something i found which may intrest you

http://www.swissstyle.com/business-succession/

Fiscal pressures, the search for talent, international expansion… family companies need to deal with a wide array of challenges. Without doubt, however, the most critical challenge involves generational change. More specifically, what happens when the third generation – the grandchildren of the founders of the company – takes over.

“The most important temptation for today’s entrepreneur is not being infallible, but being immortal.” A seasoned entrepreneur

The role that family-owned businesses play in the economy should not be underestimated. For one, they are in fact the most common type of business organisations. Furthermore, they can be quite large, as exemplified by such global players as Walmart, Samsung and Ermenegildo Zegna, which are also major employers.
An impressive 88% of current family business owners believe the same family or families will control their business in five years, but succession statistics undermine this belief. Only about 30% of family and businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. The statistics reveal a disconnect between the optimistic belief of today’s family business owners and the reality of the massive failure of family companies to survive through the generations. Research indicates that family business failures can essentially be traced to one factor: an unfortunate lack of family business succession planning.

Where should the apple fall?

Most family businesses struggle with succession as it is an extraordinary and rare event. However, it can and must certainly be planned for. In Switzerland, 216,000 out of 300,000 companies number less than ten employees, and only 1,000 have more than 250 employees. Small and medium- sized, mostly family owned, companies form the backbone of the Swiss economy. One out of four is confronted with having to find a replacement for their owner/founder/manager as he or she approaches retirement age. According to UBS, 45,000 to 60,000 enterprises will find themselves in such a predicament within five years.
Entrepreneurs generally put the lion’s share of their effort into building up their business, naturally, while a negligible amount goes into planning for succession, even though it can take up to seven years to successfully transfer a business. The complexity of the issues to be resolved and that the owner/founder is confronted with is both highly technical (taxes, retirement amount, inheritance taxes, succession rights of the family, qualifications and motivation of the successor(s), credit rating, etc.), and sometimes also very emotional (family involvement in the business, for example). That may explain why in a seemingly disproportionate 52% of cases the business is sold to its employees through a management buy-out.
In 2007 Credit Suisse and the University of St. Gallen published an extensive study on the subject. One of the sad consequences of the failure of entrepreneurs to proceed to an orderly and successful transfer of the business they created is a very important number of job losses because the businesses, without management, close down.

There are several solutions to replace the ageing owner:

1. succession by family member(s)
2. management by an outside person while the business remains in control by the family
3. an IPO
4. merger or participation by a financial investor (however, the latter does not provide for management)
5. a MBO and/or a management buy-in
6. the sale to a strategic partner.

Choice challenge

Even for the owner/founder of a family company, it can be a challenge to navigate not only the complexities of the business itself, but also of the family dynamics, let alone succession planning. The family and the business become so intertwined that it’s hard to tell where one ends and the other begins.
The nature of the beast often leads to the conclusion that the time is ripe to strip the family business of its “family member” status and treat it for what it is: a business and, accordingly, consider selling the company. Easier said than done – for many entrepreneurs, their company is their life’s work, and the sale of their business may have dramatic implications for both their own and their family’s financial and personal lives. But after the sale decision has been made, new issues emerge and another planning process begins:

Moving to the next gen

It is mandatory for the entrepreneur to put in writing the organisation of the enterprise when he is not longer the “captain of the ship,” get the adequate people to do the job – and stick to his decision to hand over the daily business as well as the strategy of the enterprise and implement the plan of succession. This process may take several years and must be taken seriously if the value and the future of the enterprise are to be preserved.

