satisfying this aim, 300 Riyadh Polytechnic Institute students are chosen each year to join OIG, where they undergo two and a half years of intensive training. From there, the students develop into hard-working professionals with the skills, aptitude and determination to help expand the business. “We take these students and develop them into first-class operators,” Abdallah says. “There is an internal assessment center to monitor their progression and develop them into a new generation of leaders for this company.

“I don’t believe in bringing people from outside,” he adds. “If you feed your business with good people, you can and will continue growing successfully, which is exactly what we are doing.”

Opposite Abdallah Obeikan stands in front of a building that is topped with a wind tower, a cooling design that pre-dates the arrival of air conditioning

Succeeding for generations24 Succeeding for generations 25

Timeline: Cosmetics, fashion and luxury goods

In economic terms, the finer things in life are global heavyweights

Cosmetics, fashion and luxury goodsObjects of beauty

1932 Revlon is founded by Charles Revlon and his brother, Joseph.

1872 Arinobu Fukuhara founds the Shiseido pharmacy. It is now a global cosmetics company, but in its early days it also brought ice cream to Japan.

4000BC 18001500 1900 2000

1923 The designer Coco Chanel gets a suntan on a cruise to Cannes and makes sun-kissed skin fashionable. Having a tan grows in popularity, with beach holidays and sunbathing en vogue.

2 AD The Romans use oil to clean their skin and hair, rather than soap, scraping the oil off their skin to get rid of dirt. They also have skin creams made of olive oil, beeswax and rosewater. Red okra is used as rouge, and soot darkens and extends the eyebrows. They even use crocodile dung as a face mask.

3000 BC The Chinese stain their fingernails with substances such as beeswax and egg. The colors signify social status and lower classes are forbidden from painting their nails. Red is a popular shade, along with gold, silver and black.

1500s In Europe, a pale complexion is considered fashionable because the upper classes do not have to work outside and so are pale skinned. Those lower down the social scale try to make their skin look pale by using white powder, which sometimes contains lead. Queen Elizabeth I is well known for her alabaster skin.

1856 Thomas Burberry opens an outfitter’s shop in Basingstoke, Hampshire, England, at the age of 21. The business grows in popularity and he opens a shop in London in 1891. Burberry trademarks its well-known check pattern in 1920, when it is first used on a trenchcoat lining.

4000 BC Ancient Egyptians use cosmetics containing hazardous chemicals, including kohl made from lead and soot. However, literature from the time suggests that people were aware of the dangers of ingesting lead, and recent research has shown they used lead-based makeup to prevent eye infections. Ancient Egyptians also use spices as deodorant.

1837 The Hermès Group, specializing in high-end fashion, accessories and fragrances, is founded by Thierry Hermès. It is still 80% family owned.

1911 Elizabeth Arden is founded by Florence Nightingale Graham, who can be credited with single-handedly laying the foundations of the modern American cosmetics industry.

1888 Mum antiperspirant deodorant is formulated by an unidentified person in Philadelphia. It is a cream that is applied by hand. 1952 Helen Barnett

Diserens, who worked for Mum, is inspired by the ballpoint pen to create roll-on deodorant, which goes on sale in 1952. Aerosol antiperspirant comes to the market in 1965.

1946 Mentored by her chemist uncle, John Schotz, Estée Lauder founds a company that sells four skincare products to salons and hotels. She holds the belief that to sell a product, you have to touch the customer, and insists that everyone is beautiful in their own way.

1987 Moët Hennessy and Louis Vuitton merge to form LVMH, drawing together companies with a rich history. Moët & Chandon was founded in 1743, Hennessy in 1765 and Louis Vuitton in 1854. The group now owns more than 60 brands in wines and spirits, fashion and leather, perfume and cosmetics, watches and jewelry.

1978 Founded by the Jatania family, the Lornamead Group is set up as an international trading house. From these beginnings, it acquires brands known for their customer loyalty, including Yardley and Lypsyl, and is now a globally successful company. The family builds its successful business despite a difficult past; in 1969, they fled their native Uganda when Idi Amin expelled all Asian people from the country.

2000s “Natural” and organic cosmetics and skincare come to the fore, capitalizing on consumers’ concerns about chemical preservatives in products.

4 AD The use of reliquaries — containers for precious objects associated with saints or religious figures — becomes an important part of Christian ritual from at least the fourth century.

3000BC 1000

794 to 1185 Japanese women use white makeup made from rice powder or lead. They use crushed petals to color their lips and, for certain ceremonies, they blacken their teeth.


Esteve


Esteve was founded in 1929, but the family has been involved in the pharmaceutical sector since the 18th century. Now, the third generation is in charge of the family legacy

Chemical reaction

Dr. Antoni Esteve Subirana, the founder of Spanish pharmaceutical company Esteve, used to warn his family that without investment

in continued research, development and innovation, the company would cease to exist. Coming from a family of pharmacists, he used this philosophy to launch a pioneering laboratory whose dedication to hard work and groundbreaking investigation would draw the interest of Nobel Prize winner Dr. Alexander Fleming.

The Esteve family’s involvement in pharmaceuticals began in the 1780s, when Tomás Esteve Gavanyac left the rural idyll of Cerdanya, near the border with France, to work in a pharmacy at the Manresa Public Hospital, about 30 miles from Barcelona. Having found his niche, Gavanyac struck out on his own and established a pharmacy office in Manresa in 1787. Its wooden façade, topped with elaborate wrought-iron accents, can still be seen at the corner of Carrer del Born and Plaça Plana de l’Om.

Almost a century and a half later, in 1929, his descendant, Dr. Antoni Esteve Subirana, set up Esteve with the aim of developing products for the Spanish pharmaceutical market, which was dependent on imports at the time. Rising demand for healthcare products had illuminated the deficiencies in supply, a market trend that Dr. Esteve Subirana seized upon. In its first year, the company made its mark by unveiling its first commercial product, Esterosol, a vitamin D supplement.

The course of history doesn’t run smoothly, however. In 1936, General Franco led a coup d’état against the Popular Front government, plunging Spain into a civil war. This threw up challenges for businesses and

individuals, but at Esteve, life went on, bringing landmark discovery after landmark discovery. Dr. Esteve Subirana was the first pharmacist in Spain to synthesize sulfamides, the original antimicrobial drugs that paved the way for the antibiotic revolution in medicine.

The company’s successes caught the eye of some of the most eminent figures in science. Dr. Alexander Fleming, the discoverer of penicillin, visited the company in 1948 after Dr. Esteve Subirana had himself learned how to make the antibiotic. Fleming’s visit to Esteve’s new head office in Barcelona inspired Dr. Esteve Subirana’s sons, Josep and Joan, and his daughter, Montserrat Esteve i Soler, to turn Esteve into an international company by establishing business relationships outside Spain, a strong R&D structure and strategic alliances with other companies.

In the 1960s, Esteve diversified into veterinary pharmaceuticals and developed a chemistry department. It also formed links with other pharmaceutical companies, including the Belgian company Janssen, and started Isdin, a joint venture in the field of cosmetic dermatology, with fellow Spanish company Puig. By the 1980s, Esteve was the market leader in Spain.

More than 80 years after the company’s launch, the third generation is now in charge. Antoni and Albert Esteve, Chairman and CEO of the group respectively, took over the executive positions at Esteve in 2005. They run it using the guiding principles and standards laid down by their grandfather, but with the business acumen inherited from their father, Josep, who is now Honorary Chairman. The second generation, which

Opposite Brothers Antoni (left) and Albert Esteve on the roof of their head office in Barcelona


Esteve

included their uncle and aunt, Joan and Montserrat, also placed an emphasis on professional management; former Group CEO Joaquim Targa was key to Esteve’s growth. “The skills of our family’s second generation lie in their ability to generate trust in others and go on to establish business agreements after gaining that trust,” says Antoni.

Since taking over, Antoni and Albert have nurtured their father’s dream of international expansion. Esteve is now a global pharmaceutical company and market leader in Spain, with a net turnover of more than €900m (US$1.3b) in 2010. Innovation never stops: about 10% of annual turnover is invested in R&D each year to ensure the company’s future sustainability.

Antoni and Albert Esteve’s formative years were intertwined with the family business. Both gained experience working in companies outside Esteve and, after joining the family firm, learned the ropes in several departments, gaining crucial experience prior to taking up executive positions. “Our grandfather was a scientist and an entrepreneur who never stopped working even after suffering a stroke, but our father is more of a businessman with clear commercial sense, very committed to the company’s growth,” says Antoni.

“We try to be a combination of them, with the values of our uncle and aunt, Joan and Montserrat, and to draw inspiration from both the founder and his successors,” Albert adds.

Today, 370 of Esteve’s 2,900 employees work in innovation and research. The company has established more than 800 patents during its existence and now has six factories dedicated to the production of chemicals for pharmaceuticals: two in Spain, two in China and two in Mexico. Meanwhile, close to 100 million boxes of drugs and medical products leave Esteve’s pharmaceutical product factory in Martorelles, near Barcelona, each year.

Albert believes strongly in investing in research, innovation and industrial development to ensure the company’s future sustainability. “We have a robust pipeline of innovation and development that allows us to keep investing, which is what we think the company will profit from,” he says.

Looking to the future, the Esteve brothers say that their main objective today — increasing the value of the company for the next generation — will be achieved through corporate diversification and further internationalization. They believe that international sales will generate more than two-thirds of the business in five years’ time. In 2010, they accounted for 50%. Further recent diversification has come about through the development of joint ventures, including the establishment of Esteve Tejin Healthcare with Japan’s Teijin Pharma, a company specializing in respiratory therapy.

Two other members of the family have active responsibilities inside the company. Jordi Esteve and Silvia Gil-Vernet, cousins of Antoni and Albert, lead the business development and sustainability areas, respectively. And the Esteve family board, which meets monthly, is made up of 11 cousins (including Antoni, Albert, Jordi and Silvia); its mission is to provide advice and prepare the next generation to take the reins of the company.

As the company has grown, its business interests have become as important as its focus on the family, but the brothers firmly rule out a merger or change of ownership — they believe that a culture of strong family ties helps in tough economic times. Albert adds that operating a private family-run company has the advantage of not being subject to the daily and short-term perils of a publicly listed company, which cushions the business in times of economic recession.

“Our objective is to hand over to the next generation a company that has been improved upon,” says Antoni. “This is a tall order, considering the inheritance we have received.”

From left In 1948, Dr. Alexander Fleming, winner of the Nobel Prize for Medicine (center), visited the Esteve laboratories. Dr. Antoni Esteve i Subirana is on the left

The 18th-century Esteve family pharmacy is still in its original location in Manresa

The pharmaceutical facilities at Martorelles

“We have a robust pipeline of innovation and development that allows us to keep investing, which is what we think the company will profit from”Albert Esteve

“Our objective is to hand over to the next generation a company that has been improved upon. This is a tall order, considering the inheritance we have received”Antoni Esteve


Oras Invest

The Paasikivis are one of Finland’s most successful families, having turned a small metal workshop into a US$1b business. Now it’s the third generation’s turn to shine

Portrait of a family

Owning a company is worlds apart from investing in one, at least for the Paasikivis. One of Finland’s most successful families, they are

second- and third-generation entrepreneurs turned industrial owners. Their company, Oras Invest, has some of Finland’s finest under its wings.

Modest beginnings marked the birth of the Paasikivi family business. In 1945, Erkki Paasikivi founded Oras Ltd. with his wife, Irja, née Oras, in his father-in-law Kosti’s basement. It started out as a small metal workshop producing pretty much anything people needed. Kosti Oras was a firm believer in the younger generation’s skills and knew Erkki and Irja could achieve a lot. Be that as it may, there is no way Kosti could have guessed that Erkki and Irja’s decision to name their little company after him would eventually make his surname an international brand.

The small basement operation took its first steps toward serial production when Erkki managed to get his hands on a batch of surplus grenade shells, which he manufactured into radiator pipe connectors. It seems that once the Paasikivi family was introduced to the winning combination of metal and water, nothing could stop them.

In the 1950s, the business grew in parallel with Finland, a country that was rebuilding itself with unmatched vigor after the war. Water-related foundry products soon formed the core of the business and, by the 1970s, Oras was a synonym for faucets. High-quality, consistent innovation and design collaboration with the likes of Alessi have made the company the Nordic market leader, one of the largest manufacturers of faucets in Europe and an internationally known brand.

Yet today the family business is about much more than this. Oras Invest is an industrial owner with a mission. For the Paasikivis, industrial ownership means never investing mere money in a company. Being part of the family’s portfolio of companies means that the Paasikivis will also invest their time, talent and expectations in a company. They plan on being part of its history.

In addition to owning 100% of the original company, Oras, the family business owns a quarter of Uponor and 18% of both Kemira and Tikkurila — all three are major listed companies on the Finnish stock exchange. All of Oras Invest’s companies operate in water technology, housing solutions or both. At the end of 2010, Oras Invest’s net asset value was more than €650m (US$940m). Not bad for a family business.

“We aim to be the largest owner in our listed companies and majority owner in our unlisted ones,” explains Annika Paasikivi, granddaughter of the founders and board member of Oras Invest since 2006. This is in line with the Paasikivi outlook on business. First and foremost, they are a family business, fully family owned and family run. Second, they are responsible industrial owners. The Paasikivis see nothing wrong with short-term investors; they simply want to make it clear that their approach to business is different.

“Our aim is to act in the best interests of the company,” she adds. “We are not after fast returns, or in it for a three- to eight-year stretch. We are looking for steady profit, healthy growth and a solid foundation for sustainable development. We only seek ownership in companies that we

Opposite Kaj, Annika and Eerik Paasikivi, grandchildren of the founders


Oras Invest

can literally grow old with and then pass to the next generation; companies that will benefit and prosper from the know-how we bring in as owners.”

