My Phase 1, 2 and 3

Should have posted it earlier just forgot to!

Phase 1:

Early History:

Mr. Tahar Benjelloun and his wife Rita are from Casablanca and have been living there since their childbirth. Mr. Benjelloun’s father had a small construction business and passed away when h was in his early 20’s.  Tahar took over his father’s business since he was the only child; made it grow and was very successful in doing so. He is now one of the top 5 major construction companies in Morocco and has been specializing in low cost apartments these last 15 years, due to an increase in demand for cheap apartments. The government encouraged businessmen to invest in the low cost construction sector by making taxes cheaper and increasing subsidies in order to help getting rid of the slums. Mr. Benjelloun stepped up and took this opportunity to grow his business even further and has been very successful in this sector.

Tahar and his wife raised their two sons and daughter in Casablanca. The two sons names are Amine and Hicham; Amine is currently 35 years old and has been working with his father for the last 10 years in the construction department after he finished his studies in the USA in Suffolk University. Amine is married and has two young sons aged around 6 and 4 living in their separate home. Hicham is 26 years old, very smart and is about to finish his MBA in UPN, which is the best university in the world for business studies. His goal is to come back and work for the family business. The daughter’s name is Kenza and she is 33 years old, married and currently taking care of her three children since they are still at a young age. She went to the USA taking a business major and a minor in photography.

Plot:

Tahar unfortunately has been diagnosed with a late state brain cancer and is predicted to live for another year. Tahar now is thinking of giving a CEO position to one of his sons, however giving the children the same amount of shares (20% each) and the mother 40%. Tahar’s concern is not the number of shares, but the management of the company and who should lead the firm. Tahar is somewhat pleased with what Amine is doing for the company by going to construction sites making sure deadlines are met and so forth. However, Amine is not exceptionally smart or bringing any extra input in the company but he is loyal, hard working, and has great human skills. Tahar sees more potential in Hicham because he has graduated from UPN and currently finishing his MBA in the same university. He has also worked for the two biggest construction firms in the USA for around 3 years. He has been also offered an important position in one of the companies after his completion of the MBA. He is clearly more qualified for being the next elegible CEO of the firm even though his lack of experience in field compared to his older brother. Tahar’s concern is that the older brother might be unpleased if he gives the CEO position to the younger one because he has been devoted to his father’s business. However, Tahar is thinking what would be the best decision for the company and who would be most eligble for developing the company even further.

            Tahar has not yet mentioned his sickness to his children or his wife. He is gathering everyone for a family dinner in order to tell them about his cancer and what he has planned to do with his succession plan. Tahar officially makes his youngest son Hicham the next CEO after he finishes his MBA in the USA and simultaneously giving his eldest son vice-CEO position.

Phase 2:

Issues:

There are a couple issues that Tahar is facing by choosing the most eligible successor of his business and the effects that it will have in the family as well as the business in the future.

Firstly, he is not sure if his eldest son, Amine would be able to be successful in developing the company as the CEO. It would be problematic because it’s been ten consecutive years that he has been working with his father in the construction department. The father knowing that it might hurt his feelings to give the reigns of the company to some stranger or to his younger brother.  However, the father believes there is a chance that Amine would prefer the reigns were handed over to someone in the family rather then someone who is not.

Secondly, another issue is to give Hicham the position of CEO because he is still very young and lacks experience in the field, considering the fact that things work differently in the USA then in Morocco. Hicham might struggle with some of the issues that might come up in the future. However, considering his brother has been working these last 10 years in the company and that the succession plan goes smoothly, he would be able to support his younger brother in that sense.

Thirdly, if this succession plan fails because Amine is not happy of his father’s decision of giving CEO position to his younger brother and giving him a position that is inferior to Hicham’s. This would destroy the relationship between them and would cause a lot of pain for the family and the business because of 3 main reasons. The first one would be that there would be no more sense of unity in the family, which is a very important aspect when dealing with family businesses in the second generation. Secondly, that might push Amine to leave the company and decide not to help his younger brother manage the company by giving his view and experience in the field. Thirdly, the worst case scenario is that Amine decides to sell his shares and invest on something on his own. That would create a problem because no one in his family would be able to pay him the full amount at once. This would then stop being a family business and would therefore change the dimensions of the family business.