Pure figures

The enterprise should be priced at fair value. To be able to do that, any assets adding value to the balance sheet but not to the company, should be eliminated, and transferred to the owner. So, the buyer will pay only for what interests him.
Also, the balance sheet must be transparent. Undervalued assets may cause conflict in the points of view of the negotiating parties and also be a risk for the buyer in case they are re-evaluated and the difference in value taxed as a profit, even though no cash has been generated.
The seller will certainly hesitate because transferring assets from the commercial to the private fortune entails taxation of the price difference between value on the balance sheet and market value as partial liquidation of the business. Since tax rates are progressive, transforming business into private assets should be done gradually, over several tax periods (years), in order to be taxed at lower liquidation tax rates.
The business may also be divided into several separate entities, e.g. into production and real estate holding enterprises, of which the first will be sold and the second kept by the owner.
This kind of scenario will have to be dealt with according to the Law on Fusions (which also rules scissions of enterprises). It is crucial to know that this law also defines the conditions at which this kind of operation will be fiscally neutral – i.e. a period of five years without changes or transfers in order to avoid tax reprisals.

Influence of the juridical status of the enterprise

A business in Switzerland may be founded without creating a company. Registered partnerships, limited partnerships and individual enterprises may be registered with the company register to do business. Creating and registering the enterprise as a joint stock company or a limited liability company has the advantage of separating the business from the private assets of the entrepreneur, but entails a 35% withholding tax on dividends, a final tax on dividends, plus the annual taxes on the net assets and the benefits of the company. This system is considered a double taxation of company profits.

Fiscal factors

Fiscal aspects may sometimes hamper the transfer of a small to medium-sized business in Switzerland. This is why tax planning is crucial to a successful succession. Tax authorities make a distinction between the commercial and private assets of a natural person, and the passing of any assets from one to the other category entails tax consequences which may be quite expensive.

Sale of a non-incorporated business

The sale of the business or parts of it is subject to the liquidation tax on capital gains. This tax is levied on the difference of the value of the enterprise’s assets in the books and the price received from the buyer/successor, at the rate of the personal income tax on independent professionals. The maximum tax rate is 40%, to which 9.5% AVS (social security) on professional income must be added.

Sale of a joint stock company

If the owner has incorporated his enterprise as a joint stock company, the sale of the shares and any gains on their value may be regarded as private capital gains, which are generally not subject to income tax in Switzerland. The reason is that the shares are regarded as being a part of the private assets of the seller.
Hence, advisors usually recommend that the owner convert the enterprise into a joint-stock company before selling the business. The company must keep its productive assets for at least five years; if they are sold in order to finance the acquisition, the operations will be deemed to be a partial liquidation and the seller will be taxed as if the had liquidated the company. Therefore, he must provide in the sales contract that the buyer may not, for a period of five years, proceed to what the tax authorities may consider as a partial liquidation of the company.

Financial factors

An enterprise being put up for sale should be able to generate enough cash to liquidate present indebtedness in a period of five years. The buyer should be able to raise at least 20% of the sale price of the enterprise. The banks are generally well equipped to counsel and work out financial plans to facilitate a handover. Many entrepreneurs help the buyer by conceding payment conditions such as payment by tranches, granting a loan, granting a guarantee to the bank financing the deal, or a reduction of the price of sale.

Family inheritance rights

One important factor often neglected is communication within the family of the founder/owner of the company. Family enterprises are frequently structured by hierarchy and power of predominant members, with little or no communication with members of the family such as children of even the spouse. Decisions taken by the owner, if he or she wants to keep an adequate relationship with his or her family, need to be shared with other family members in order to avoid conflict that may hamper the functioning of the enterprise and even the transfer to one family member or employees or even third parties. Highly emotional issues may end up in court proceedings, stopping or slowing down the evaluation process of the company and any negotiations to hand it over. If one child is to take over the enterprise, the spouse and other children have to be thought of and paid off in cash or other assets in order to respect at least obligatory succession provisions of Swiss law.

As a guideline, the following parts of the heirloom are protected:

For the spouse: 1/2 of the value of all assets accumulated by the couple during the marriage, as entitlement to the liquidation value of the marital union; the only way to avoid this is for the entrepreneur to enter a formal separation of assets agreement at the onset of the marriage
For the spouse as heir:

• 100% of all assets, of which 50% are protected, if there are no children
• 50% of all assets, of which 50% are protected, if the heirloom is to be shared with children
• 75% of all assets, of which 50% are protected, if the heirloom is to be shared with the company owner’s parents For the children as heirs:
• 100% of all assets, of which 3/4 are protected, if there is no surviving spouse
• 50% of all assets, of which 3/4 are protected, in case of a surviving spouse
• If there are children of the deceased, his parents inherit nothing.