In 2011, the third generation of Paasikivis, of which Annika is part, is preparing to take the lead. Living up to the success associated with the family name is by no means simple, but it takes only a few moments in their presence to be convinced that this pack will hold their own. Annika, Kaj and Eerik Paasikivi represent the new generation on Oras Invest’s board. Kaj is also a member of the board at Oras Ltd, along with his brother, Risto.

The third generation comprises seven cousins in total, and they meet up regularly to discuss the family business. More cousins may well join Annika, Kaj and Eerik on the board in the future, but no one is forced to take part in the operative business. However, if the rest of the cousins share even a portion of the enthusiasm these three show, it is likely we will be seeing more Paasikivis on the Oras Invest board and in operative roles in the years to come. Admittedly, it is not an easy challenge. Working with your entire family is one thing. Joining a group with decades of unflappable business success is an entirely different matter.

The Paasikivis have the reputation of not having a reputation. Rarely in the public eye, they go from one success to another without so much as a whiff of failure. A track record so good might even be a burden to future generations. Is a family member allowed to make mistakes? “Of course, but preferably in their youth while working for somebody else,” Annika says with a stern face. It takes a moment to grasp that she is kidding. “Seriously speaking, we all share the family’s strong values, which for us

represent a way of life: ownership, vitality, commitment and endurance,” she says. “Together, they spell out the respect we feel toward work. We always live up to these values, whether we are employed by the family or by someone else.”

For Oras Invest, as for any family business, the generation gap is something to be overcome. Some claim a family should not consider a change in generation until everyone — including the older generation — is old enough to respect the rest, regardless of age. “We definitely have mutual respect,” says Annika. “I think I am starting to resemble my father more and more each year. Or perhaps I always did and was not willing to admit it earlier on!

“Even though you are someone’s child or niece or nephew, it does not mean anyone is allowed to treat you as a child after you’ve reached a certain position,” she adds. “This is vital in order to keep the business running, although I must admit that I have one exception to this rule. My grandmother, solid as a rock and one of the smartest people I know, is in her 90s now. She is allowed to tell me off, tell me what to do and treat me as if I still have a lot of living and learning to do before she deems me a grownup. From her perspective, I gather I still do have a thing or two to learn about life.”

Oras Invest could make a full generation shift at any point, but the family is in no particular hurry. There is a large enough age difference between Pekka, Jukka and Jari — Annika’s father and his two brothers — to keep things running smoothly. Annika and her cousins hope that Jari,

who is the youngest brother and CEO of Oras Invest, will stay with the company for a good 10 years after Jukka and Pekka retire.

“Not that I believe my father or any of his brothers would ever actually retire,” Annika laughs. “Mark my word, all three will be in and out of here, pottering about, for as long as they live. This business is a part of who they are. I would say that this is one of the best things about being in a family business. It is virtually impossible to lose knowledge due to key people leaving or retiring. We’re in this for life.”

Above The founders of Oras, Irja and Erkki Paasikivi, in the 1950s

Right Early Oras products at a fair in 1959

“We all share the family’s strong values, which for us represent a way of life: ownership, vitality, commitment and endurance”Annika Paasikivi


Avantha Group

The Thapar family has been in business for nearly a century. A split in the second generation paved the way for Avantha, now one of India’s biggest conglomerates

Future gazing

Hanging on the walls of the Avantha Group’s headquarters at Thapar House in New Delhi is an art installation of large clocks. Somewhere

in the middle, there is one that purports to tell the time in Pataal (“netherworld” in Hindi). “This one goes anti-clockwise,” explains Gautam Thapar, Chairman and CEO of the US$4b Avantha Group.

So let’s go back in time to 1919, when Thapar’s grandfather, Karam Chand Thapar, founded what would become the Thapar Group. He started out in the coal-trading business in the early 1920s and, over time, built up assets and entered into manufacturing. He made forays into industries ranging from textiles and chemicals to sugar, banking, insurance and paper. He had four sons and eventually passed the Thapar Group to his third son and Gautam’s uncle, Lalit Mohan Thapar. When it came time to think about the third generation, Lalit had been grooming his nephew, Vikram, to take over the business — but ended up choosing Gautam as the successor instead.

It’s a situation that family businesses dread: how do you solve the problem of two or more family members competing for the top spot? There is the potential for hurt feelings, endless mediation and even court battles.

But not in the Thapar Group’s case. Gautam had never expected to become leader of the group; in the 1980s, he was studying chemical engineering in the US. He returned to India in 1985 to join the family business, and had risen in Lalit’s estimation after turning around the fortunes of group companies such as Andhra Pradesh Rayons, Ballarpur Industries (BILT) and Crompton Greaves (CG). Therefore, Lalit, who

Opposite Gautam Thapar at Avantha’s New Delhi headquarters. One of the clocks in this installation runs backwards, purporting to tell the time in the netherworld


Avantha Group


never married, left his share of the businesses to Gautam in 2005 when he retired.

The Thapar empire divided in its second generation, unlike most family conglomerates, which tend to split in the third. A four-way division of the family’s assets in 1999 was followed by a separation between Gautam and his older sibling Karan in 2005. Unlike other splits, however, the Thapar Group partition was a rather amicable one. Instead of fighting with his cousins over the family name, Gautam Thapar decided to drop the baggage of the past and rebrand his group businesses as Avantha in 2007.

But no matter how amicable the split, a change of that magnitude was never going to be without its difficulties, particularly in the immediate aftermath. It took time to financially consolidate the holdings and resolve pending issues. “We lost time,” admits Thapar.

And so a new era began. Yet Thapar feels that Avantha and the original Thapar Group have a lot in common. “My grandfather was someone who relied on professionals. That culture is still there,” he says. “Moreover, he was a risk-taker. But then, he learned his lessons rather quickly. That quality lives on in the group.”

In practice, Thapar puts decisions into two categories: those that are good for the individual businesses and those that are good for the group. He takes the lead on the latter, looking strategically at what will drive growth in the group, and leaves the day-to-day running of the individual businesses to their respective CEOs. His strategy is working. In recent years, he has globalized the group’s operations, made acquisitions and

expanded capacities. The group has manufacturing facilities in more than 10 countries and a worldwide customer base. Its businesses include BILT, the largest manufacturer of writing and printing paper in India; CG, an engineering company dealing in the management and application of electrical energy; the Global Green Company, Avantha’s foods division; Solaris ChemTech Industries; Avantha Power and Infrastructure; Builtech Building Elements, which is focused on green building materials; and Salient Business Solutions and Avantha Technologies, which both deal in IT and IT-enabled services. BILT and CG together account for nearly 65% of the group’s revenues.

All this growth has resulted in a fourfold increase in Avantha’s turnover — from US$1b in 2003 to US$4b today — and it is on track to achieve a turnover of US$10b by 2015. “In a country that is growing at 9% per annum, there are opportunities emerging every day,” says Thapar.

And the company is quick to capitalize on these opportunities. Its overseas acquisitions began in 2005, with CG taking over Belgium-based power-transformer maker Pauwels. Since then, CG has made five global acquisitions in the US, France, Hungary, Ireland and the UK.

Other group companies have also grown inorganically, with Global Green acquiring Belgium-based Intergarden in 2006 and Hungarian food company Puszta Konzerv in 2008. Similarly, in 2007, BILT acquired Malaysia-based Sabah Forest Industries and, recently, Bangalore-based Premier Tissues India. In the IT sector, the Avantha Group acquired Pyramid Healthcare Solutions, based in Florida in the US.

Globalization initiatives have exposed the group to a plethora of risks, however, which has necessitated a risk and governance framework. Thapar has already put an Avantha management board structure in place to manage the group companies better. The primary purpose of the board is to prepare the group for future growth and create a global Avantha. It focuses on financial matters, talent, R&D, technology and sustainability. It reviews each of the group businesses along these parameters and advises Thapar on issues such as investment, disinvestment and diversification.

Talent is another key area for the group. According to Thapar, companies today need to make themselves attractive to global talent. “The best talent will not join you if they know that they have to be subservient to the promoter in any way,” he says. He believes strongly in giving professionals in all his group companies the freedom to manage as they see fit.

Avantha may have a new name, but its roots are intertwined with those of the Thapar family. Thapar himself has two daughters, aged 11 and 13, but isn’t making any predictions about whether they will join him at Avantha. Some time back, he and his wife decided that they would not press them to join the family business. While he’s not closing any route to his children, Thapar wants them to be clear about the difference between ownership and management of a business. “It’s one thing to understand the nitty-gritty of a company and quite another to understand your role as a shareholder,” he says. Even if his daughters decide to go down that route, Thapar insists that the day-to-day running of the companies will be left to the professionals. “Talent is not genetic,” he says. “Globally, there are several professionally managed, family-owned businesses where both the management and the board are headed by a professional, non-family person.”

Whether Thapar’s daughters play a leading role in the business or not, it’s clear that it will always have professionalism at its heart. For him, there are three things that will keep Avantha ahead of its competitors: the fact that it gives its people freedom to operate in the way they see fit; the fact that it is very good at the basic skill of manufacturing and getting margins out of manufacturing; and the fact that, as the company grows, its skills base grows too. This is one family business that is always looking ahead.

“Our secrets to success are that we give our people freedom to operate, we have a strong understanding of manufacturing and we add skills as we grow”Gautam Thapar

This page Gautam Thapar is a high-profile figure in India. Here, he visits one of his paper factories and, right, meets current US Secretary of State Hillary Clinton

Opposite The Thapar family in the first part of the 20th century

Succeeding for generations38 39

Timeline: Media and publishing

1935 Penguin paperbacks are born. Allen Lane has grown frustrated with the lack of cheap, good quality paperback books being sold in Britain and so decides to launch a range of contemporary works that are cheap enough to be sold in corner shops.

1901

1901 Giovanni De Agostini founds the Istituto Geografico De

Agostini, which evolves into the De Agostini Group, now owned by

the Boroli and Drago families.

800AD 1400 18001600 19001500 1700 2000

1953 Playboy magazine is published for the first time, with Marilyn Monroe on the cover. It is not dated, as co-founder Hugh Hefner does not know if there will be another.

1501 Italian Ottaviano Petrucci is a leading light among music printers and is granted a monopoly on printing certain types of music in Venice for 20 years. Some of the methods he uses, such as the size of the note stem, are still in use now.

1450s The Gutenberg Bible is the first book in Europe to be produced using a movable type printing press. Before this, books in the region had been copied by hand. German Johannes Gutenberg comes up with the method for mass-producing books and paves the way for affordable printed work that could be produced in large quantities.

1741 Benjamin Franklin is due to publish the first

magazine, General Magazine, in the US, but is beaten

by three days by Andrew Bradford’s American

Magazine. Both publications last a matter of months.

1663 The world’s first magazine is published in Germany by Johann Rist, a theologian and poet who lives in Hamburg. It is called Erbauliche Monaths-Unterredungen (Edifying Monthly Discussions).

1856 Langenscheidt Publishing Company is founded. Still family owned, it produces dictionaries, maps and educational material. 2000s Regional and

national newspapers see circulation falling, which many put down to the rise of the internet and 24-hour rolling news.

1979 Rupert Murdoch creates News Corporation as a holding company for News Limited, which holds assets inherited from his father, Sir Keith Murdoch. Three of Rupert Murdoch’s children, James, Lachlan and Elisabeth, now work for News Corporation.

868 AD The oldest known printed book in the world, the Diamond Sutra, is published in China. According to the British Library, seven

strips of paper are printed using carved wooden blocks and then stuck together to make a scroll more than five meters long.

1963 Ralph J. Roberts founds Comcast Corporation, one of the world’s leading media, entertainment and communication companies.

1922 Sam Newhouse founds the family-owned business Advance Publications, Inc. with the purchase of the Staten Island Advance.

1887 After taking control of The San

Francisco Examiner from his father,

William Randolph Hearst founds the

Hearst Corporation. The Hearst family is still involved in

the ownership and management

of the publishing empire.

1857 The McClatchy Company dates to the California Gold Rush era, when James McClatchy is one of the founding editors of its first newspaper, The Sacramento Bee.

From the Gutenberg Bible to political blogs, the industry proves that the pen is indeed more powerful than the sword

Media and publishingEntertaining and informing the world


De Agostini Group

Long famous for its publishing activities, De Agostini is still controlled by the Drago and Boroli families. Now its interests extend far beyond the written word

A broad canvas

Marco Drago seemingly had little choice but to join the family business. One day in 1969, not long after receiving an economics degree from

Milan’s Bocconi University, his uncle, Adolfo Boroli, told him to report for work the following Monday at the family’s company, Istituto Geografico De Agostini. Drago, whose mother, Giuliana Boroli, was one of Adolfo’s sisters, willingly complied.

He had other job offers, but felt drawn to the publishing sector. “I certainly couldn’t have imagined everything that has taken place since then,” he says. “It’s made a great story.”

Drago worked his way up in the company, becoming a manager in 1975 and spearheading domestic and international growth as CEO of the De Agostini Group’s publishing business in the 1980s and 1990s. The current chapter of the De Agostini story sees the 65-year-old Drago as Chairman of De Agostini S.p.A., the group holding company that now comprises not only the historic publishing work of the Boroli and Drago families, but also media, gaming and services, and financial activities. Today, the De Agostini Group is an international force, with group revenues of more than €4b (US$5.6b) and a presence in 66 countries.

