1st part of our seminar:

On Monday (February the 2^nd) our group simulated the round table meeting regarding the succession of the family business Ilapak.

The characters were:

-       Roger

-       Roger’s wife Ilana

-       Guy

-       Guy’s lawyer

-       Sabrina

-       Sabrina’s husband

-       Luciano

All members tried to find a plan for a future success of Ilapak regarding the succession arrangement, while keeping the relationship within the family as good as possible. Their results were as follows.

The father and founder of Ilapak, Roger, adhered to his opinion that no family member should ever become president of Ilapak. Consequently, his children and further descendants should never be a part of the executive operation, but just chairmen or chairwomen. Further, he still wanted Luciano to become president, which means that only he should be the boss who will have an active impact on the operate business.

Sabrina’s opinion was to clearly have an interest in becoming a part of Ilapak, and her husband shared her opinion. However, their residence is in London, and thus too far away from participating in day-to-day business. From Roger’s point of view, also chairmen and –women have to learn the day-to-day business in order to become able to make the right decisions. Thus, he tried to advise her against entering the company, on the one hand because of the distance and on the other hand because she should have enough time for her four children. However, Sabrina and her husband still want that Sabrina becomes a shareholder, especially because she plans to safe future shares in the business for her children.

Not only Sabrina, but also Guy expressed the wish to get shares in Ilapak. Thus, Guy’s lawyer suggested to arrange the division of Ilapak’s ownership (= still Roger’s 100% of Ilapak) as follows (directly or when Roger dies):

-       25 % for Guy

-       25 % for Sabrina

-       35 % for Ilana

-       15 % for Luciano

I unfortunately missed the arrangement what should happen to Luciano’s shares in case he leaves the company or dies, but to judge this issue critically, this should be resolved carefully.

From my personal point of view, it is not even necessary to give shares in the business to him, as he is rewarded enough by becoming the president, and it is too naïve and dangerous to give shares out of the company if this only has the intention to motivate a chief executive to further run the company and to train Guy.

I believe that it might be a good approach of Roger to create a corporate culture in which every employee is aware of the real opportunity of becoming the president. So Roger might believe that this is the right way to motivate his employees to be hard working. However, on the other hand, this solution is also a serious demotivation for Roger’s children who have less exciting tasks by being excluded from the operative events and decisions. Of course, Guy and Sabrina will have to learn and understand the whole company, which is a lot, but which motivation might they have for these long-time efforts, if they know that they will never be able to really apply this knowledge? I strongly believe that it is more important to motivate the real successors of the company, who are Guy (and Sabrina), because they have a more relevant relation to the successful succession of the company than the employees. Another reason for this is that in reality, most of the employees do not seriously wish to become the company’s president and to get all this responsibility – in contrast to the founder’s children (=future shareholders). If the future shareholders are not motivated enough, maybe one time there won’t be any willing successors of the shareholders anymore. Just money doesn’t make happy in the long run.

Maybe the following would be a safer solution: Guy and Sabrina are taught by Luciano, with the plan that they will become presidents when Luciano leaves the company some day. When their children are old and competent enough to become presidents, Guy and Sabrina could become chairman and –woman of Ilapak. This would ensure competent operative successors of Luciano, and Guy and Sabrina would be truly motivated to learn and understand the company.

2nd part of our seminar:

The second part of the seminar included a skit about the journal (of Management Studies 44: 1 January 2007, 0022-2380) with the headline “The Development of Organizational Social Capital: Attributes of Family Firms”.

This journal broaches the very theoretical issue of correlations between Family Social Capital (FSC) and Organizational Social Capital (OSC), and that FSC influences the development of OSC. One example of this correlation is the way FSC has an impact on OSC by the way family members (with regard to FSC) have been influenced by other institutions. Those institutions are either proximate (legal or financial systems) or background social institutions (schools and families). Proximate institutions have a coercive type of influence on FSC, and background social institutions mostly have a mimetic or normative type of influence on FSC, which reflects in the impact of FSC on OSC.

For sure, there are lots of factors having an impact on Family Social Capital, especially because every family member (regarding family businesses’ shareholders) is a more sensitive person and might be more influenced than OSC, but from my personal point of view it might be questionable if these correlations can be explained that theoretically. The reason for this is that there are thousands of factors that mostly influence family members that have very different character traits, and those again have numerous different ways of interacting with employees, and thus having an impact on the Organizational Social Capital. If one had the intention to examine the way FSC influences OSC within a specific family business, I strongly believe it would be indispensable to get to know the family characters first.

A group of three students acted a skit of this journal. As I could not be prepared by reading the journal before the lesson (because of sickness), unfortunately I missed the chance to fully understand their role play. Nevertheless, it sounded interesting, and I suppose that every character intended to embody each of the three types of influences: coercive, mimetic and normative, while having a weekly Board meeting. Although I cannot judge this role play because of a lack of understanding, I think to have understood the following: Nkem represented a family business’ family member that had been influenced in a coercive way. Performing in an authoritative way, she suggested changing strategy by now trying to beat competitors, maximising profits and flushing out. Further, I suppose Elena embodied the mimetic and normative way of having been influenced. By acting less imperiously, she advised for more team work and to show the competitors to have unique staff. She seems to have been influenced by background social institutions, so she might have intended to represent the mimetic or normative type of influence.