These inheritance rules must be followed if the succession is to be effective within the family. Neither the spouse nor other children will accept to be despoiled of their part of the value created and held within the company in favour of the chosen successor within the family circle (one of the children, cousin, nephew, etc.). They will have to be paid off in cash amounting to the value of their protected part of the heirloom, so arrangements will have to be made to generate enough liquid assets to pay off their claims.
If the enterprise has been incorporated into a joint stock company, the product of the sale of the shares will be divided among the heirs in the same proportions as cited above. Such are some of the points which have to be envisaged for a successful transfer of a family business.
About the author: Geneva-based Isabel von Fliedner is an international lawyer and litigator with extensive experience in Swiss Corporate Law.

Roles of CEO Spouses

Hello!

In class on Monday we discussed mainly gender issues that can emerge during the succession stages. Until now we have never analysed the role that wives have in family businesses therefore I thought it would have been interesting to post a paper about it.

In a nutshell the paper highlights the key role of CEO spouses as stewards of the family legacy and facilitator of communication within the family. They tend to strengthen the family unity. I am attaching below the reading I found by Poza and Messer who are two influential authors in the field of gender issues in succession planning.

However, I feel and fear that most spouses prefer to keep their distances from the family business unless the company is going through a critical moment and their intervention is necessary in order to keep the family still in charge of the business. 

As far as I am concerned, gender norms are even more ingrained in spouses than daughters successors when it comes to take the reins of a family business because they will not be the actual owners of the business, so somehow they will feel more under pressure. 

I am really curious to read your opinions about this topic.

I am probably conditioned by the Italian culture where spouses STILL tend to take steps back from these responsibilities because their opinions would not be too welcomed by the rest of the family, "the initial owners".

Family Business Review 2001 Poza 25 36

Is Family Leadership always Beneficial?_ Topic W3

Hello everyone! 

This post relates to the topic of Week 3: "Family systems and Family Business Performance".

 One of recommended readings has captured my attention: "Founding-Family Ownership and Firm Performance." The paper in itself was fairly straightforward trying to highlight two main points:

1. Family firms outperform in comparison to non-family firms

2. When a family member serve as CEO, performance is better than with outside CEOs.

However, the question that immediately came into my mind was whether or not family ownership can be considered always beneficial. After having done some research I found an interesting academic paper which was aimed at answering to my same question. Moreover the research for this reading had been conducted in Italy making the whole study even more interesting for me (attached you will find the paper).

The study shows that a variable that can positively or negatively affect the performance of family businesses managed by family CEOs is the size of the firm.

Blog Paper_Topic W3

READ ME: The Gender Divide and Occupational Segregation

Hey everyone. :) 

So during class today, we had a conversation about gender and especially the fact that most men are complacent in what their possibilities are in regards to their roles in society, specifically with jobs.

I then proceeded to pose this question to all the males in the class:

“If you had all the qualifications to be a nurse or a ballerina, and your passions lined up with those professions, what would stop you from pursuing those careers as a man in modern day society?”

I asked this question because I was curious to see what the key obstacles were and if each male would hold a different perspective.

The consensual agreement between the boys was that:

a) You would be questioned amongst your male friends in regards to your sexuality and you would be made fun of

b) It could be seen as a failure to uphold masculine posts, i.e. you failed in school to become a doctor (‘masculine’) and so by default you came a nurse ('feminine')

c) There are boundaries to perceived feminine jobs that men just do not wish to cross  

However, it differs between across cultures. For example, Youssef mentioned in class that in Egypt, 50% of the nurses are in fact male.