De Agostini’s history dates back to 1901, when the geographer Giovanni De Agostini set up a mapmaking business in Rome. Just a few years later, he moved the company to Novara in northern Italy, not far from Milan. Marco Drago’s maternal grandfather, Marco Boroli, and Boroli’s business partner, Cesare Rossi, acquired De Agostini in 1919, with the Boroli family taking full control of the group in 1946. It was initially Marco Boroli’s son,

Achille, subsequently accompanied by his brother Adolfo, who built up the company’s publishing business in the decades after World War II.

Beginning in the 1960s, more than a dozen members of the third generation of the family, including Marco Drago himself, took on operational positions in the group. Today, two members of the fourth generation of the company have management roles in group companies and two others sit on the board of directors of the holding company, De Agostini S.p.A.

Drago expects more family members from the fourth generation to take an increasingly active role in De Agostini companies to help pave the way for succession in B&D Holding, the limited partnership of the Boroli and Drago families that controls the De Agostini Group. “For this, we must train the fourth generation of shareholders to take our place when the time comes,” he says. As Chairman of B&D Holding, he wants to leave behind a solid and sustainable company for the next generation.

While family members seeking a job in the De Agostini Group were once welcomed with open arms, today they must meet strict requirements and demonstrate they can stack up well against outside competition. Requisites include at least five years’ experience in another company, knowledge of languages and a solid degree. The company’s board of directors has devised official criteria for family members looking to enter the company; there is also a special committee that evaluates the qualifications and career development of the fourth-generation shareholders. This stringent personnel selection policy has helped to make the De Agostini Group

Above Calendario Atlante (Calendar Atlas) was first published in 1904 and, with the exception of a single volume covering 1945 and 1946, has been issued annually ever since. The first edition was 64 pages long and came with 12 maps. The 2011 edition, the 107th, comprised 1,100 pages full of facts and figures about the world’s 194 countries

Opposite Roberto Drago, Marco Drago and Marco Boroli (left to right)in the Novara head office


De Agostini Group


a magnet for top managers from outside the family. In 2005, Drago stepped down as CEO, as the family was increasingly concentrating on its shareholder role. “The concept is that the manager heading a business should be among the best on the market,” he explains. Drago’s reserved approach, and willingness to delegate and to treat managers as partners, is seen as one of the secrets of the group’s success.

While outside managers have come to the forefront, family members still make up the majority of the board of directors of De Agostini S.p.A. and the family clearly still has an essential role in steering and coordinating the strategy of group companies. One of the benefits of family-owned businesses, Drago believes, is that they can provide continuity to both the company and its managers over the years, allowing for the development of a long-term strategy. On the other hand, if a family is not united, succession can be a problem. Drago notes that family businesses can also potentially run into trouble if the family finds itself with insufficient capital to fund necessary investments for growth and is unwilling to open up to outside capital. B&D Holding was established so that the four branches of the family could take a unified approach to their investment in De Agostini. Financing growth has not been a problem at the group, which, under Drago, pursued a diversification strategy that saw it establish itself as an international player and branch out from publishing.

In the late 1990s, De Agostini sprung to the forefront of Italy’s financial arena by lining up alongside other investors to acquire Italian telephone directory publisher Seat Pagine Gialle. The group’s €340m (US$479m)

“Our success and longevity rests on our ability to innovate and adapt to changes in the market, and the way in which we handle generational succession”Marco Drago

Right In 1946, the Boroli family took over the company completely. It was led by Achille Boroli (left), first on his own and then for more than 30 years with his brother, Adolfo(right)

Opposite Pietro Boroli


De Agostini Group


investment yielded a €1.8b (US$2.5b) profit when the group sold its stake in 2000, providing liquidity for additional acquisitions. It also made a windfall on its investment and subsequent sale of a stake in the Italian insurer Toro Assicurazioni.

De Agostini entered the gaming business in 2002, with Italian lottery operator Lottomatica. Its 2006 acquisition of US lottery equipment provider GTech made it the largest global player in the gaming sector, and Lottomatica now accounts for more than half of all group revenues. De Agostini has also acquired interests in the media and financial sectors, grouped together respectively in its De Agostini Communications and DeA Capital divisions. Its historic publishing business is housed under De Agostini Editore. Shares of Lottomatica and DeA Capital are listed on the Milan stock exchange, while those of Spain’s Antenna 3 de Television, a subsidiary of De Agostini Communications, are listed on the Madrid bourse.

As the De Agostini group diversified, investments were chosen in businesses designed to guarantee attractive returns. Geographical diversification and the entrance into different businesses besides publishing also helped to improve De Agostini’s risk profile. “Today, the publishing sector or, generally speaking, the media sector, faces more difficult prospects,” notes Drago. “Consumer habits have changed radically. For example, a lot of young people don’t buy paper newspapers anymore but read them on their iPads at a much lower price. The evolution of the internet has changed consumers’ behavior and allowed new competitors to come on to the market.”

That said, De Agostini’s Chairman still ranks publishing as one of the most interesting businesses. “I enjoyed myself immensely when I was involved first hand,” he says. “Besides the bigger issues you have to deal with, there are thousands of details like the choice of a book cover or an advertising campaign. You become very attached to the product.” Despite sometimes difficult market conditions, Drago says the family has no plans to get out of the publishing business. “We continue to believe in and invest in this sector. It’s part of the history of our family and of our company.”

And with 110 years of experience, De Agostini has certainly learned to make its way in a competitive and evolving market. “Our success and longevity rests on our ability to innovate and adapt to changes in the market, and the way in which we handle generational succession,” says Drago. To meet the demands of the fast-changing publishing market of the 1920s, the group made a significant investment in its first web rotogravure printing system in 1927. With the launch of the encyclopedia Il Milione in 1959, De Agostini first gained a name for its partwork publications. Sorted by country and continent, the encyclopedia was issued in 312 weekly installments of 32 pages, which made it accessible to a broader public. New media and multimedia products have helped to drive growth in the publishing business in recent decades.

If the past is any precedent, who knows what changes could be in store at the De Agostini Group over the next century? “If you consider that cartography was everything and now represents 1% of our business,” says Drago, “it’s clear that everything has changed.”

Opposite Cesare Angelo Rossi and Marco Adolfo Boroli (top — second and third from left) took over the Istituto Geografico De Agostini (middle, the first showcase office in Rome, 1901) in 1919. The company upgraded to rotogravure printing line in the 1920s (bottom)

Opposite, right Marco Drago


Prym Group

In its nearly 500 years of existence, Prym has had its shares of ups and downs. But through diversification and solid governance, the haberdashery supplier has built a new future

A stitch in time

The imposing brick building in Stolberg in the Rhineland, Germany, speaks of success. When Hans Prym built his company headquarters

in Zweifaller Strasse more than a century ago, his family had already been manufacturing metal goods in the town for 270 years. The three-story building was an expression of Prym’s confidence in the future; the business was booming and Prym’s snap fasteners for clothing, in particular, were a roaring success. Today, William Prym is Germany’s oldest family-owned industrial enterprise.

But when Michael Prym receives visitors these days, he invites them to a business park two miles away. Until he reached retirement age, he was CEO of the William Prym company. Now, two decades before the company’s 500th anniversary, he has taken up a new challenge, having founded Prym Consulting. At the same time, the old family firm is about to launch into a new era. “The problems of the past are not yet entirely behind us,” says Michael, “but the outlook for the future is bright.”

The family can trace its history back to Johann Prym, who lived in Aachen in the 14th century. The company began five generations later with the goldsmith and brass-worker Wilhelm Prym, who was known to be working in Aachen around 1530. His great-grandson, Christian Prym, a Protestant, was forced to leave the Catholic city of Aachen during the Thirty Years’ War and, in 1642, he settled with his family in Stolberg, where he set up in business as a master coppersmith.

Andrea Prym-Bruck, Michael’s wife, who is in charge of the corporate archives, is the guardian of the family and company history. “That early

Opposite Michael Prym, who recently retired as CEO, at Prym’s headquarters in Stolberg

Left A 1920s Prym Rabattmarke — loyal customers collected stamps in exchange for a discount


Prym

awareness of being different really strengthened the family ties,” she says. “On top of that, with charcoal, ore, water and freedom of religion, the family found in Stolberg the backdrop they needed to develop into an exceptional company.” There were, however, obstacles to overcome. Following the Congress of Vienna in 1815, the Rhineland passed into Prussia’s possession, which meant that Prym lost its French market and the workforce shrank from 250 to just 8. William Prym, the leader at the time, restored the company to a robust state of health, however, and to this day it bears his name. His son, Heinrich August, furthered the company’s growth. He completed an apprenticeship in Birmingham in England and put his newly acquired knowledge to good use by introducing the mechanical production of metal goods to the German market.

The real catalyst for the growth of the company, however, proved to be the development and refinement of the snap fastener by Hans Prym. In 1903, he developed a reliable fastening mechanism, produced it in brass and bronze, and had it patented. In the first year alone, the company manufactured eight million snap fasteners a day — all rustproof and flexible. The clothing industry, including the mass production segments for the armed forces, became one of the company’s major customers. And so, in the years leading up to World War I, Hans Prym built not only the company’s headquarters but also a foundry and a rolling mill.

The Stolberg-based firm was quick to expand abroad. By the 1920s, it was already active in the US, where today it is the largest supplier of haberdashery, including snap fasteners, zippers, sewing needles and knitting needles. Over time, a large part of Prym’s production activities was transferred to Asia and the company diversified its portfolio into three divisions: Prym Consumer, which produces sewing and needlework accessories; Prym Fashion, which makes snap fasteners and fastening systems for the fashion and textiles industry; and Inovan, which produces connectors and mechanical precision parts for the automotive electronics and telecommunications sectors.

From humble beginnings, William Prym now employs a global workforce of 3,900 people. In 2010, the company reported sales of €360m (US$514m) — despite having been on the brink of disaster only two years earlier. “We had immense problems,” says Michael, who joined the company in the mid-1970s, when it was run by non-family executives. His cousin Axel also joined the board of directors in 1988, at about the same time as the company split into several independent sub-groups.

The late 1990s brought a series of commercial misfortunes and failures. “We were loss-making in a big way,” recalls Michael. “We were turning out 15 million snap fasteners a day and still failing to make a profit.” A misguided investment policy led the company to lose more than €100m (US$140m) and it also ran into difficulties with the Brussels monopolies commission, which demonstrated that the company had been guilty of price-fixing arrangements with sewing-needle manufacturers. In 2004, the commission imposed a fine of €30m (US$42m), which was reduced by the European Court of Justice Luxembourg to €27m (US$38m). Events took a dramatic turn when the antitrust investigators also found evidence of price fixing for fasteners and demanded that the company pay a further fine of €40.5m (US$57m).

“All of the partners in the company had lost vast personal assets, and we were thoroughly disillusioned,” Michael says. What had once been a great strength of the company — the common interests of the partners — was in danger of breaking up. But it was not only the partners who had kept silent for too long. “Our supervisory bodies failed us. They proved incapable of exercising their corporate governance mandate.”

Shortly after Michael retired in 2005, his cousin Axel also stepped down from the board. It was the end of a tradition stretching back centuries: for the first time in 14 generations, the management board did not include a member of the family. But things were about to get worse: in light of the mismanagement at the company and the fines imposed by the antitrust authorities, the banks urged the partners to sell their stakes in the company. The family was facing the loss of the entire company.

In response to this situation, the partners set aside their own interests and turned their thoughts to the welfare of the company. In a painful process, they came to realize that they could only save it through coordinated action as a family. “We had been shipwrecked on the high seas and were each holding on to individual planks,” recalls Andrea, who ultimately persuaded her husband’s cousin that they would only survive if they brought all the planks together and built a raft.

The raft took the shape of a partners’ committee comprising four members of the family, including Andrea and Axel, who acted as trustees for the entire community of partners. Their common goal of rescuing the company gave them the strength to resist pressure from the banks.

So, in the summer of 2008, when the financial institutions demanded that the partners sell their shares to a financial investor, the Pryms

Left The Prym family in 1890

Below Hans Friedrich Prym, who in 1903 developed the double-S snap fastener — a key earner for the company


Prym Group

Above A late-1950s portrait of the Prym factory

Opposite Michael Prym outside the old headquarters on Zweifaller Strasse, which Hans Prym built more than a century ago

“Family candidates must be able to demonstrate a successful track record at the level at which they want to work at Prym — which means at the very top”Michael Prym

unanimously said no. “We refused to give up,” says Michael. “Together, we faced up to our responsibilities and found a tremendous source of strength.” The banking consortium was impressed by the family’s show of solidarity and prolonged its lines of credit. Ultimately, even the European Commission proved amenable; Michael suspects that it didn’t want to be the cause of the demise of Germany’s oldest family firm. Following lengthy negotiations, in the spring of 2011, Brussels reduced the antitrust fine in the second round of proceedings to €15m (US$21m).

But can William Prym still be considered a family firm if there are no family members on the management team? “You can — and, indeed, you must — act as an entrepreneur without being involved on the operational side,” says Michael, pointing to the positive creative forces that the family brought to bear in a time of crisis. The fact is, though, the company only survived the management errors and resultant infighting by the slenderest of margins. “There was no shortage of arguments in favor of excluding family members from management entirely in the future,” recalls Michael. “But then I considered the next generation and asked myself why we should anchor something in the articles of incorporation that would deny all future Pryms this opportunity, just because we weren’t able to make use of it.”

In 1936, Hans Prym had laid down a rule stating that no one should become a member of the board of management merely by virtue of being born into the family. In an 80-page partnership agreement, he decreed that candidates from within the family must be at least as well qualified as external candidates. The bar will be set even higher in the future. “Any family member looking to join the firm must first win his or her spurs with another company,” says Michael. “Family candidates must be able to demonstrate a successful track record at the level at which they want to work at Prym — which means at the very top.”

