1	“A Standard Family Business Manual: A Tool for Generations to come” Sobhi Batterjee President & CEO Saudi German Hospitals Group
2	Family Business. Simply stated “A family Business is the one that includes two or more members of a family that has financial control of the company” “A business in which majority ownership or control lies within a single family and in which two or more family members are or at some time were directly involved in the business.”
3	A Family Business Can be…. Sole Proprietorship Partnership Limited Liability Co Joint Stock Company
4	Global Predominance of Family Business UK-75% Switzerland-85-90% USA -86-96% Italy-99% Spain-80% Saudi Arabia- 99% ???… Source:IMD Int.
5	Family Business Facts & Figures 35% of 500 Fortune companies are family business. In USA Family Businesses generate from 40%-60% of gross national product and are the major source of new employment. 70 % of family businesses fail during 1^st or 2^nd Generation. Only 23 % of Family Business make it to the 3^rd generation.
6	Family Business Golden Rule Treat Family Business As A Family & Treat Family As A Business
7	Challenges to Family Business Technology Impact (IT-Impact) Globalization. Lower Income. Growing Population. Generation Gap. -Education -Values Judiciary & Legislature No case studies, precedence. Leadership.
8
9	Family Business Manual “A document that contains all the possible issues that a Family Business may have to address and the various options to handle such issues.The document should analyze relative merits and demerits of each option,learn from the experience of other family businesses and draw from the global best practices to document to handle various issues that are most appropriate to the individual family and its peculiar environment.”
10	Introduction and steps to Family Business Manual. Need to formalise the structure and guidelines to own and operate family business. Written policies on different issues related to business. Generations to come will have a reference and guideline. Involvement and consensus among shareholders and their successors. Facilitation,Assistance and Review by an external consultants.
11	Contents of Family Business Manual (As Illustration) Preamble:The purpose and importance of family Family Vision Family Mission Family Values Family History Profile of the founders Family Philosophy on business ownership. The benefits to the family. To the business and to the society. Corporate Governances. Family Council. Cont…….
12	"Contents of" Contents of Family Business Manual Cont…… Family Goals- Long Term/ Short Term - Operational/ Strategic Financial structure of the business. Diversification Strategy and Plans. Transfer of shares. Inheritance of shares. Employment of family members -Owners -Others Occupational Choice of family members. Performance Management of family members.
13	"Contents of" Contents of Family Business Manual Cont……….. Retirement of owner employees. Continuous education and development of family members. Role of women in family business. Role of In-Laws. Succession planning. Family Council, structure and duties of the board and its chairman. Board of Directors. -Selection Criteria, -Competence, Role & Responsibilities. Access to Information.
14
15	Advantages of Family Business. Sense of identity and family pride. Common interests and interaction. Opportunity to develop future family leadership. Something one inherits,nurtures, polishes and hands over in better shape to the next generation. Speed of decision making. Flexibility. Opportunity to demonstrate the values of sacrifices,savings, investments and risks. Dedication & Commitment to Business Interests.
16	Limitations of Family Business. Lack of business objectivity. Family Business and ownership issues can get mixed up. Members rivalry and groupism, individual loyal managers can lead to contradictations and conflicts. If successors are not well qualified, properly inducted and trained- it can even lead to the the collapse of Family Business. Short Life. Small Size. Local,some regional –usually not global
17	Succession Plans Succession is a process- not an event. Require several types of development opportunities for each of the family candidates for succession. They should have mentors like managers or consultants. Focus on out side exposure,industry education, team building. Involve in business processes (board meetings,strategic planning meets, company socials, ceremonies etc)
18	The 7 stages of Developing successors. 1: Attitude Preparation: Age 0-25 -Development of key attitudes toward the family business and preparation through education and outside experience. 2: Entry: Age 20-25 -Entry into the business including training and orientation. 3: Business Development: Age 25-35 - Acquiring business skills and experience. 4^: Leadership Development: Age30-40 -Successor acquires needed leadership skills, experience and Maturity. 5: Selection: Criteria, processes 6: Transition: The transition to greater authority and responsibility step by step. 7: The Next Round: Age 45 and up -Planning for the next round of succession to the Top Management.
19	Few Tips for the Founders to develop their children. Avoid saying to any of your children”someday this business will be all yours” Instead they will have to earn it and be prepared to take the responsibility that comes with it. From the time children are young,promote the skills of listening, communicating, resolving conflict and working together,even with those whom they may not like. Children should have the knowledge and skills to re-invent the company. Be proactive, foresee situations, put policies and procedures in place. Welcome in-laws and educate them about the business. Let leadership among the siblings emerge. Practice Patience.Don’t always step in when things are not going smoothly. Demand performance,assess objectivity.
20	Checklist for successor Development Does the successor has adequate academic education,overall business and industry knowledge? Has the successor gained worthwhile experience outside the family business? Has the successor gained in-depth understanding of the organization and has a proven track record within the organization. Has the clear personal development plan been laid for the successor? Is someone other than a parent teaching and monitoring the successors?
21	Why Family Businesses Fail? Not benchmarking their polices with other businesses and not learning from the best practices across industries. Not recognizing the future needs instead they prefer the comfort of the present. Keeping balance between Family priorities & Business needs Not matching the emotional based family with the task oriented Business.
22	Family Business Mission Family Businesses need mission statement (Apart from the Business Mission-and Individual Family Mission) By creating and living by a family business mission, families are gradually able to build moral authority in the family itself.