Why is this possible in Egypt but not possible in my home country Nigeria? What are the fundamental differences in the cultures that allows for such gender positioning differences to take place? How comfortable would you be to see men in the maternity ward and day care centres or women in trucking, construction and heavy machinery operations?

It would be great to achieve an ideal employment balance on a national scale and I believe we’re still very much headed in the right direction. But I don’t lose sleep over the preponderance of traditional jobs today. 

case study outline

Outline of the case study

David and George founded a mining company in 1990. Two childhood friends who met in  playgrounds back in Arizona. They grew up together and they both joined the military forces  before collage. They lost track of each other but years later after they both had retired from military when they both had got married they found each other and decided to establish a company and work together for old times sake. There families bonded really well. They started by extracting copper out of mines and melting it and sell it to the copper refineries. Their business soon expanded and therefore they wanted to enter different fields to make huge amounts of profit. They started buying lands and properties the prices were rising and the profit was hugely increasing day by day. Soon David left Arizona and moved to the turkey to expand the real-estate business in turkey. After David moving to turkey the business grew exponentially and the total assets of the company soon rose from $200m to $400m.the way the things worked between David and George was, David had control of all the assets in Turkey by having a letter of attorney in turkey and vice versa in Arizona. After a few years of succession in 2007 David heard rumours about George leaving all the assets as guarantees in order to get a loan of $300m to expand the mining sector of the business without discussing things with David.

When David was back in Arizona he found out that there are no assets left there and for some reason George cannot pay the debts. No factory or refinery has been established and basically the money was lost. No money, no assets and George has nothing to say but mentioning he used the money to support davids section in turkey while David was claiming that they outsourcds only $20m and that was by selling some assets back in the day.
Peter and Henric ( Emily’s nephews ) who worked in the office in Arizona as commercial managers and chairman respectively were completely blank on what happened to the money. The bank soon took over all the assets and the Arizona branch was completely broke. Soon later the credit crunches hit the turkeys market and economy, the price of land and properties dropped while David was under a lot of debts to pay the mortgages of the properties which devalued by over half. David gave back the properties under the mortgage and was just left with less than 10% of the initial assets and moved back to Arizona. Davids oldest son ( Daniel ) who was finishing his studies in Canada soon moved back to Arizona and got the job from his cousin and started training as the commercial manager in the company. David and George couldn’t solve the problems with each other and the conflict was taken into the families as well. Emily’s nephews Henrik and peter stayed with George and David sold his shares of the company with the price negotiation, that he would not want any part of the troubles that George had taken them into, therefore George has everything which included the responsibilities.
David started all over again by founding a new mining company, and with the experience he has had and help of his son Daniel in the company they accomplished a new source of income for the family. Emily’s other nephew Matthew ( peters younger brother ) got a job in the company as one of the chair men. The new company started working well in both construction and mining industries back in Arizona while davids family had decided to stay and live in turkey. Daniel soon became fed up with his fathers decisions in the company, and his over trust issues by lending money to friends and having to fight later on to get the money back and investing in the wrong fields in Daniel’s point of view. He stablished a company of his own turkey to be next to his family as well as being introduced to the new opportunities in Istanbul, however he needed more experience. David had still no idea about Daniel’s decisions but Daniel managed to convince David that he needs to study masters. After he finished his masters in business and management he didn’t know whether he wanted go back to Arizona and deal with the bad decisions of David or go to Istanbul and hope for some new opportunities to come up and make money.

Class starts at 15:15

Hi guys, 

I just met Ed and he said class starts today at 15:15. 

See you later there!

Individual Case Study: Phase 1

Individual Case Study - Phase 1 

Shovan Gandhi

February 22nd, 2015

Introduction

Early History:

Mr. Shantilal Shah, and his wife Kanchan used to stay with their 8 children in a small one bed room apartment in the lower east end of Mumbai, India. Due to the political instabilities at that time and the difficulty of business, they could not manage to get a bigger house at that time, now set up their own business.