Andrea and Michael Prym’s own children are initially planning their careers outside of William Prym, although they and their cousins have a long-term commitment to the revision of the partnership agreement. They are, however, busy acquiring skills that could well become important in the future: Catharina advises family firms, Christian works for an investment bank, Michael-Dominic is studying economics in Witten and, having already qualified as a physiotherapist, Sarah is busy obtaining perhaps the most important qualification of them all. She has started training as a mediator.


WICOR

It’s a classic turnaround story: rescued from bankruptcy in the 1920s, Swiss manufacturer WICOR is now a global name in the electronics and plastics technology sectors

Perpetual motion

I’m more of an entrepreneur than a manager,” says Franziska Tschudi, CEO and Delegate of the Board of Directors of Switzerland’s Weidmann

International Corp., or WICOR. The Rapperswil-based company, which has been in her family’s hands for the better part of a century, is a leading global supplier of engineered products and services to the electronics and plastics technology sectors. In 2009, it posted CHF669m (US$763m) in sales and employs nearly 3,700 people.

The company has come a long way from its humble beginnings as a single pressboard and cardboard factory founded in 1877 by Heinrich Weidmann. Using Rapperswil’s old water-powered town mill on the eastern shore of Lake Zurich, Weidmann supplied insulation materials to the fledgling electrical industry.

When he died without a successor in 1914, the management and local townspeople took over the company and transformed it into a joint stock corporation called H. Weidmann Aktiengesellschaft. The struggling firm snapped up about 10 acres of land in the area and built a modern factory and office complex. In 1923, the company was rescued from bankruptcy by a financial consortium led by Jean Tschudi-Klaesi, who owned a small paperboard mill in the nearby town of Ennenda. The mill made specialty boards for non-electrical applications, mainly rotary printing.

Jean’s son, Hans Tschudi-Faude, formed the electrical and plastics technology divisions that power the company to this day. When plastic resin components, in particular Bakelite, became fashionable in the 1930s, Weidmann became one of the first companies in Switzerland to use them

“


WICOR

to make machine parts for the textile industry. The company experimented with the use of plastics in electrical insulation, but the leadership soon decided that the material wasn’t ideal for this purpose. Nevertheless, having acquired new production expertise, Weidmann took advantage of other opportunities in the plastics field. It paid off: when the export market for high-voltage insulation collapsed during World War II, the company did well thanks largely to its booming plastics technology division, producing everything from components for rifle shafts to housing for the domestic telecommunications industry.

In 1948, Hans Tschudi traveled to the US to buy the first injection machine. At the same time, the company was expanding its electrical technology activities, building its first large transformer board machine in Switzerland in 1952. Dr. Felix Tschudi-Hubacher, who took over from Hans in 1968, put the firm on the map as a major international player, pouncing on acquisition opportunities in countries such as the US, France, England and Brazil and opening representative offices around the globe. The different business units were regrouped under the roof of the WICOR holding company in 1994.

Today, WICOR is the global leader in electrical insulation for power and distribution transformer manufacturers. It offers a wide range of insulation,

from board and paper to customized components and packages, as well as technical support and design assistance. The company is also developing its service portfolio, including oil diagnostics and fleet management analysis. WICOR’s Electrical Technology division accounts for more than two-thirds of sales.

The other arm of the business, Weidmann Plastics Technology, produces sophisticated multi-component molded plastics applications for carmakers, including Daimler, BMW and Peugeot, and medical-device manufacturers, such as Swiss drug giant Roche. In total, WICOR has production sites in 12 countries, including Ukraine, China, Germany and Mexico. It also has licensing partners in Spain and India and engineering and sales offices in 15 countries (8 of which also have manufacturing sites).

By the time she succeeded her father at WICOR when he retired in 2001 at age 70, Franziska Tschudi knew the business inside out and was keen to build on its success, through acquisitions as well as organic growth. She had joined the business in 1995, first as Head of Corporate Development and then as the member of the management board responsible for WICOR’s Electrical Technology division in the Asia Pacific region.

But her professional experience wasn’t formed in a WICOR bubble: prior to joining the company, she had worked at Lenz & Staehelin, one of

Switzerland’s largest law firms, and was Secretary-General of the company then known as Schweizerische Industrie Gesellschaft, which supplied carton packaging, packaging machines, railroad vehicles, automation solutions and arms.

She also holds law degrees from the University of Bern in Switzerland and Georgetown University in Washington, D.C., and has an executive MBA from Switzerland’s University of St. Gallen.

For Tschudi, the prospect of working for a family-owned company that was focused on business rather than internal politics was an exciting one. “Apart from being a leader, I always wanted to be part of a team-oriented company,” she reflects. Coming in as the first woman CEO, however, she initially had to convince the management board and employees that she was the right person for the job.

“Although I had proven myself at the company, I was considered an outsider and was forced to change the whole patriarchal corporate culture,” she says. “That took longer than I thought, but as long as you manage to instill a value-based, family-style culture, then you can inspire a team spirit and retain capable people, even in difficult times.”

This flexibility has been key to WICOR’s strong performance. Tschudi says that, as a privately held firm that doesn’t have to answer to shareholders

Above, from left The factory in Rapperswil being built in 1919

Telephones being produced by one of WICOR’s first machines, a plastic injection molding plant

Product samples made out of Bakelite, a plastic resin compound, circa 1930

Above, from left Heinrich Weidmann founded the company in 1877

Jean Tschudi-Klaesi, leader of the consortium that rescued the company from bankruptcy

Hans Tschudi-Faude, who bought the company’s first injection machine

Felix Tschudi-Hubacher established WICOR’s international reputation


WICOR

“We are well diversified, so that if we lose a customer or market, we can succeed in another part of our business. This diversification has helped us not only to survive, but also to grow and thrive during our 135-year history”Franziska Tschudi

or focus narrowly on short-term returns, WICOR has always been adept at branching out into different directions in reaction to changing market needs. “That’s one of the major pluses of being a privately held business,” she says. “We can make decisions faster than many publicly traded companies, while taking a long-term view of the business with an emphasis on innovation.

“We are well diversified, so that if we lose a customer or market, we can succeed in another part of our business,” adds Tschudi, who dislikes the term “crisis” and prefers to speak of rebuilding rather than restructuring. “Essentially, one of the two arms of the business is always carrying the other. This diversification has helped us not only to survive, but also to grow and thrive during our 135-year history.”

So what’s next for the company? “It’s difficult to predict, but we definitely will continue to build our two core activities,” says Tschudi. “We intend to remain a leader in the electrical world, while developing our potential on the plastics side. As our markets and customers evolve, we will evolve with them.”

The firm is constantly developing new materials and applications in both areas. On the plastics side, for example, it recently began using cutting-edge nano- and micro-technology for medical devices and develops illuminated components for automobiles. “That didn’t exist five years ago,” says Tschudi. She adds that, increasingly, price is as important to customers as quality. “We will never, ever, offer cheaper

stuff, but we need to have innovative products incorporating a better overall cost aspect.”

After nearly a decade in the job, Tschudi says it’s too early to start thinking about a successor, especially since the next generation of the family is not yet of age. Her brother, Daniel, is her Deputy and Co-head of the Electrical Technology business area, the larger of the two divisions.

“Whether or not this company will forever remain in the family, we do not know,” she says. “That is why it is essential to ensure that we have enough talented professionals and leaders who would be qualified to take over. I am fully satisfied that, beside my brother, I have capable colleagues who will guarantee this company will survive even without our family.”

Meanwhile, she plans to continue the job she loves for a long time. “Being at the steering wheel of a constantly changing company, knowing that I am carried by a capable team of colleagues and a dedicated workforce — that is the best I could ever want.”


Timeline: Automotive

Our love affair with our cars looks set to continue as automakers move into the electric era

AutomotiveGetting us from A to B faster and more efficiently

1980 Japan overtakes the US as the biggest manufacturer of cars in the world for the first time in the history of the industry. Its focus on international expansion has paid off, backed up by efficient production techniques and a focus on building popular cars.

1700 1800 2000

1990s Increasing environmental awareness means that hybrid cars begin to grow in prominence and popularity. The Toyota Prius and Honda Insight are launched, as well as Smart microcars with very small engines.

1865 With self-propelled automobiles emerging, such as a steam locomotive built by Richard Trevithick, the British Government brings in a law restricting vehicles to 4mph in the countryside and 2mph in towns, and someone has to walk ahead of the vehicle carrying a red flag.

1830s Scotsman Robert Anderson is credited with inventing the first

electric car, although American Thomas Davenport invents a similar

vehicle at around the same time.

1940 The first Jeeps are designed. The US Army invites companies to design an all-terrain vehicle and orders some from Willys Truck Company, Bantam and Ford. Jeeps are used during World War II and later by the US Post Office, as well as being sold commercially.

1885 German Karl Benz invents the first petrol-powered car,

which is driven in Mannheim and given a patent the following

year. It is three-wheeled and powered by an internal

combustion engine.

1958 Chrysler is the first to use cruise control. Engineer and inventor Ralph Teetor had patented the system 13 years earlier. The story goes that Teetor was inspired by his lawyer’s erratic driving; he would slow down and speed up while he was talking. Teetor was blinded as a child but built his first automobile at the age of 12 with his cousin and went on to become a successful inventor and engineer.

1769 Nicolas-Joseph Cugnot invents a three-wheeled,

self-propelled tricycle for the French army that is powered

by a steam engine. The vehicle is used to move artillery and

can do more than 2mph. It has to stop frequently to be refilled

with water and to allow steam pressure to build up again.

1960s There are 95 million cars on the road, compared with about 9,000 in 1900. They are almost all powered by internal combustion engines and the industry begins trying to reduce emissions from vehicles. In California, positive crankcase ventilation has to be used in all 1961 cars. The system, which means certain emissions are burned rather than being released into the air, becomes widely used as the decade progresses.

1903 The Ford Motor Company Inc. is founded

with Henry Ford as Vice President and Chief

Engineer. It makes a few cars a day, with small

groups of workers putting together parts that are

made by other companies.

1900s For a time, electric cars outsell petrol-powered cars in the US and are considered a good choice for women

because they are quiet and clean. However, they are slower than petrol-

or steam-powered alternatives and can only go short distances before

having to be recharged.

1908 The Model T Ford is created. It is easy to drive, reasonably priced and becomes very popular. To meet demand, another, larger factory is opened in 1910 in Michigan, where Ford begins employing standardization of parts and, in 1913, a continuous assembly

line. This revolutionizes the manufacturing process and

lowers costs. The success of the Model T makes Ford

the largest carmaker in the world.

1931 Ferdinand Porsche founds his consulting firm and, with the help of his son, Ferry Porsche, goes on to design a car for Wanderer.

1935 A manufacturer in Delaware introduces the first indicators, or blinkers, which use a thermal interrupter switch to stop the flow of electricity temporarily.

1945 Serial production of the Volkswagen Beetle begins after World War II. The car is developed by Ferdinand Porsche and is the basis of Volkswagen’s success today.

1937 Toyota Motor Co. is established by Kiichiro Toyoda. The carmaker has always maintained a family-run tradition.

2009 Inventor Giles Cardozo and British

soldier Neil Laughton fly and drive the world’s first road-legal biofuel-

powered flying car from London to Timbuktu.

2011 Fisker Automotive launches the Karma, which, at

almost US$100,000, moves the hybrid car

into the luxury market.

2008 Indian conglomerate Tata unveils the Nano. At £1,300, it is

the cheapest new car in the world. Its “people’s car” seats four people and can do 65mph. It is launched in

India in 2009.

1957 O’Reilly Auto Parts, originally known as O’Reilly Automotive, Inc., starts with one store in Springfield, Missouri.

19501900


Barceló

Can one old truck form the basis for a tourism empire? For proof, look no further than Barceló, the Spanish travel company with family at its heart

From Mallorca with love

As unlikely as it sounds, the Spanish island of Mallorca is one of the birthplaces of modern European tourism. The island had been a

gathering spot for the rich and powerful for decades, but as the industrial revolution gave rise to a large European middle class in the early part of the 20th century, tens of thousands of newly empowered workers set their sights on the small island 150km off the coast of Barcelona.

Fast-forward 100 years and Mallorca is still a tourism hotspot. It attracts more than 10 million visitors a year — nearly 15 times the island’s year-round population — but, more importantly, family-oriented Mallorcans have used the expertise earned from generations of working with tourists to spread their influence far beyond the island’s rocky confines. Today, four of Spain’s five largest hotel chains are based in Palma, the island’s largest city. All of them are family owned.

The second-oldest of these companies is the Barceló Corporation, which was founded in 1931 by Simón Barceló Obrador, then just 29 years old. He borrowed money from friends, his in-laws and other family members to buy an old truck, which he used to shuttle mail, newspapers and, later, the occasional tourist around the island. Before long, his two eldest sons began to work alongside him as the business expanded to include a bar in the village of Felanitx, then a travel agency. In 1962, Barceló acquired its first hotel property, the Hotel Latino.

Today, the company employs more than 26,000 workers at 185 hotels and more than 500 tourist agencies spread across 24 countries. Yet it remains privately held by the Barceló family: cousins Simón Barceló Tous

and Simón Pedro Barceló Vadell, grandchildren of founder Simón Barceló, are Co-presidents. They took over from their fathers, the founder’s eldest sons, who started out working in the bar in Felanitx.

