Family Business Conference 2010 Factors causing Family Business
Family Business Conference 2010 Factors causing Family Business Failure International Institute for Family Enterprises Paul Dietze | Managing Director By kind invitation of the Yemeni Businessmen Club 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises
The International Institute for Family Enterprises Factors causing Family Business Failure What is the International Institute for Family Enterprises (IIFE)? We are the premier advisor and knowledge-leader for Middle Eastern and German family enterprises, delivering profound improvement to our members for success across generations. 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises 1
The International Institute for Family Enterprises Factors causing Family Business Failure IIFE Executive Summary • Founded in 2007 at Witten/Herdecke University in Germany • Academic non-profit organization • Pioneering approach (First-Mover in the MENA Region) • 100% privately-financed organization • Developing a selective “By invitation only-membership” for Middle Eastern and German family businesses and value-adding third parties • Integrated and global best-practice approach in the fields of research, education, networking and advisory services 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises 2
The International Institute for Family Enterprises Factors causing Family Business Failure IIFE Global Experience 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises 4
The International Institute for Family Enterprises Factors causing Family Business Failure Family Businesses Dominate the Global Economy… “Family businesses are challenged. Only 30% of all family-owned businesses survive into the second generation, 12% will still be viable into the third generation, and only 3% of all family businesses will be operating at the fourthgeneration level and beyond. ” Joseph Astrachan, Ph. D. , editor, Family Business Review & IIFE Board Member 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises 11
The International Institute for Family Enterprises Factors causing Family Business Failure Why Do Family Businesses Fail? Poor Management, Insufficient Capital, Lack of Planning, Overexpansion, Strategic Deficits, Competition, Wrong Decisions, … “Most family businesses do not fail because of high taxes, economic turbulences, or technological revolutions. They fail because of family conflicts and the inability of generations to oflet go. ” Family Business Summit Dr. Jürgen Hereaus, senior Chairman Hereaus Group & Patron Arab-German 2010 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises 12
The International Institute for Family Enterprises Factors causing Family Business Failure Three Circle Model Non-Family, Non. Manager Owners Family Owner s Family Members Non-Family Owner Family Employees Owner Employee s Family Employees Non-Family Employees Source: John A. Davis | Professor at Harvard Business School and IIFE Board Member 29 September 2010 | Sana'a, © International Institute for Family Enterprises Yemen 13
The International Institute for Family Enterprises Factors causing Family Business Failure The Developmental Stages of the Ownership System Cousin Consortium 12% Sibling Partnership 30% Controlling Owner Source: Kelin Gersick, Ph. D. | Professor Yale University and Chairman of IIFE Academic Board 29 September 2010 | Sana'a, © International Institute for Family Enterprises Yemen 14
The International Institute for Family Enterprises Factors causing Family Business Failure Types of Family Business Ownership Cousin Consortium Sibling Partnership Controlling Owner Source: Kelin Gersick, Ph. D. | Professor Yale University and Chairman of IIFE Academic Board 29 September 2010 | Sana'a, © International Institute for Family Enterprises Yemen 15
The International Institute for Family Enterprises Factors causing Family Business Failure The Controlling Owner Stage Owner - Manager Source: Kelin Gersick, Ph. D. | Professor Yale University and Chairman of IIFE Academic Board 29 September 2010 | Sana'a, © International Institute for Family Enterprises Yemen 16
The International Institute for Family Enterprises Factors causing Family Business Failure Types of Family Business Ownership Cousin Consortium Sibling Partnership Controlling Owner Source: Kelin Gersick, Ph. D. | Professor Yale University and Chairman of IIFE Academic Board 29 September 2010 | Sana'a, © International Institute for Family Enterprises Yemen 17
The International Institute for Family Enterprises Factors causing Family Business Failure Types of Sibling Partnership Egalitarian First Among Equals Source: Kelin Gersick, Ph. D. | Professor Yale University and Chairman of IIFE Academic Board 29 September 2010 | Sana'a, © International Institute for Family Enterprises Yemen 18
The International Institute for Family Enterprises Factors causing Family Business Failure Types of Family Business Ownership Cousin Consortium Sibling Partnership Controlling Owner Source: Kelin Gersick, Ph. D. | Professor Yale University and Chairman of IIFE Academic Board 29 September 2010 | Sana'a, © International Institute for Family Enterprises Yemen 19
The International Institute for Family Enterprises Factors causing Family Business Failure Governance Structure for a Complex Family Enterprise Family Governance Family Assembly Shareholders’ Assembly Family Council of owners Family Office Career Planning Committee Family Foundation Redemption Fund Education Committee Venture Capital Fund Family Reunion 29 September 2010 | Sana'a, Yemen Board of Directors Advisory Board Business Governance CEO Governance © International Institute for Family Enterprises Management 20
The International Institute for Family Enterprises Factors causing Family Business Failure Governance Structure for a Complex Family Enterprise Ownership Business Governance Family Assembly Shareholders’ Assembly Family Council of owners Board of Directors Family 29 September 2010 | Sana'a, Yemen Advisory Board Family Governance Business © International Institute for Family Enterprises 21
The International Institute for Family Enterprises Factors causing Family Business Failure Avoiding Failure | Family Constitutions • • • • • Family mission/vision for the family, business, owners and governance Core family values Family commitment to the business and other activities Family employment and compensation policies Selection of future business leaders Retirement policy Ownership transfer policies Stock buyout process and valuation method Dividend policy Shareholder responsibilities and rights New venture support Perquisites (perks) policy Family ground rules – how to treat each other and support the family Agreement on how to arbitrate or mediate disputes Family council and family assembly structure Family office and service Education plan Philanthropy, civic and other key family activities 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises Preamble Employment Policies Ownership and Financial Policies Governance Regulations Other Family Activities 31
The International Institute for Family Enterprises Factors causing Family Business Failure Thank You! 29 September 2010 | Sana'a, Yemen © International Institute for Family Enterprises
- Slides: 17