Mr. Harendra Shah, the eldest son of Mr. Shantilal Shah,would spend his summers in Radiant Engineering Works, where his father was a minority stake partner. Harendra or Harry as he was fondly called, despite being in the 9th grade, had a very sharp eye and was keen to learn the working of things around him. By the time Harry turned 20, his father had already decided to cash out his shares at Radiant Engineering Works, and to shift to a more profitable market. Mr. Shantilal decided to set up his own firm, Harry Engineering Works. This company would manufacture gear boxes and motors for application in machines in various different industries. Harry decided to drop out of college and join his father full time due to his growing interest in the business. Following his footsteps, Harry’s younger brothers, Henry and Karl, still in the 7th grade decided to spend their summers in the manufacturing unit and in the office. With the untimely demise of Mr. Shantilal Shah in 1959, the company was left in the hand of a 24 year old Harry. Mr. Henry decided to drop out of engineering college, to help Harry with the business and to curtail the expenses of schooling, giving a chance to Mr. Karl to pursue his degree in engineering.

Plot

There was a lot of animosity in the work place amongst the second generation, and hence, after Mr. Henry’s death and with the deteriorating health of Mr. Harry, ideally, the company would be in the hands of hiss eldest son, Mr. Bobby, but due to his negligence as the head of the purchase department, and his hot headedness, he lost out on the chance and George, his younger brother was still learning the working of the business, hence, the company landed in the hands of Mr. Karl’s family. The cousins were irritated and angry with this ordeal, since they thought there was foul play involved. Since each family had equal stake, there was no superseding power to make the final judgement, and hence the reigns of the company did come in the hands of Karl’s family, but Karl, selflessly, made Bobby, George and Sandy (Karl’s son), the Heads of the department of Sales, Manufacturing and Purchase respectively. Henry’s son, Nick was keen on designing and he focused his attention on that, making a point not to come in the way of his brothers. After working for 7 years under Karl, Bobby and George decided overnight that they no longer wished to work under Karl, the wanted out.

There was major chaos in the family, as no one had ever expected this to happen. Karl and his brothers too were shocked, and they had no idea how to handle the situation. Harry and his wife Anna summoned his children and tried to reason with them about their decision, but they were really adamant and did not obey their father. They also specified that they did not want any stake in the company, and they wanted to sell off their shares. With the cash flow for the other partners being curtailed, there was a confusion as to how the shares would be bought by the others, since 2 brothers would buy out the shares of the third one. Nick considered Karl as a father figure in his life and told him that Karl’s decision would be final, and he would support that decision. The situation had sort of become a battle ground, with the entire families being against each other and it felt like the onset of a cold war.

• How will the shares be bought by the remaining two families?
• Would the families remain hostile after the split?
• Who would take charge of the functions on the board, and as the head of the various departments?

Phase 1 of Case "Becker Onlineshop Ltd."

1. Introduction & History
In 1986, the 26 year old Oliver Becker founded the German company, which is nowadays called "Becker Onlineshop Ltd.". At these times, the company had the purpose of a classical craft business of heating and sanitary products. As Oliver had not studied, his first wife Rose, who had studied business administration, supported Oliver by leading the accountancy. Since Oliver was a very disciplined and hard working businessman, working till midnight almost every day, the company grew fast and became profitable from the beginning, and Oliver and Rose got two children, Laura and Luise.
In Germany, craftsmen generally receive payments after having fulfilled their service - which is the reason why Oliver's success changed dramatically in 2003. Oliver and Rose were betrayed by a big customer -a hotel proprietor-, who disappeared instead of paying them, after Oliver had installed more than 900 expensive sanitary products in his hotel. Losing a huge amount of money, Oliver almost became insolvent, which caused lots of stress and worries. Although he could change tack and save the business by working day and night, these efforts caused that private/family life suffered, and Rose and Oliver got divorced.
From this time on, Oliver decided to change the whole business concept in order to never get into such a situation again. In 2004, the purpose of his business changed from a craft business to a pure online shop. Consequently, products were no longer installed, but could only be viewed in an exposition and bought online - by payment in advance.
This decision was probably the best decision Oliver had ever made. The business grew much more than ever expected before, as a huge demand for buying premium bathroom products online existed, and five years later, the turnaround increased to more than 100 million euros per year. Within these few years, Oliver had to work even harder than ever before, as he had to quickly cope with this immense growth, and to raise all departments simultaneously. Also, he had to figure out how to professionally run and manage a trading company that employs more than 300 workers - without ever having studied management.
Nowadays, Becker Onlineshop Ltd. is one of the biggest online retailers for bathroom furniture in Europe. Of course, Oliver is very proud of himself for having founded and raised such a successful company, but being in such a good market position is hard in another way. In Germany, the sanitary market has always been ruled by a couple of huge, old-established wholesalers that have a very strong bargaining power. These wholesalers are not pleased with this new online trader that purchases the products in great quantities from the manufacturers, and sells them directly to end consumers. Within this value chain, wholesalers do not have any right to exist, which makes them taking lots of illegal measures, for example pressuring manufacturers to not deliver their producs to Becker Onlineshop Ltd..