Phase 3: 

Succession is one of the most important areas in a family business because it ensures continuity into the next generation. If not properly handled, the issue of succession can mark the beginning of a slow but gradual death of any family business irrespective of its size and years of existence. The following three theories, therefore, help analyse the issue of succession in the case presented:

            Systems Theory: This theory looks at family businesses as three overlapping and interrelated sub-systems that include the family as a system, ownership and business as other related systems that partly cover (Poza, 2009). In the context of this theory, the father, Mr. Tahar, should not only look at skills but have a holistic view of the three sub-systems that jointly constitute his family business. From the family point of view, Amine should take over because of his position as the elder son and for his decade old service to the family business. Despite his lack of proper training comparative to his brother who holds an MBA from UPN, it must be understood that Amine has something more valuable than skill; commitment to family goals. For the 10 years of his dedication to the construction company, he has shown nothing but commitment to growing what his father inherited and nurtured and this drive coupled with his hands on experience, would make him a suitable candidate.

            On the basis of systems theory, Mr Tahar should bring a balance between family and business. He has already done an exemplary job at dividing ownership equally among his three children and leaving 40% to his wife Rita. All he now needs to do is avoid an eminent fall out by ensuring that family hierarchy is not breached in the business to escape the possible conflict between Amine and Hicham. Amine should on this basis; therefore, be CEO with Hicham taking over as CFO to compliment his elder brother’s lack of skill as Amine brings family leadership as the first son and vast experience in the business.

            Game theory: This is a useful tool in decision making especially when there are two or more variables involved. It looks at the many factors to be taken into account and the outcomes of the possible choices.  Even though the theory is mathematical, it takes into account emotional undertones, decisions and behaviours which make it applicable in handling succession within family businesses (Osbourne, 2003). In the case presented, there are factors of experience and skill as they relate to the construction business in question. The theory will, therefore, factor Amine’s experience and Hicham’s skill as well as prior experiences outside the family business in relation to how these will affect the business in question. An expert can be hired to come with the possible empirical model on the basis of game theory and test its validity so that a final presentation is made to Mr Tahar before he decides on who becomes the next CEO. Having a purely scientific approach will give Mr Tahar an objective insight into the possible outcomes of choosing Hicham so that his decision is not made on the basis of experience and how he feels, but backed by empirical data. If his current fears of fallout between the sons should he choose the youngest is confirmed by this theory, then he has sufficient ground to have a change of heart and make Amine the new CEO.

            Complexity theory: Family businesses have the most basic traits of complexity theory through the interaction of three extremely related sub-systems that are: Family, Ownership and Management. These three sub-systems according to Marion and Uhl-Bien (2001) are so complex that leaders who are accustomed to traditional command and control styles of leadership are likely to be frustrated in creating effective organizations.  Mr Tahar has a successful business but by looking at this theory, the complex relationship between its three fundamental characteristics of family, ownership and management are likely to destroy its future success. It is at this point that the current issue of succession between its two sons has the potential to not only fragment his family, but also bring down his business and the legacy he inherited from his father and built to new heights. The future of this family business depends largely on who becomes the next CEO. Should Amine find reason not to support his brother if Mr. Tahar makes him CEO, then his vast experience and hands-on model of operation will be missed and the company will most likely not grow to the next generation as envisioned by Mr. Tahar. Should Hicham accept his elder brother as the new CEO and compliment his experience with the MBA AND OTHER educational skills he acquired, then three things will happen; the family will remain united around a common vision, the business will grow stronger and Mr. Tahar’s legacy will be carried to the next generation. The future of the three pillar of this family business depends on how the issue of succession is handled and the outcome of such a decision.

                                                                  References

Poza, E. J. (2009). Family business 3E (3rd ed.). Mason, OH: South-Western Cengage Learning.

Osbourne, M. J. (2003). An introduction to game theory. Oxford, England: Oxford University      Press.