The family members remain aware and intensely proud of the company’s history. In 2006, they produced a book, Barceló. 75 years. Memoirs of our journey together, to celebrate the anniversary of the company’s founding. Co-president Barceló Vadell, whose company responsibilities are centered in Europe (cousin and Co-president Barceló Tous is based in the Americas), can rattle off the key dates and developments in the organization’s history with ease. “The family’s history and the history of the company is something we are all very conscious of,” Barceló Vadell says. “That history is the basis for where we are today. We want the company to grow, and we are an innovative company. But when it comes to this aspect, we are extraordinarily conservative, because we would never do anything that would put at risk the company that our fathers gave us and that we intend to pass on to our children.”

That philosophy has served the company well. When the founder died unexpectedly in 1958, it marked the company’s first crisis. With no real succession plan in place, his sons Sebastián (Barceló Tous’ father) and Gabriel (Barceló Vadell’s father) were forced to take over the company overnight. The first thing they did was to take steps to assure that this situation would never happen again. Gabriel retired in 1993 with a plan in place: his brother took the reins of the company for seven years and the family spent the interim years conferring with advisors. They set up and

Opposite Simón Pedro Barceló Vadell. Above Barceló opened the Hotel Pueblo in 1966


Barceló

consulted with an administrative board that included both Sebastián and Gabriel, and an executive board of figures from outside the family. They wrote new bylaws, established Barceló’s four-member board and defined the co-presidency.

Barceló Tous and Barceló Vadell stepped in when Sebastián retired in 2000. “The biggest challenges for a family-run company are usually the transition periods,” Barceló Vadell explains. “It is always better for it to be a process and not an event, as it was for us in 1958. This has been a priority for the company for many years.”

The next period of succession shouldn’t come for a while yet, as the two co-presidents are both young. But Barceló Vadell says that the potential successors are to be prepared, whether through their studies or by working with specific sections of the company. Most of the company’s high-level executives are from outside the family (though usually from inside the company, which prefers to promote from within). He says, however, that when it is time for his cousin and him to retire, he believes the fourth generation of Barcelós will be ready to step in.

“The most important thing we can do to prepare the next generation is to instill in them our core values,” he says. “We don’t want to forget where we came from. The company has progressed through the hard work of a great many people and it’s a big responsibility to maintain that in the future.”

Barceló Vadell represented Mallorca in the Spanish Senate until 1993, when he left politics to work full time for the company just before his father’s retirement. In the nearly two decades since then, he has seen

many changes in the Spanish hotel sector. But one thing has helped to make his job simpler: the fact that the hotel sector is expanding rapidly. “It is much easier to find growth and to be innovative in a fast-growing sector,” he says. “Companies have a much harder time in other economic sectors where growth is flat or the industry is in decline.”

Looking ahead, the company has its eyes on growth in areas where it already has a presence — still mostly Europe and the Americas. “People say future growth is in Asia, but we aren’t ready for Asia,” says Barceló Vadell. For him, Europe — particularly Portugal and Italy — is attractive in terms of expansion, as is using the company’s footholds in the US, Central America and the Caribbean as a springboard to South America and Canada. But he also admits that it is increasingly difficult to make long-term plans in an area that is evolving as quickly as the hotel business.

“As part of the succession strategy put in place by my father and uncle, we enacted five-year plans for the company,” Barceló Vadell says. “We had a five-year plan in 2000 and another in 2005. The next one was supposed to be in 2010, but we postponed it for two years because it was so much harder to look ahead with any clarity. The important thing is to know your business well and to be prepared for whatever might come up. If you know your sector well, you’ll have a good chance of figuring out what to do.”

Simón Pedro Barceló Vadell with his father, Gabriel Barceló, in the 1970s. Simón is among the third generation of Barcelós to join the business

Right Founder Simón Barceló Obrador, holding one of his sons, in 1928. His wife, Antonia Oliver, is standing (far left)

“The most important thing we can do to prepare the next generation is to instill in them our core values. We don’t want to forget where we came from“Barceló Vadell

Left The Hotel Latino was Barceló’s first hotel. It now has hundreds of hotels and tourist agencies in nearly 30 countries


Berry Bros. & Rudd

Berry Bros. & Rudd, England’s oldest wine merchant, may be 300 years old, but the British institution is constantly innovating

Time in a bottle

S tep through the door of London’s No.3 St. James’s Street and the modern world falls away. A clock ticks, the sloping wooden floorboards

creak and a well-dressed man (who prefers Bordeaux himself) orders a case of Sancerre for his wife. Appearances, however, can be deceiving. Berry Bros. & Rudd may cling tightly to its 300-year history, but the company is not trapped in amber. Behind the oak paneling and antique wine bottles that line its walls is a laser focus on progress.

Simon Berry is the latest in a long line of Berrys and Rudds to lead the London-based fine wine and spirits merchant. He spends his days surrounded by reminders of its past, from the 18th-century shopfront, with its countless layers of grey-green paint, to the portraits of royalty in military garb and former chairmen that are dotted around the premises. All this history could weigh heavily on the shoulders of the man who is the public face of this venerable British institution. But, if anything, it seems to provide the fuel that keeps Berry Bros. & Rudd growing and changing — he calls it a “warehouse of ideas.”

The story begins in 1698, when the Widow Bourne opened a grocer, the Coffee Mill, a stone’s throw from the gatehouse of St. James’s Palace. The first heir to the shop was her son-in-law, William Pickering, and it was then handed down through the Pickerings and their relations until 1788, when the first Berry entered the business.

John Berry, a wine merchant from Exeter, inherited the shop on the death of the current owner, whose daughter he had married. It’s to him that the credit must go for cementing the Berrys’ place in the business;

Opposite Simon Berry in the wine cellar at No.3 St. James’s Street — Berrys now has its main cellar in Basingstoke, England

Below Inside No.3. The scales on the left have been used to weigh eminent customers from Lord Byron to the Agha Khan


Berry Bros. & Rudd

he named his son, George, heir to the shop when the boy was just a year old. By the time George joined the business in 1803, aged 16, it was part of the fabric of London life. It had begun supplying wine and goods to the royal family in 1760, during the reign of King George III — a practice that continues today. And its famous coffee scales had been weighing luminaries, from 18th-century dandy Beau Brummell to poet and lothario Lord Byron, since 1765.

George Berry took over the running of the business fully in 1810. On his death in 1854, his sons inherited the business, and Berry Bros. was born.

But what about the other family — the Rudds? This half of the partnership first made an appearance in 1920, when Hugh Rudd, the son of a Norwich wine merchant, joined Berry Bros. as a junior partner. Little did he know how key a role he would play in the company’s history. Between 1936 and the end of World War II, four members of the Berry family died. Hugh Rudd was left to sort out death duties and keep the company going. As a result, the Rudd family today holds about three-quarters of the shares. “Quite rightly,” says Simon Berry. “It’s a miracle we had any left at all!”

The two families have been working together for 90 years now, and Berry paints a picture of a harmonious partnership, to the extent that they rarely even have to resort to a boardroom vote. He says that the families get along “fantastically well” — not to the point of going on holiday together, perhaps, but maintaining a spirit of respect and generosity. “There is a very good distance in the relationship,” he says.

Berry himself joined the business in 1977 and has been Chairman since 2005. He grew up surrounded by the wine business and his parents always assumed that, being the only son, he would join the company. He had other ideas, however, and left the company in 1979. “I thought, why should this be what I’m going to spend my life doing?” he says. “It took me a year and a half to realize that this was a wonderful company and I was mad to think of doing anything else.”

As his influence grew, he began to be excited by the company’s potential. The generation before him had run the company fairly conservatively since the devastation of World War II and it hadn’t really changed much since then. For Berry, this was a challenge to relish. “It was like discovering an immaculate Rolls Royce in the garage, covered in a layer of dust,” he says. “It would require a certain amount of love and care to keep it going, but then you could do almost anything with it.”

The turning point for Berry Bros. & Rudd came in the early 1990s. Berry’s predecessor, his cousin Christopher Berry Green, had realized that what the company needed as it grew more complicated and challenging to run was professional management. And so he hired the firm’s first non-family Managing Director, Tony Easter, who retired from that position in 2006 and was succeeded by Hugh Sturges.

Berry is a strong advocate of family businesses taking outside advice. “The business is not just there to give powerful jobs to members of the family. It is a living entity,” he says. “If a family firm can accept this, then they will see that this big step into the unknown is usually an extremely

good idea.” Part of this, in his view, is that families should be the ones coming up with the big, bold ideas, and management should be the tempering force, either giving the green light or advising against it for practical or financial reasons.

Bringing in outside talent brought major changes for the company: in 1994, Berry Bros. opened a duty-free shop at London’s Heathrow Airport and, recognizing that the heart of the wine world was shifting away from the US and towards Asia, launched its wine sales in Hong Kong in 1999.

It was also the first wine merchant to venture into the world of online retailing: BBR.com launched in 1994, before many members of the board even knew what the internet was, according to Berry. “In the beginning, it was me answering emails on my own,” he says. “Our first customer ordered a 1947 Cheval Blanc, to be delivered to New York City that weekend. That’s the power of the name.” The website now brings in 20% of the company’s sales. There’s a blog, an app and even an online wine-trading platform.

The other big change came in 2010, when the company sold Cutty Sark, the blended whisky it had created in 1923. Always a big seller abroad, particularly in the US during the Prohibition era, it had propped up the company financially for many years, bringing in 90% of sales. But as the wine side of the business continued to evolve, the lack of synergy between the wine side and Cutty Sark become more apparent.

The company decided that premium brand spirits would be a better fit and has invested funds from the Cutty Sark sale in high-end products such as Glenrothes, a single malt whisky, and the recently launched

No.3 London Dry Gin. Berrys is also redoubling its marketing efforts behind the King’s Ginger, a liqueur originally formulated in 1903 for King Edward VII that has become popular in San Francisco as a cocktail mixer.

While these big ideas are what keep the company growing and changing, there is another benefit: they attract good people. Berry is determined that the company should not become a repository for unemployable members of the family, and he and Hugh Sturges have introduced a rule saying that any family member who wants to join the company must have a university degree and must have worked in a completely different sector for at least two years. This not only weeds out the less serious candidates, it also gives the younger members of the family a chance to think about whether joining the company is what they really want to do.

The younger generations are always at the back of Berry’s mind. While he doesn’t plan to step down any time soon, he knows that it’s best to start planning for succession sooner rather than later. “Succession can be tricky, and sometimes quite painful, so clarity is the main thing,” he says. Over the next couple of years, he and Sturges will hatch a succession plan, looking at the three or four strong candidates in the coming generation and perhaps even further down the line.

It’s clear that this centuries-old family firm has more energy and ideas than many younger, non-family companies. The secret to this success isn’t really a secret at all, says Berry: “Never stop changing. It’s much more dangerous to stay in the same place than it is to make one or two wrong moves.”

This page, from left Anthony Berry, Simon Berry’s father, who died in 2010

Hugh Rudd, the first Rudd to enter the business

The sign of the Coffee Mill, the shop’s original name. It still hangs outside No.3 St. James’s Street

This page, from left A photograph of No.3 St. James’s Street in the late 19th century

A turn-of-the-century customer being weighed on Berrys’ famous scales

Berrys’ wine buyer Jasper Morris and Burgundy-based winemaker David Clarke. Along with Simon Berry, they appeared in a 2009 BBC program, Wine: The Firm


Berry Bros. & Rudd

“Never stop changing. It’s much more dangerous to stay in the same place than it is to make one or two wrong moves”Simon Berry


It’s sparked wars and fueled empires, induced cravings and fallen victim to calorie-counting. Food is more powerful than it seems

Food and drinkSatisfying our need for sustenance — and pleasure

1884

1698

1916 The Papadopoulos family begins baking biscuits to sell from their home in Constantinople. The children sell them to help the family stay afloat. In 1922, Evangelos Papadopoulos, his mother and brothers flee the country as refugees and decide to stay in Greece.

2011 The number of Subways around the world passes the 33,000 mark. Set up by

Fred DeLuca and Peter Buck in 1965, it has expanded through a franchise system — it

claims that an average of six stores open each week in the UK and Ireland alone.

1955 The first McDonald’s restaurant is opened in the US. A decade later,

the chain has expanded to encompass 700 branches across the country.

1500 BC The Olmec Indians in South America grow cacao as a domestic crop and use it to make a bitter drink. Later, the Spanish take cocoa beans to Europe and, at the end of the 19th century, milk is added to make chocolate for eating.

1906 Kellogg’s is founded as Battle Creek Toasted Corn Flake Company after brothers Will and John Kellogg “accidentally” discover a new breakfast cereal.1698 Berry Bros. & Rudd, Britain’s oldest wine and

spirit merchant, is established in London. Berrys and Rudds still own and run the company. It has supplied wine to the royal family since the time of George III.

1876 F & J Heinz, famous for its tomato ketchup, is

founded in Pennsylvania by Henry John Heinz with his

brother and cousin.

16th century Explorers first bring potatoes to the UK and Ireland from South America, where they have been eaten for thousands of years. People need a crop that can be grown easily on small plots and does not need to be processed.

11 AD The first restaurants are established in Kaifeng, China. The concept develops in the coming years so that, in a town square, you might find signs with details of local establishments and customers’ opinions of them.

4000 BC The oldest known wine-making facility is in use in Armenia. Archaeologists, who discover it in 2011, believe people trod the grapes in a shallow basin that drained into a vat. This scale of wine production suggests it had been drunk for some time before this date.

1935 Tyson Foods, Inc., one of the world’s largest processors and marketers of chicken, beef and pork, is founded in Springdale, Arkansas.

1920 It all starts with the chicken

and the egg — Perdue, the family-owned and -operated

poultry company, is founded.