For the 55 year old Oliver, it gets more and more exhausting to fight against those practices in forms of court proceedings.
As he had to cope with many challenges during his life, he now feels to get too weak to continue those fights for the next 15 years, which makes him think about succession planning. He would prefer his two daughters to take over the business some day, but in order to secure a successful continuation of the business, he wants them to enter the business asap because he needs enough time to train and teach them about the company and the industry.

2. Key players
Oliver:
As already mentioned, Oliver is a very disciplined and ambitious person, who loves working.
As he does not rely on bankers, his company has not only been profitable from the beginning, but it is also 100% equity-financed. He is a very responsible-minded human, also towards his employees, which is one reason why he does not want to sell the business. He wants to be sure that his employees keep their jobs after he retires.
After he and Rose got divorced, Rose moved out and started a job in another company. Ten years later, Oliver married another woman, Susan.

Susan:
Susan had trained as a sales assistant in a butchery. After she and Oliver became a couple,
she started working in Oliver's exposition for bathroom accessories. A few years later, her niece Frieda finished her undergraduate in logistics, and as she could not find a job immediately, Susan put in a good word for her with Oliver, who then offered her a job in the purchasing department of Oliver's business.
Since Susan's father passed away a few years ago, Susan and her family have a serious inheritance dispute, which caused that Frieda thought she had to support her father Eric. Thus -instead of staying out of these disputes- Frieda took Eric's side, which made Susan feel betrayed by her. As a consequence, Susan persuaded Oliver to sign Frieda off.

Laura:
Oliver and Rose's first daughter, Laura, studied business studies and started working in her
father's company immediately after graduating, as this was his wish. She first planned to start working for a consultancy in order to gain experience and to learn how other companies are managed, but taking Oliver's arguments into account, she did him the favour and started working with him, with the option to leave the company a few years later in case she will not be satisfied.

Luisa:
Luisa studies business studies in her second year. She is sure she wants to enter her
father's business after finishing her undergraduate studies.

Robert:
After Oliver's decision to start e-commerce, his business grew very fast, which made him
decide to look for a business partner who could support him with mercantile decisions. He found that person in Robert, who had been his previous contact person and field worker of a supplier. In Oliver's eyes, Robert was a very good salesman.
Roberts wife (Maja) and Susan became friends, and Maja decided to enter the business as well, so started working as a sales assistant in the exposition, too.
After a few years, Oliver recognized that Robert could not really support him, as Robert often felt overburdened and stressed out. Oliver still had to make all the important decisions on his own, and he even realised to manage this very well. Robert also wanted to spend more time with his family, and came to the decision to retire and to get paid off; and Maja retired then, too. Oliver became the only shareholder again.
However, Robert is still interested in what happens to the company, if Oliver retires some day. 
One year after Robert had retired, his oldest son, Paul, entered Oliver's company and took
over responsibility for the whole purchasing department.