Marion, R., & Uhl-Bien, M. (2001). Leadership in complex organizations. The Leadership            Quarterly, 12(4), 389-418. doi: 10.1016/s1048-9843(01)00092-3

"Invisible matriarchy" More thoughts on how to place women in the study of family owned-businesses

Despite a number of you accepting the notion that in your cultures women's roles are confined to traditional participation in the family business, very little has paid attention to the 'invisible matriarch' and the influence along the 3 key dimensions: ownership, business management, family! This paper may offer a route to re-construct traditional notions of the role of women through investigating their perceptions rather than that attitude by others.

Repositioning Culture for Development- Women and Development in a Nigerian Rural Community

Family.....Business!!

There you go folks!
This has been my first thought when we started the course...Had to post it :))

Enjoy!

https://www.youtube.com/watch?v=oMVe_HcyP9Y

How to decide who are the right people for the highest-level positions in a FOB?

Before starting the course on Family Business, even though I was aware that longevity of FOBs is an exception to the rule, I have always thought that the challenges faced by these businesses were mainly going back to the family itself. Now, of course, I know that the issues a family nusiness has to deal with have to be examined through the lenses of three different dimensions, which are all interlinked with each other: family, ownership and business.

The article I am posting focuses on family and ownership, highlighting the key factors that contribute to the longevity of the business: e.g. finding the right future leader from within or outside the family.

https://hbr.org/2015/04/leadership-lessons-from-great-family-businesses

In the literature there is a tendency to consider professional managers in family businesses as external managers who do not interact with the family management but they are rather mutually exclusive (Chittoor & Das, 2007). Even though it is well-known how complicated is to integrate professional managers in family businesses (often due to a mismatch between their wishes and those of the family), they are regarded to be of vital importance, in the long run, to keep the business stable, as they provide objective advice to the family (Hall & Nordqvist, 2008).

In order to have a greater impact and influence on the company, professional family business managers need to have not only formal competences but also cultural ones (Hall & Nordqvist, 2008). "Cultural competence refers to an understanding of the unique socio-cultural patterns originating from the family’s influence on the business.” (Hall & Nordqvist, 2008: 62) Gaining this cultural competence requires a continuous process of interaction and communication between professional managers and key members of the family so that they can share their respective values and goals.

My questions are: Is it all about technical competences when choosing the future leader for a FOB?

References

Chittoor, R., & Das, R. (2007). “Professionalization of management and succession performance— A vital linkage”, Family Business Review, 20(1), 65– 79.

Hall, A., & Nordqvist, M. (2008). “Professional Management in Family Businesses: Toward an Extended Understanding”, Family Business Review, 21, 1, pp. 51-69, Business Source Complete, EBSCOhost. (Accessed 18 April 2015).

Reflection of succession in regard to Ilapak and personal aspects

Reflection of succession

Today we ended the class with the Ilapak case. At the very end of our passionate discussion Ed suggested it is an option for family businesses to plunge children, i.e. potential successors in at the deep end. Let them make their own experiences, mistakes and thus show if their capable of successfully running a business, without the permanent help and guidance of a mentor or coach, which could be an experienced, wise employee working for the business for several years.

The way our parents founded a business was quite the same and in my case it is definitely true. My father had no guidance, he could not ask his father any question about  the products or the industry. Since my grandfather operated in a completely different industry and my father founded his business himself. In this sense he was isolated and the only possibility he had was to prove himself through becoming successful, that he is able to run the company. It was a matter of sink or swim.

I am not sure if it is necessary to do so, when transmitting the family business from one generation to the other. I also do not want to say here that spoiling children is good either. Finding a compromise between the two might be a reasonable solution. I make this claim because of the following: imagine, referred to our Ilapak case, Guy who manages the business in the US, fails to successfully run the company. Imagine he completely fails and goes bankrupt, he really screws the business up. Hundreds, maybe even thousands of employees will be unemployed, they lose their income, their security and face serious issues in their lives. What I want to state here is that as managers, owners, we have a social responsibility that should not be hazard, only because one successor has to prove his ability and capability of succeeding in the family business. This also underlines and even emphasizes how tremendous the pressure upon the founder is to find an appropriate, qualified successor to whom to hand over the business. When I personally thought of succession, I always took the viewpoint of the successor, of the children, simply because I might be a successor one day, it was easy for me to identify with this role, cause it will affect me. So, I completely disregarded and underestimated how difficult the situation is for the founder, i.e. for the generation that will hand over. Now, for the first time I understand why founders often do not want to plan succession.