4000 BC 180015001000 19001600 2000

2000 BC In ancient China, people sink bamboo boreholes

into the ground, extract brine and

boil it to get salt. Salt is a valuable

commodity because it is used to preserve

food. In ancient Greece, slaves

are traded for salt, which leads to the phrase “not worth

his salt.”

1916

1884 Arvid Nordquist opens a shop in Stockholm to supply Swedes with delicacies, coffee and wine. His business, still in family hands, has now developed into a multinational company trading in high-quality food and drink.

1824 John Cadbury sets up his first grocer’s shop in Birmingham, selling hops, mustard, cocoa and drinking chocolate. In 1831, he expands into a factory, marking the first step in Cadbury becoming a full-scale chocolate manufacturer and household name in the UK and globally.

2000 BC


Timeline: Food and Drink


Papadopoulos

From refugees to the creators of Greece’s most popular cookie brand: for the Papadopoulos family, necessity truly was the mother of invention

Sugar, spice and everything nice

Ninety years ago, in 1922, the Papadopoulos family fled Constantinople to escape the devastation of the Greco-Turkish War. Along with many

other refugees, they boarded a boat bound for Marseilles, expecting to make their new life in France. Stopping at the port of Piraeus for refueling, however, they asked for coffee and cookies and were told they could only have the coffee, for cookies were in short supply in Greece.

This was the moment that decided the family’s history. They changed their plans and disembarked, because in their few belongings they carried with them their precious recipe for “petit beurre” — buttery cookies that the family had sold on the streets of Constantinople to supplement the meager family income. A simple wooden seal, which they also carried with them, imprinted the cookies with the family name.

From a refugee apartment in the center of Athens, current CEO Ioanna Papadopoulou’s grandmother bought a small oven and began once more to bake her cookies, while her sons Nicolaos and Evangelos sold them on the streets. This time, however, a new seal printed the words “Papadopoulos Brothers, Hellas.” The family’s hard work and determination eventually bore fruit. In 1940, they opened their first small factory in Athens. It manufactured not only their signature Petit Beurre, but also Cream Crackers and Sandwich Biscuits, which are still produced today.

The wooden seal sits proudly on display in the lobby of the Athens headquarters. With three other factories in Thessaloniki, Volos and Oenophyta, and a staff of about 1,000, the company is now Greece’s leading manufacturer of cookies and related food products, holding about

70% of the domestic market. There are few homes in Greece that do not have Papadopoulos products in their cupboard: generations of Greeks have been raised on them.

Ioanna Papadopoulou studied food chemistry in England and began working in 1975 on the factory floor, learning the business from the bottom up. It is, she says, the only way. Since becoming CEO in 2002 after her father’s death, she has kept true to the ethos that a family business comprises not just the family, but the employees too. Loyalty is important to her; at a time when many other companies in Greece and Europe are cutting staff costs due to difficult economic conditions, she has given the company’s employees a salary increase. “In hard times,” she says, “you must look after your own.”

She admits that the sector is in a strong market position; when people cut down on luxuries, cookies are still affordable treats. Even though the 2010 company report shows that turnover and profits before tax dipped slightly, tonnage production increased. This is because, in tough times, company policy is to give free incentives to consumers, such as an extra packet of cookies or a free sample. Success comes, says Papadopoulou, from having a product of which you are proud and goals that are affordable and achievable. Her father, Evangelos, the founder of the modern company, always said that respect for the consumer is crucial.

Papadopoulou’s management style is informal and practical — “My door is always open, my tables are round: we are all in this together.” She encourages her employees to raise their problems with her as she loves to

The Papadopoulos family baked their first cookies in 1916, but it wasn’t until they fled to Greece that they began to market their products properly, as this early advertisement shows


Papadopoulos

help solve them. She compares her workforce to an orchestra; she might be the conductor, but for the whole thing to work, everything must be well tuned and in harmony.

To Papadopoulou, the advantage of being a family business is that, without having shareholders asking only for profit increases, there is greater flexibility and decisions can be made and implemented quickly. This makes it simpler to respond to a volatile economic climate but, equally importantly, it means there is the strength and security that comes from stability. It is easier to have a long-term vision, to be patient, to try new things without the pressure to constantly produce results. Her workforce, too, commits for the long haul. “Many start with us and take their pensions from us,” Papadopoulou says. She believes that successful companies must have mutual respect between management and the factory floor.

That sense of respect extends to her attitude to the consumer. Papadopoulou emphasizes the importance of listening to customers, producing reliable and sustainable quality at the right price and responding to changing market needs. This awareness of changing tastes and trends has led to continual new product development. In 1978, the company launched its sophisticated Caprice brand, and in 1985 came the highly successful bread substitutes. In 2008, recognizing the growing interest in healthy eating, especially from mothers with growing families, the company developed a sugar-free, high-fiber range.

Papadopoulou proves that running a highly competitive and successful business does not have to be an aggressive occupation. This

is management with a gentle touch. “I love my work,” she says. “I love cooking; we cook every day.” Indeed, the company’s offices above its factory in an Athens suburb smell of chocolate and vanilla. She hopes one day to pass the business she inherited from her father to her family, but one gets the sense that she will never really retire. “I know nothing other than work — I love it,” she says.

The lobby in the factory proudly displays plaudits from the past, such as a diplôme d’honneur awarded in Paris in 1937 for “Biscuits d’Athenes” and a Medal d’Or in Brussels in 1930. Yet this is no museum or monument to days gone by. The best of its traditional values remain, but the obvious pride in the achievements of past generations, and a sense of stewardship, lead the company to dynamically and enthusiastically invest in the future.

Papadopoulos prides itself on its commitment to innovation and education, making sure it offers training to its staff. It is looking to expand its export market, while continuing to develop and maintain its position in the domestic market through the continued expansion of bread substitutes and “added-value” products.

Ioanna Papadopoulou is proof that the successful transmission of a business from generation to generation means respecting and building on the best of the past, but stamping your individual mark on the future. Her gentle but determined management means that the company is in safe hands and well placed as the Greek economy faces difficult times. The secret, she would tell you, is to love what you do and remember to put the consumer’s needs first.

Below A time before packaging: the company’s cookies used to be sold in bulk from metal boxes

“My door is always open, my tables are round: we are all in this together”Ioanna Papadopoulou

Opposite, from top The Papadopoulos kiosk at a food fair in Thessaloniki in 1925

Ioanna Papadopoulou’s late father, Evangelos (second from right), on a ministerial visit to the company’s factory in Athens. His brother, Nikolaos, is on the far left


Arvid Nordquist

From “exotic” canned pineapple to its Classic brand coffee, Swedish retailer Arvid Nordquist has been championing the best in food and drink for the past 130 years

Shop of many delights

Not many 26-year-olds have the drive and ambition to open their own business. Arvid Nordquist, who founded a delicatessen bearing his

name in central Stockholm in 1884, was one of these extraordinary few. But even he could hardly have imagined that, more than a century later, his grandson would be head of what has become one of the most respected family-run trading houses in the Nordic region.

Having previously worked as a clerk, the grandfather of the current CEO, Anders Nordquist, had learned the value of customer service and high-quality goods. In practical terms, this meant that he made sure that people who worked in his store, selling exquisite produce from around the world, were just as polite and well groomed as he was.

The success of the company to this day owes much to its founder’s eye for business opportunities within the food and beverage industry. Like many successful entrepreneurs, he had spotted a gap in the market: in the 1880s, Stockholmers shopped in their local neighborhoods, but Arvid believed he could attract customers from other parts of the city if his shop offered exclusive beverages and delicacies. And this is exactly what he set about doing. The first step was to procure goods that customers couldn’t get anywhere else. So, despite the complicated nature of foreign travel at the time, Arvid went abroad in order to establish trade agreements with leading international companies such as Fortnum & Mason, a luxury food hall in London, and French sardine supplier Rödel & Fils Frères.

And so it grew. Six years after opening the delicatessen, Arvid saw the potential for a new market: supplying food and beverages to restaurants.

So, in 1892, he moved the shop to Sturegatan, an elegant street near one of the city’s premier parks. With its prime location, premium goods and outstanding customer service, the shop attracted the high society of fin de siècle Stockholm. Royalty was among them and, in 1910, three years after it became a limited stock company, Arvid Nordquist became Purveyor to the Royal Swedish Court. In later years, both Arvid’s son Bengt and grandson Anders received the same honor.

During the second decade of the 20th century, however, the company faced the first major threat to its prosperity. World War I led to rationing and drastic price increases. In 1917, Sweden experienced its worst harvest in 50 years, provoking riots in the capital. To make matters worse, Parliament banned wine imports and introduced a state monopoly on the sale of alcoholic beverages, slashing the company’s revenue overnight.

In spite of the forces working against it, Arvid Nordquist was able to weather the storm by keeping a focus on its core values of premium service and high-quality goods. In 1922, however, it was to face an even bigger crisis: the unexpected death of its founder. He had married late in life and, while he had no doubt dreamed of the family carrying on the business, his son, Bengt, was just nine years old.

But, having had the foresight to turn Arvid Nordquist into a limited stock company in 1907, Arvid had put in place the foundations that would ensure the continued survival of the company well into the future. Johan Hagström, a highly regarded vintner, became Chairman of the Board, and Ernst Thelén, a friend and long-term employee of the company, became its

Above Arvid Nordquist introduced its Classic coffee brand in 1961 — this packaging dates from around that time

Opposite Anders Nordquist, the founder’s grandson, in the company’s boardroom


Arvid Nordquist

second in command. Thelén became CEO and worked to keep the business running while Bengt grew up. It was a post he would hold until his own death in 1941.

It could seem like a lot of pressure for a nine-year-old child, knowing that the business was waiting for him, but Anders Nordquist believes that his father had a strong desire to follow in his own father’s footsteps from a young age. “He grew up in a household that only talked about the business,” he says. “It was in his blood.”

Under Thelén’s mentorship, the young Bengt worked in the shop during the school holidays. He started full-time work at the company when he was 22, and Thelén sent him to London, Paris, Hamburg and Berlin to learn about the grocery and beverage trade and improve his languages.

Today, Swedes are known for their impeccable English, but in the 1930s, foreign languages were not widely spoken in the country. Thelén’s insight in sending the young Bengt abroad to gain experience ensured that the company continued the strong international connections that its founder had believed were vital to its success.

Bengt Nordquist became CEO of Arvid Nordquist after Thelén’s death in 1941, at a time when the company was again struggling under difficult circumstances. Despite Sweden’s neutrality, World War II had brought the return of rationing and the company was cut off from foreign trade. Nevertheless, Bengt’s continued belief in his father’s vision and the company’s core values ensured its survival. “My father’s life was taken up with the business,” says Anders Nordquist. “He was seldom home, devoting

all his time to Arvid Nordquist. In a way, the business was family, and family was the business.”

One of the ways in which Bengt brought this philosophy to life was by establishing, in the early 1960s, a tradition of post-Christmas parties for the children of his employees that continues to this day. At the party, each child receives a toy that has been specially selected from NK — Sweden’s most exclusive department store — and staff members are treated to delicious foods in the true spirit of Arvid Nordquist. Bengt was also instrumental in opening up new markets. Under his stewardship, the company expanded its import agencies all over the world, searching out good-quality products for Swedish restaurants and consumers.

For all its successes, the company had yet to attract the attention of one key person: the young Anders Nordquist. “I was never going to work for the family business,” he says, laughing. “Absolutely not! Instead, I chose to study law. My father thought this was a good idea and put no pressure on me to follow him into the business. I think the idea, of course, appealed to him, but it was never forced upon me.”

It was coffee that finally brought Anders into the family business. He remembers talking to Erik Nilsson, who was responsible for the purchasing, quality control and production of coffee and who made it sound so exciting that it caught Anders’ imagination.

As the industry changed and consumer trends wavered, the company reluctantly made the decision to close the original delicatessen on Östermalm in 1981. Anders Nordquist was then just 22, four years

The Nordquist family in 2009 (left to right): son Wilhelm with Dino the dog, Anders, wife Ulrika and daughters Gabriella and Beatrice

Left This photo, taken at the store in the 1960s, shows Bengt Nordquist, Anders’ father, on the left, with two managing directors. Anders and his siblings Carin and Johan are in the middle

Right Trucks deliver goods to the store on Birger Jarlsgatan in the 1960s

younger than his grandfather had been when he started the business almost a century earlier. Things had moved on and the company’s future lay in trade.

It continued to import foreign foods and beverages, but it was at this time that coffee became central to the Arvid Nordquist brand. In 1982, the company built a new roasting house in Solna and when, 8 years later, at the age of 31, Anders took over the responsibility for the company’s premium product, he made major investments into new machines for coffee production and environmentally friendly packaging.

After Bengt died in 1991, Anders, now a total convert, succeeded him as CEO. He shares his eye for new possibilities with his father and grandfather: the company opened sales offices in Oslo and Copenhagen in 2002, and Helsinki in 2004. But coffee has stayed closest to his heart, and it’s perhaps because of this that Arvid Nordquist is best known in Nordic households for its Arvid Nordquist Classic brand.

The company, like all long-running businesses, has experienced its share of ups and downs. War, crop shortages, inflation — all have the power to topple companies that haven’t built up a solid financial and customer base. Anders Nordquist believes that his family firm’s belief in a close-knit community of employees has helped it overcome adversity and grow from generation to generation.

Like his father before him, however, Anders is putting no pressure on his three children to follow him into the family business. He believes that, first and foremost, it is important for them to pursue their own dreams. “If that

“As the market changes, Arvid Nordquist will continue to look for new opportunities, just as it has done since my grandfather opened the very first store in 1884”Anders Nordquist

means they work for Arvid Nordquist one day, that would be wonderful,” he says. “But if they don’t, the company will continue to thrive with people who believe in the family ethos of mutual respect and understanding, and a desire to provide the Nordic region with high-quality goods.”