Paul:
Paul, Robert's oldest son, had studied business studies, and started working for a huge multinational concern afterwards. After a few years, he was not happy with this job anymore, as communication and decision processes always took a very long time, which demotivated him.
As the relationship between Oliver and Robert was still good, Oliver became aware of Paul's dissatisfaction, and offered him to work for him. 
He has even more responsibility and managing power now, which made him come to fulfilment in Oliver's company, but nevertheless, he is neither interested in becoming a shareholder, nor in taking over the business some day. The reason for this is that he wants to maintain work-life balance and the possibility to spend enough time for his family.

In order to better view the family relations, turn to the Family Genogram in Appendix A. 

Week 4- Succession Planning

Hi all,

For week four we discussed the importance of succession planning. From what we discussed and concluded in regards to the Tai Po Fruit Traders Case I feel succession planning and just a family businesses in general are such a messy affair! Looking for interesting articles in regards to succession planning I stumbled upon this interesting piece. The author discusses how succession planning differs according to cultures (East vs. West). I found this interesting and it made me think of the other cases we have discussed in class. In regards to succession it’s actually quite interesting to note that both the Harilela and Tai Po Case was kind of ‘all in the family’ in regards to succession. David was looking after Jimmy and Donald’s empire and was under pressure by his family not to let go of Tai Po despite his own dreams; and Hari saw Aron as an obvious choice in regards to the Harilela empire. However, when we go back to week 2 and look back at the Ilapak case, Roger was more eager to hand over his company to Luciano before passing it along to his son Guy.

I am aware that individualistic Western cultures and the collectivist Asian cultures differ in their styles of conducting business. However, I find it interesting to see that there seems to be a prominent difference in matters such as family business succession planning between the cultures too. Perhaps this has to do with Asian family systems vs. Western family systems in general? Asian and Southeast Asian cultures are usually composed of a joint family system as opposed to the Western nuclear family system, which can perhaps also influence succession. Harilela and Tai Po were more concerned with keeping the business within the family as opposed to Roger in Ilapak who was actually concerned that heavy nepotism after his departure from Ilapak may actually hurt his company.

Any thoughts?

http://www.step.org/family-business-succession-planning-east-versus-west

Phase 1- OBS Pharma

Hey all,
here is my phase 1, would love your thoughts and comments!

Company Overview & History

Organon Bio Sciences (OBS) is a leading pharmaceutical company in the Pakistani healthcare industry. OBS has a solid reputation in producing quality medicines for   fields such as: gynaecology, psychiatry, anaesthesiology, and other therapeutic areas. The company focuses on improving quality of life for their consumers by providing high quality products at affordable prices.

The company was born in 2006 when the multinational Akzo Nobel expanded its business into Pakistan by selecting OBS as their strategic partner. OBS reached another milestone in 2008 by expanding and acquiring American pharmaceutical giant Merck Sharpe & Dhome (MSD). In an attempt to expand internationally, OBS successfully made its mark into Sri Lanka by acquiring some MSD products. OBS has continued to grow through other acquisitions with multinational giants such as Schering Plough and Johnson & Johnson, as well as some large local companies. In less than a decade OBS gone from number 58 (out of approximately 700 registered companies) to one of the top 10 pharmaceutical giants in Pakistan.

CEO’s Journey

Junaid was born in a middle class family in Lahore and was the third youngest of four brothers. His father was a biology professor in university and his mother was a stay at home wife. Junaid received his education in a public military school and after finishing college he thought he would pursue a career in the air force like his oldest brother (Amjad). Destiny had other plans for Junaid as he was certified as unfit to fly by the air force due to his medical test being below the requirements for a fighter pilot. His mother saw this as a sign from God and thought he should become a doctor. Junaid reluctantly applied for a degree in biology and left for Canada shortly to join his other older brother (Soliman) who was pursuing a degree in accounting. After his first semester Junaid transferred to business school.