23
24	Family Meetings Family Meetings strengthen the family as they can discover and build common ground to unite themselves. Continuous inspiration,infusing values and education for the new generation. Preserving family tradition and history. Recognizing and resolving conflicts. Review annual corporate results,goals and plans Meetings foster a sense of commitment to the business among members of the family who are not directly involved in Management. Family Meetings are one of the most important recourse in ensuring family business continuity.
25	Family Council A family council is a group of the Family Members who are involved in Business and they meet periodically to discuss Business and Family related issues. Council members articulate their values,needs and expectations vis a vis the company and develop policies that safeguard the long term interests of the family and business. Provides an ideal setting for educating family members about the rights and responsibilities that come with business ownership and management. provides an appropriate setting in which relatives can discuss their concerns without cluttering family events with business discussions. In short,3 key roles of owners council, -Forge owners goals, vision and values, -Design corporate governance. -Plan for ownership continuity.
26	Continuous Education for Family Members Sharing educational experiences build unity among family members. Use a facilitator or family business consultant. Education should be an explicit part of family meetings. Visit other family businesses where sibling teams operate successfully. Develop a broad based ,high-level understanding, financial matters and assets management. How to handle confidential family matters should be emphasized. Regular professional education,members should attend management courses. Personality development program. Industry specific programs.
27	Employment of Family Members Family members meet the same specified criteria for the position. 3-5 years of outside experience and promotion earned by merit in an external organization. Clear standards for employment in the business and expected to perform like any other non-family members. Non family managers should understand and agree to developing family member managers. Start family managers at their individual level of competence. Give them the real independent jobs,measured against real standards and real feedback. Not titles like Assistant V.P or Joint Director etc. Lasting impressions are made in the first two years of the career –make it a successful experience. Compensation should be at “fair market value” for the position held.
28	Checklist for successor Development Does the successor have an opportunity to make an independent and visible contribution to the business? Is the successors continuing to learn useful skills and values outside the business as well as inside? Is the owner manager continually teaching the successor the business history,philosophy and strategy? Does the successor spend time with other family business successors,sharing interests and concerns? Does the successor enjoying the trust and confidence of family members and the senior management.
29	Compensation The objectivity of a good compensation plan is to keep all involved interested family members in the business working. Compensation to owner employees should be “fair pay” to encourage professional growth among family members and they will accept financial and self growth responsibilities for themselves. Compensation for position like chairman, managing director etc should be linked to company performance and should be attractive.
30	Retirement. Agree on a retirement age and adhere to it. Successor should be identified at least 3 years prior to the retirement. Family members must be prepared for the transition. After retirement the person should not have office in the organization. The business can still benefit from the practical wisdom and industry insight through the family council.
31	Dividend policy The Board should consider the following:- -Most critical and most sensitive issue policy decision.So the board should get the consensus and support of all family members. The following points to be considered: Adequacy of funds and revenues to meet the companies present and contingent liabilities,upgradation and growth requirements. Past trends and present expectation in dividend distribution. Need for dividend VS maximizing shareholders wealth. Implication on taxation- Tax on Income VS Tax on capital gains.
32	The 7 habits of highly effective Families by Stephen Covey. BE PROACTIVE:Become an agent of Change in your family. Begin with the End in Mind:Developing a family Mission Statement. Put First Thinks First:Making Family a priority in a turbulent world. Think “Win-Win”: Moving from ‘Me” to “We” Seek First to Understand …Then to be Understood: Solving Family problems through empathic communication. Synergize: Building Family unity and leveraging the diversity of reasons and talents . Sharpen the Saw: Renewing the Family spirit through tradition.
33	Sample Family Code of Conduct We the family realize that what is good for the company is good for the family as whole. We will follow up the company rules and we will cherish our reputation for honesty and integrity. We will do all we can to promote and develop strong family loyalty. We will always respect the opinion of others. We are committed to resolving our disagreements constructively. We will prepare ourselves for family meetings.We will promote each others positive strengths among ourselves and with our spouses. We will keep shareholdings within the family. We will seek ways to give back to the community.
34	Recommendations A centre of excellence (Family Business Institute) that will cover a wide range of facilities like research, networking, conflict management, arbitration, news letters. Family Mission and Values. Family Business Manual as reference and guideline. Rely on professionals and keep professional on the board and in management. Create, nurture and maintain a professional environment.
35	Recommendations Cont…….. Three keys to family business success. 1) ''hadaf al dunia'‘Members should have a good sense of family vision, values and goals. 2) ''hadaf al akhera” The family culture fosters the individual sense of responsibility and accountability to something greater than one's self. 3) ''become first choice for their employment'' The family develops a mechanism to allow individual members a freedom of choice to choose freely in building relationships, careers in business and ownership status, but work hard to attract members to join the business by making it attractive beyond financial return ''standing for something and stimulating pride,excitement and interest by providing leadership,opportunities for contribution as well as solid financial returns and access to liquidity.
36	Bibliography Keeping The Family Business Healthy: By John L.Ward, Publishers (Business Owner Resources: Marietta, USA) The Family Business ,Its Governance for sustainabilit by Fred Neubauer and Alden G.Lank(Routledge, New York) Family Business Leadership Series from Business Owner Resources. The 7 habits of Highly Effective Families by Stephen R.Covey,Publisher( St.Martin’s Griffin,New York) The OMBI Family Business Series by Owner Managed Business Institute. The Family Business Advisor Monthly Magazines (A publication of Business Owner Resources, Marietta)
37