Although no one can predict what the next 130 years will hold for Arvid Nordquist, Anders is sure there is a bright future for the company, no matter how the industry changes. “We’ve gone from selling ‘exclusive’ products such as canned pineapple, which my grandfather’s generation saw as exotic, to importing and distributing fine wines and producing premium-quality coffee,” says Anders. “As the market changes, Arvid Nordquist will continue to look for new opportunities just as it has done ever since my grandfather opened the very first store in 1884.”


Timeline: Shipping

Oceangoing vessels have made fortunes, won wars and expanded the boundaries of the known world

ShippingAdventure and profit on the high seas

1868

1970 The Mediterranean

Shipping Company is founded. The Geneva-based

company remains independent and

wholly owned by CEO Gianluigi Aponte and

his family.

2001

1961 The Shipping Corporation of India, now the largest shipping company on the subcontinent, is created with the amalgamation of the Eastern Shipping Corporation and Western Shipping Corporation.

2001 Van Oord begins construction of the Palm Jumeirah, a project to create a huge palm-shaped island from reclaimed land in Dubai.

1577 to 1580 Sir Francis Drake successfully circumnavigates the

globe, the first Englishman to achieve this feat. His trip sheds light on the geography of the world. By the end of the trip, only one ship of five that takes part in the voyage is left, and Drake renames it the Golden Hind.

1492 An expedition led by Cristobal Colón, or Christopher Columbus, crosses the Atlantic and reaches an island in the Bahamas. The explorer thinks he is in the East Indies and, when he reaches Cuba, decides that it is Japan. In his lifetime, Columbus makes four trips across the Atlantic but does not realize he has reached the Caribbean. He lands on the mainland of South America but never reaches what is now the US.

1769 The British Government sends Captain

James Cook on an expedition to the southern hemisphere, ostensibly to observe Venus

passing in front of the sun. In fact, another reason is to find a large country that is believed to exist there. He

goes on three voyages to the region in total, visiting Tahiti, New Zealand and Tasmania,

and getting within 121km of Antarctica. On his last trip,

Cook becomes involved in a dispute with some Hawaiians

and is fatally stabbed. His voyages help map the Pacific,

New Zealand and Australia.

1871 Hamburg Süd is founded. It is now part of the

Oetker Group, a family-owned German conglomerate.

3000 BC The ancient Egyptians build boats made from wooden planks tied together with rope. People believe that, after he dies, the pharaoh will sail down the Nile with the sun god Ra in this boat.

1868 Govert Van Oord founds a company

that will one day play a role in creating some

of the world’s most ambitious projects.

1904 The A.P. Moller–Maersk Group is founded by captain Peter Mærsk-Møller and his son, Arnold Peter Møller, in Svendborg.

1932 Aristotle Onassis buys his first ship, which he names Calliroe after his sister. He marries Athina Livanos, whose father is also a shipowner, 14 years later. Onassis goes on to become a multimillionaire shipping magnate.

2007 The Cutty Sark, the only tea clipper still in existence, is ravaged by fire after staff accidentally leave a vacuum cleaner running for two days. A £50m restoration project is being carried out and the ship is due to reopen to the public in 2012.

15 AD During the Ming Dynasty, China builds up one

of the most powerful naval fleets in the world.

1829 An expedition to the Arctic led by John and

James Clarke Ross lasts four years as they get trapped in

icy conditions. The explorers try to find a link between

the Pacific and the Atlantic Oceans, a connection that has been sought after for

hundreds of years.

3000 BC 170015001400 1800 20001900

1717 The notorious pirate Blackbeard, whose real name is

possibly Edward Teach, acquires his own ship. He attacks and

plunders vessels in the Atlantic and the Caribbean until

November 1718, when he is killed by a navy sailor.


Van Oord

Like many Dutch families, the Van Oords have long made a living from the sea. From harvesting marshland to dredging the Palm, Van Oord is now an international concern

Where land and water meet

Govert van Oord lived and worked in the marshlands of Biesbosch, in the southwest of the Netherlands. A religious man, he was dismissed

in 1868 by his landlord employer when he refused to work on Sundays. Instead, he rented and maintained a section of marshland covered with willows and reeds, from which he made his living.

Govert’s four sons all entered the family business and, in 1919, they established themselves as Gebr. Van Oord (Van Oord Brothers). Between the two World Wars, the company gradually began to move into marine construction sub-contracting. In 1948, the company was split up among the four sons. One of these was Jac. G. van Oord, who, along with his two eldest sons, Goof and Jan, continued the small earth-moving and marine construction company under the Van Oord name.

The 1950s was a time of strong growth for Van Oord, precipitated by the great flood of 1953, which led to an enormous amount of dike reconstruction work within the Netherlands. During the 1960s, the company continued to expand and began to take on large infrastructural projects in the Netherlands, such as motorway foundation, and large canal and port construction projects. In the next decade, the company spread its wings into the neighboring countries of Germany, Belgium, France and Spain. “This was a far riskier proposition in the 1970s than it is in today’s age of the internet and globalization,” says Koos van Oord, CEO from 1995 to 2008 and the great grandson of Govert van Oord. “It took us about 10 years of gradual transition and we felt like pioneers at the time.”

Van Oord’s expansion continued further abroad during the 1980s, which was a time of great change. The dredging industry comprised numerous small-to-medium-sized players, many of which experienced difficulties as a result of adverse economic conditions. Consequently, there was a gradual process of consolidation over the next 25 years and the competition was reduced to a limited number of very large international concerns. “Getting through these difficult times called for resilience and a strong entrepreneurial spirit from the family, as well as the will to succeed,” says Koos. “And, like any other business, we also needed a healthy slice of luck.”

In recent decades, Van Oord has transformed itself from a family-run firm into a professionally organized business, with the proper governing structures in place. During the 1990s, the company became a truly global concern, undertaking the dredging work for the construction of Hong Kong Airport in association with other contractors, as well as major land reclamation projects in Singapore. Most recently, Van Oord was the main dredging contractor for the Palm and World offshore real estate development projects in Dubai, and was one of the leading contractors for the Maasvlakte 2 expansion project at the Port of Rotterdam.

The company’s growth has accelerated in the past 20 years, partly due to a merger with Ballast Ham Dredging in 2003. It has also diversified into other offshore services, such as pipeline protection and the construction of the largest offshore wind parks in the Netherlands and Belgium.

To this day, Van Oord remains a privately held company in which the Van Oord family maintains a large majority shareholding. The company

Opposite (from left) Koos van Oord, Chairman of the Board of Merweoord, the family investment holding company; Karien van Oord, Chairman of the family association; Pieter van Oord, CEO of the Van Oord company


maintains a large fleet of vessels and has an annual turnover of €1.6b (US$2.3b) and about 4,500 employees.

One of the reasons why Van Oord has enjoyed success for generations is that it is constantly preparing for the future, assessing where it is today and where it wants to be tomorrow. “This should be true of all companies,” says Koos, “but one of the keys to creating a long-lasting family business is finding the right balance between the family side and the business side. If there are problems with either of these aspects, both will suffer.”

The Van Oords put just as much effort into family matters as they do into the business and have their own Family Association, which is open to all family members over 18 years of age (currently, about 129 members). It organizes social activities and has its own communication channels, such as a newsletter and website. The association provides loans to family entrepreneurs, runs a management training program and operates a charitable foundation.

“The association keeps the family close together, creating a sense of belonging and providing continuity,” says Koos. “One of the advantages of a family business is that you can think long term. Next quarter’s profits are important, of course, but we are able to look much further ahead. It also provides family members with a sense of history and of being involved in something that is helping to create a better world. It’s very rewarding.”

A crucial moment for any family business is when it passes from one generation to the next. Succession planning within Van Oord is one of the most important tasks the family and company’s leaders face and typically

involves 5 to 10 years of forward and contingency planning. In fact, most of the company’s leadership comes from non-family members; only six members of the Van Oord family currently hold positions.

While the family would prefer to have one of its members at the company’s helm, there is no guarantee of this. The appointment of each new CEO is based on merit and capabilities alone. As a safeguard against nepotism, any appointment of a family member within the company has to be approved by a three-person committee, which contains at least two are non-family members. “My own appointment as CEO was a very gradual process,” Koos says. “After many years of working within the company and receiving the appropriate training, at a certain point it became apparent that I would be the most logical choice. However, it took quite some time before I came to the same conclusion.”

He says that the same is true of his successor and cousin, Pieter van Oord, who took over as CEO in 2008. Previously, Pieter had worked for Phs. Van Ommeren — a large, internationally operating shipping and forwarding company — for a number of years before joining Van Oord in 1994. The board recognized his potential and guided him through the preparation process, but at no point was his appointment as CEO guaranteed. When it did eventually happen, it was based purely on the objective assessment that he was the best man for the job.

Koos van Oord puts the company’s success down to entrepreneurship and good leadership within the business. The ability to think long term and anticipate required changes are also important factors, along with the ability to attract outstanding non-family members and cooperation with other business partners. “Any Van Oord family shareholder should consider the company not as a possession but as a custodianship that will eventually be passed on to someone else,” Koos concludes. “We need to ensure that the company operates in a way that is beneficial to both stakeholders and clients, treats employees with dignity and treats the environment with respect. As for the future, we will continue to explore expansion possibilities for the business, which offers a sea of possibilities wherever land and water meet.”

Opposite The Palm Jumeirah in Dubai, a luxury development in which Van Oord played a key role. It is one of three Palms

Right Van Oord played a part in protecting the Netherlands from flooding during the February 1953 storm surge

Below Pieter van Oord (right) watches as the Mayor of Rotterdam breaks ground for Van Oord’s new head office

Overleaf (from left) Karien, Pieter and Koos van Oord standing in the pumproom of the seagoing cutterdredger Athena, under construction at the IHC Merwede shipyard at Kinderdijk


Van Oord


Van Oord


GMR Group

The third generation of the Rao family may only just have joined the family business, but GMR is planning ahead. Its newly enshrined family constitution was the first in India

A 21st-century legacy

E ight members of the Rao family attended a conference in Jaipur on family businesses in November 2000. The patriarch of the family, G.M.

Rao, is Group Chairman of GMR Group, the Bangalore-based infrastructure conglomerate that he founded in 1978. He was there with his wife, Varalakshmi, his two sons and daughter and their spouses. The conference marked the beginning of a 10-year journey for the GMR family that culminated in legalizing India’s first “family constitution.”

A decade later, on 22 March 2011, with colleagues, friends, family, senior employees and a spiritual advisor in attendance, members of the GMR family went up on stage and spoke about what the family constitution meant to them and about their commitment to the company. Varalakshmi spoke about upholding its values and culture, both within the family and in the company. The two daughters-in-law spoke about being allowed the space and freedom to articulate their views, express their doubts and speak on behalf of their children. The sons spoke with humor and insight about safeguarding their father’s legacy.

“We started off this process with my parents’ vision of wanting to see our family together, implementing processes with clarity and communicating well among ourselves,” says G.B.S. Raju, Rao’s eldest son and Chairman of the Group Corporate Services and International Business Division. “The whole process has resulted in a commitment to help our family build a great institution together.”

Kiran Grandhi, Rao’s younger son and Chairman of the Airports Business, adds: “I am personally committed to this process; it’s a part of me and part

of us as a family. The chances of going wrong are now much slimmer. While it doesn’t mean that we will avoid all differences, we are now much better prepared to face them proactively and constructively. This makes us much stronger.”

The GMR Group, one of India’s largest business conglomerates, is an infrastructure developer operating in the energy, airports, highways and urban infrastructure sectors. Its Bangalore headquarters takes up four floors of a tall glass-and-steel building in the IT corridor of Bannerghatta Road and it has a growing international presence, with offices in Dubai, Turkey, Indonesia, the UK, South Africa and Singapore. But it remains, at its core, the vision of one man: Grandhi Mallikarjuna Rao.

One of four brothers, Rao grew up in a village in interior Andhra Pradesh, in the southeast of India. Beginning with one jute mill, this self-made businessman with big dreams is now involved in two of the most crucial areas in the Indian economy: infrastructure and energy. Rao’s mantra for success is this: “Embrace change. Create win-win situations. Be fearless. Convert problems into opportunities. Excel at what you do. Give back to society. And be humble.”

Crucially, he has placed as much emphasis on maintaining strong family ties as he has on growing the business. Indeed, the openness among the family members demonstrates the closeness of their bond. “In the past 10 years, we’ve had 600 hours of meetings and everyone wanted to be heard,” says Srinivas Bommidala, son-in-law of Rao and Chairman of Urban Infrastructure and Highways on the GMR Group Holding Board.

Opposite G.M. Rao in his office, with a model of one of the company’s biggest projects, Terminal 3 of the Indira Gandhi International Airport


GMR Group

“As my father-in-law said, we have experienced situations where people say one thing and then, the moment they go home and discuss it with their spouses, things change. We wanted to get the thoughts of all family members on one platform. We have put a lot of mechanisms in place so that intent and content can come together. We have created the content. The intent has to come from the heart.”

Bommidala is married to Rao’s eldest child, Rama Devi. They have a daughter, Susroni, and a son, Santosh, who are in their late teens. During the signing of the family constitution, it was announced that Susroni would be the first member of the third generation to be inducted into the Family Forum. Echoing universal parental concerns, Rao said that his 18-year-old granddaughter couldn’t be present that day “because she has exams.”

But why go through a protracted 10-year exercise to create a family constitution? Just matching the schedules of his clan so that they could come together once a month for videotaped family sessions was a logistical nightmare, so Rao established the Family Office, which manages schedules, arranges meetings, and archives photographs and books.