Life in Canada was tough. Apart from Soliman there was no familial support and his parents did not have enough funds to pay for his degree or other living expenses. Although Junaid wanted to study marketing his brother convinced him accounting would allow him to always maintain a solid job to pay the bills. From day one Junaid juggled work and school. After graduation Junaid landed a job at a small accounting firm but it was not enough to pay the bills. It is during this time in his life Junaid realized he wanted to be his own boss.

When Junaid landed a solid job as a financial controller at a large Canadian hospital he finally earned enough money to pay the bills, but it was not enough for him. He had heard stories from peers about Saudi Arabia and its booming economy.  He finally landed a job in Riyadh in the early 90s and made his next career move. It should be noted Junaid was extremely family oriented. During his time in Canada his parents and youngest brother (Tito) had all moved to Canada along with other members from his extended family. Moving to Riyadh meant leaving the joint family system he was accustomed to. However, his ambitions gave him the motivation to make his big move, he also knew he would be able to provide more for his family if he succeeded.

Junaid began working for the royal family in Riyadh who owned a variety of businesses that ranged from fast food to fashion, as well as pharmaceuticals all under the name of Mawarid Trading Company. Two years after joining the company he was promoted to CFO of Muwarid’s pharmaceutical sector. A year later he was offered a job as a managing director at a pharmaceutical company in Pakistan. After successfully managing Organon in Pakistan he received an opportunity to do a management buyout of the same company he was working for. This is how OBS was born.

Main Characters

Anita: Anita is Junaid’s wife and currently works at OBS as the senior director. When Anita’s only son Samir (and child) left for university she was in disarray as she was a homemaker and her life revolved around her son. After he left, Junaid welcomed her to OBS with open arms despite her lack of business education and experience. Her role at OBS has always been quite controversial within the company for the top employees due to her lack of business education. Anita and Junaid had met in university while he was studying accounting and she was pursuing a bachelors in psychology. Anita started her career at OBS as head of Human Resources due to her natural managerial skills. Her charisma allowed her to be accepted amongst a majority of employees. Anita also feel she has a right to OBS as her father (an influential Pakistani lawyer) has always helped Junaid with legal issues regarding the company (this includes all major acquisitions made). It should be noted that Anita had also set up a Research & Development Lab within the company.

Tito: After witnessing the success of his older brother, Tito (Junaid’s youngest brother) also wanted to join the business. Junaid blindly agreed to let his youngest brother join OBS and made him the head of internal audit. Tito moved his family all the way from Toronto to get a peace of the prize. Tito had excellent credentials (he graduated from University of Toronto’s business school on full scholarship as class valedictorian). Despite his achievements he lacked managerial skills and acted more like a CEO than an employee. Junaid decided he had to let go of Tito for the sake of OBS. This move definitely weakened family ties. After Junaid fired Tito he decided to move back with his wife and younger sons to Toronto but made his oldest son stay behind and pursue a medical degree in Pakistan.

Omar: Omar is Tito’s oldest son. He lives with Anita and Junaid in their home (against Anita’s will) in Pakistan while pursuing his medical degree. Despite the dispute between Junaid and Tito, Junaid feels a strong responsibility towards Omar and ‘replaced’ his son while he is studying abroad. Omar is present in many of Junaid’s business meetings. Omar has also had the ability to create solid relationships with top Pakistani doctors through Junaid. This has allowed him to have a strong understanding of Junaid’s business.

Samir: Samir is the son of Junaid and Anita. Junaid is the same age as Omar and is pursuing a degree in finance in Canada. He feels that his father is more of a mentor to Omar than him. He feels his father is guilt ridden by the dispute between him and his uncle. And in an attempt to save a relationship with his uncle he is blindly grooming his cousin more than his own son to take over this business. Samir is grateful his mother is at OBS and has some say but feels frustration with his father’s lack of attention towards him in regards to the business. Although Anita wants Samir to finish his masters before coming back to Pakistan he feels he is in a race against time with his cousin and needs to come back to Pakistan quickly to remind his father who the rightful successor to the company should be.