For Rao, the founder and key instigator of the process, the journey toward bringing the family together began in the 1980s, when he became the non-executive Chairman of Vysya Bank. “As a banker, I saw that most of the distressed businesses and non-performing assets were because of family disputes,” he says. Watching other businesses splinter and fail gave him the resolve and foresight to decide that it would not happen to his own business — or his family.

Two decades later, as the GMR Group flourished, Rao hired family business advisors, consultants and academicians to facilitate a two-day family retreat. Law firms and accountants helped them to set up trusts and answer detailed, specific and often controversial questions. How will they allocate jobs within the businesses for future generations? What kind of lifestyle should family members adopt, not just to set an example but also because they believe in “humility” as a core value both in the business and as a family? So far, all family members take the same remuneration. Should that continue in the future? How will they allocate remuneration, dividends and compensation as the businesses become more complex and diversified? What policy should the group adopt toward people marrying into the family? Should they be allowed to join the family business or do something different? Who should speak to the media? How should they manage and resolve differences? What are the family governance mechanisms with respect to a family fund and succession planning?

“A lot of it had to do with ‘cleaning the pipelines’ so that each family member could air differences and not keep issues simmering inside,” says Rao, emphasizing that family disputes affect not just the family, but also the business and the country.

Rao and his family agreed on certain basic protocols. There would be no triangular communication. Instead, they would talk “unit to unit.” If a daughter-in-law had an issue with her mother-in-law, they would talk things out between themselves and not use their husbands as intermediaries. “You have to run the business like a family and the family like a business,”

he says. But Rao’s gaze is not only directed inward. He has never forgotten the company’s humble beginnings and places a strong emphasis on corporate social responsibility. Twenty years ago, he founded an initiative to bring high-quality education to the communities near GMR’s jute and sugar operations at Rajam, Andhra Pradesh. Now called GMR Varalakshmi Foundation after Rao’s wife, it is active in 22 locations in India and Nepal, operating in education, healthcare, livelihood and community development. In March 2011, just after the family constitution was legalized, Rao made national news when he announced that he was donating his entire stake in GMR Group, worth US$340m, to the foundation. The move led to magazines anointing him as one of India’s 50 most powerful people and politicians and policymakers lauding him for his gesture.

The future is never far from Rao’s thoughts. When his sons entered the business, he found mentors whom they met and learned from. His sons were rotated through a variety of positions, each with performance appraisals and accountability. “Human capital is immeasurable,” notes Bommidala. “You can quantify money; you cannot quantify human capital. We, as a family, bring the entrepreneurial spirit and the passion. But we also want to make the business professionally run. Professionals bring in knowledge; the decision-making comes from the family. We try to bring in the passion and drive; professionals bring in systems and processes. We want these two parallel lines to merge at one particular point.”

In November 2010, the GMR Group came up with a vision for the future and renewed its commitment to the business over the next 10 years. Called

Sankalp 2020 (Sanskrit for “resolve”), it outlined the group vision: “The GMR Group will be an institution in perpetuity that will build entrepreneurial organizations, making a difference to society through creation of value.”

Spirituality plays a large role in this vision. The family meditates together and has a spiritual advisor who is almost a family member. “Spirituality gives you humility,” says Rao.

With that, the soft-spoken man rises and sets out to undertake the next challenge, confident that he has created a solid foundation to take the GMR Group into the next generation and beyond.

Left G.M. Rao at the GMR Vemagiri Power Project

Right The GMR Power Corporation plant in Chennai, which both produces electricity and converts raw sewage into clean water

Above Terminal 3 at Delhi’s Indira Gandhi International Airport


Growth DNA model

We understand the growth DNA of family businesses and have the insight and experience to support your unique needs

Ernst & Young: helping you succeed for generations

Running a family business successfully is a balancing act between the strategic issues related to your family and those connected with your

business. It also means steering the company successfully between the forces at work in the marketplace and those within the family.

As an organization focused on entrepreneurship, with a dynastic will to build a stronger business generation after generation, Ernst & Young relates to and understands the issues that family businesses face.

Through our ongoing research program and our close liaison with leading family business organizations, we know that family businesses are well placed to ride the turbulence of volatile financial markets. This is due to their longer-term perspective, which allows them to avoid the pitfalls of “quick fixes”; their flexible and focused governance; their loyal employees and strong supplier relationships; and their unwavering commitment to quality and customer focus.

However, there is the constant dual challenge of securing the long-term existence of the business through growing the company, while balancing the risk of doing so. Any strategic decision to expand or change the business must not be taken at the expense of eroding value or threatening the family business’s long-term survival. An aligned family and business strategy will secure both your family’s and your company’s values on a long-term and sustainable basis. It also forms the foundation for the planning of ownership and management succession.

Each family business is unique, yet each has much in common; understanding these success factors and taking advantage of that

knowledge underpins what we call the “growth DNA of family business.” Our bespoke family business services, based on this growth DNA model (see diagram below), support the personal and company performance agendas of family business leaders to help you succeed for generations.

We have industry and subject-matter professionals in key business sectors who understand the specific issues you face every day and can give you informed advice on how to leverage leading practices. As the most globally integrated professional services organization, with more than 141,000 people active in almost every country, we have extensive experience of working on complex cross-border issues in both emerging and developed markets.

Our services focus on the main areas of concern for family businesses; it is these areas in which we believe we can be most useful to your family and to your business.

Managing capitalCapital is the lifeblood of a growing company and many family businesses will be considering new investments. If you are opening new subsidiaries, taking on new staff, planning an acquisition, upgrading your technology or developing new products, you may need to consider refinancing or restructuring or to explore private or public capital injections.

Sustaining growth and profitability To sustain growth and continue to drive profitability, you may be looking to explore new markets and broaden your product/service mix to exploit opportunities, achieve optimum returns and mitigate risk. This may involve pioneering, innovative entry strategies, with any acquisitions seamlessly integrated into your business, and realizing back-office efficiencies that will improve the top and bottom lines.

Managing and retaining talentA company is only as good as its employees; this principle applies even more in our globalized world. Increased cost-consciousness, market volatility, international assignments, legal requirements, tax complexities and the retention of top performers present a whole host of challenges to family businesses.

Next-generation planningGenerational change in family businesses is a highly complex process and often constitutes a balancing act for everyone involved — family, company and owner. The issues to resolve always have an emotional component in addition to the practical, objective and technical aspects. Alongside fiscal, legal and financial questions, the very personal aims and values of the entrepreneur and family members will always be a major consideration.Ernst & Young’s Growth DNA of Family Businesses model highlights

the interlinked nature of the eight characteristics of successful family businesses



Every great business started out with one great idea — and an entrepreneurial talent who envisioned something new and found a way to bring it to market.

We believe in the power of entrepreneurship and innovation, and commend those who excel. Ernst & Young Entrepreneur Of The Year is the world’s most prestigious business award for entrepreneurs. It recognizes the contribution of people who inspire others with their vision, leadership and achievement, and celebrates those who are building and leading successful, growing and dynamic businesses.

For more information, please visit ey.com/eoy

Our Junior Academy program offers young people from family businesses a chance to find out where their strengths lie, explore their interests and give voice to their own needs for the future.

The Junior Academy is an exclusive one-week training event that combines knowledge from international top-ranked executive business schools with practical experience from Ernst & Young to create a particular offering for the next generation of entrepreneurs and family business leaders.

For more information, please visit our dedicated website: ey-junioracademy.com

For further information, or to order any of our dedicated publications for family businesses, please visit ey.com/familybusiness or contact Penny Cooper, Director, Ernst & Young Family Business Center of Excellence, at [email protected]

Rothschild Copyright: D.R, courtesy of Rothschild, AKG-images

Banking timelineGenizah: Mosseri VII.189.1, the Jacques Mosseri Genizah Collection at Cambridge University Library with permission from the Syndics of Cambridge University Library, Corbis, Alamy, AKG-images, HSBC: Courtesy of HSBC Archives, Getty, iStockphoto.

Cosmetics, fashion and luxury goods timelineAKG-images / North Wind Picture Archive, Corbis, AKG-images, Advertising Archives, Alamy, Getty, Istockphoto, Christopher Anderson / Magnum Photos.

Media and publishing timelineAlamy, Getty, Corbis, logo courtesy of Penguin Books, Rex Features, De Agostini.

Automotive timelineAlamy, Advertising Archives, Steam Carriage: English School / Private Collection / Look and Learn / Bridgeman, Getty, AKG-images, image courtesy of Tata, image courtesy of Honda, Mary Evans Picture Library, Corbis.

Food and drink timelineYvan Travert / AKG-image, Corbis, image courtesy of Cadbury, AKG-images, image courtesy of Arvid Nordquist, image courtesy of McDonald’s, image courtesy of Papadopoulos, image courtesy of Heinz, Topfoto, Alamy.

Shipping timelineGetty, Mary Evans Picture Library, Alamy, Corbis, image courtesy of Van Oord, iStockphoto.

Succeeding for generations was produced by Wardour on behalf of Ernst & Young

For Ernst & YoungPenny Cooper, Marketing Director, SGM, EMEIA Sandra Ward

For WardourEditor Molly BennettAssistant Editor Ruth GanthonySenior Designer Angela LyonsPicture Editor Johanna WardDesign Director Ben BarrettAccount Director Emma KingProduction Gary ChambersProduction Director John FaulknerManaging Director Claire OldfieldCEO Martin MacConnol

Wardour, Walmar House, 296 Regent Street, London W1B 3AW, United Kingdom. Tel +44 (0)20 7016 2555 wardour.co.uk

Esteve (page 27) Photography Lluis Artus. Shot on location in Barcelona. Interview Barnaby Eales

Oras Invest (page 31) Photography Maja Flink. Shot on location in Helsinki. Interview Joanna Sinclair

Avantha (page 35) Photography Sanjit Das/Panos Pictures. Shot on location in Gurgaon, Delhi. Interview Swati Prasad

De Agostini Group (page 41) Photography Alex Majoli/Magnum Photos. Shot on location in Milan. Interview Heather O’Brian

Barceló (page 61) Photography Lluis Artus. Shot at the Barceló Pueblo Park Hotel, Mallorca. Interview Eric Lyman

Prym (page 47) Photography Peter Rigaud/Shotview. Shot on location in Stolberg in the Rhineland. Interview Ulrike Minke

WICOR (page 53) Photography Mathias Braschler and Monika Fischer. Shot in Rapperswil, Switzerland. Interview Renée Cordes

Berry Bros. & Rudd (page 65) Photography Harry Borden/Bonakdar Cleary. Shot on location in London. Interview Molly Bennett

Papadopoulos (page 73) Photography Courtesy of Papadopoulos.Interview Lauren O’Hara

Arvid Nordquist (page 77) Photography Mattias Rudh/Eyes Productions. Shot on location in Stockholm. Interview Jon Buscall

Van Oord (page 83) Photography Peter Rigaud/Shotview. Shot at the IHC Dredgers Shipyard, Rotterdam. Interview Gary Rudland

GMR Group (page 89) Image Sanjit Das/Panos Pictures. Shot on location in Bangalore. Interview Shoba Narayan

Effective tax managementTax has a big impact on a family company’s investment decisions: its financing and liquidity situation affect competitiveness and growth. It is therefore vital to ensure that you understand the tax implications of the business and personal wealth decisions you make.

Balancing riskThe need to be able to react quickly to market developments makes additional demands of family businesses’ flexibility and adaptability to risk. This can be achieved through forward-looking risk management combined with an effective control system that allows you to keep your business out of trouble and improve performance simultaneously.

Future management structureFamily businesses revolve tightly around the current owner — yet arranging a successor within the family may not always be possible. For instance, your descendants could lack the desire and the willingness to assume the entrepreneurial risk, or they may not have the necessary qualifications and experience to manage the company. Contingency management, appointing non-family executives and family charters all contribute to ensuring your business succeeds for generations.

Culture and responsibilityCustomers and employees alike are attracted by a long-standing family business commitment to sustainability, whether it is an uncompromising commitment to use local products or to source from renewable resources, or to avoid using cheap labor. You may need to consider how best to integrate ethics and values into your performance strategy and align it with the achievement of company goals with respect to growth, market positioning and optimizing internal processes such as financial and non-financial stakeholder reporting.

Ernst & Young is the world leader in advising, guiding and recognizing entrepreneurs. We will work with you to preserve your life’s work and develop it further for the next generation. Our services help you deal successfully with the challenges of today’s marketplace, with its multilayered uncertainties and opportunities. We will support you as you go forward into the future.

We’ve got what it takes to help you to succeed for generations.

The Ernst & Young Junior Academy

Entrepreneur Of The Year

Credits

Bankhaus Spängler (page 7) Photography Peter Rigaud/Shotview. Shot on location in Salzburg. Interview Rhea Wessel

Rothschild (page 15) Photography Olivier Seignette, courtesy of Rothschild. Interview Agnes C. Poirier

Obeikan (page 21) Photography Siddharth Siva. Shoton location in the Bastakiya quarter of Dubai. Interview Rob Morris

Ernst & Young (page 4)Photography Courtesy of Ernst & Young. Article Mark Alexander

96 Succeeding for generations

Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & YoungErnst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities to achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com

© 2011 EYGM Limited. All Rights Reserved.

EYG no. CY0166

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

The opinions of third parties set out in this publication are not necessarily the opinions of the global Ernst & Young organization or its member firms. Moreover, they should be viewed in the context of the time they were expressed.

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Documents

Succeeding for generations - EY Family Business · 2013-09-23 · 2 Succeeding for generations Succeeding for generations 3 Family businesses contribute significantly to economies