What I also learned today was to focus on the business and not on the family. One clearly has to differentiate these two. And most of all emotions do not belong into the field of profession and business.

I think it is the decision of the founder of the family business who will be the successor. This is a decision which is so difficult to make. A father who has several children, normally wants to treat them equally (at least this is the case in Western society). The founder has a responsibility towards himself to make sure the business he developed, survives and stays successful. He also has a responsibility towards employees, who are dependent on their incomes in order to make a living. And lastly, he has a responsibility towards his children, i.e. a father wants his children to become happy and enable them to do what they want. In this sense a family business should be seen as a great opportunity, but not as an obligation.

This raises the question of how to select between ones own children or maybe even choose an external? From what I learned I can argue that rationality is the most important factor while taking these decisions. In order to make succession prosperously it might also be of importance to consider these aspects:
Think ahead, try to start early, exclude emotions when it comes to business and differentiate between the family and the business.

What is your opinion on this? Do you think other aspects are also important, if so, which?

Please feel free to comment! :))

A possible answer to Maheen's question: Patriarchal Pakistani society

Hi Maheen,

In the following, I am commenting on your last post.

If you say that gender inequality is not in accordance to Islam, and thus not to any religious background, I believe that the reason may also not just be “a number of deeply-rooted discriminatory socio-cultural values and traditions” (according to the journal Ed posted), but I do believe that the shift from patriarchism to gender equality starts with the economic shift from agriculture to industrialism.

This can be well explained with the development of another country that has already experienced this shift, which is my home country Germany.

In Germany, compulsory school attendance, also for girls, became mandatory not before the 19th century, and till 1919, women in Germany were not allowed to elect. Further, till the beginning of the 20th century it was common that girls were educated only with the intention to become a good housewife – similar to Pakistan nowadays. Till then, almost no girl did apprenticeships or studied because the classical role allocation was the following. The man did an apprenticeship and then became an employee or employer, or took over the parents' farm, while the woman stayed at home and gave birth to as many children as necessary – again similar to Pakistan. People wanted to have a huge quantity of children, as they needed them as manpower on their farms - thus in terms of agriculture. During the 20^th century, agriculture decreased because industrialization increased, which means that more and more jobs were created and the demand for skilled workers increased, too. This had the consequence that also women did apprenticeships and in the course of time, gender equality developed. 

According to CIA World Factbook, Germany’s GDP composition (by sector of origin)*¹ is, nowadays, as follows:

• Agriculture: 0.8 %
• Industry: 30.1 %
• Services: 69 %

…whereas Pakistan’s GDP composition (by sector of origin)*² is:

• Agriculture: 25.3 %
• Industry: 21.6 %
• Services: 53.1 %

To formulate this cautiously (because I don’t know Pakistan as a country, and do not like to say something wrong about your home country), for me this shows that Pakistan has, in comparison to Germany, not yet had such a development from agriculture to value adding industries, (which can also be seen by the comparison of GDP per capita: Germany’s is almost ten times higher than Pakistan’s.)

Therefore, the key to give Pakistani women more independence and freedom to do a career is the development of the country’s economy.

Nevertheless, I admit it would be naïve to believe this would be the only solution, but also the “social move” (as Benazir Bhutto named it in her speech on Youtube) in terms of culture and traditions is indispensable.

According to the journal “Leadership at the grassroots: positioning women in patriarchal society”*³ (to be found on our EBSCO uni website), in Patriarchal societies (like Pakistan), even those women having succeeded to become a politician are the victims of male politics, and thus only their male colleagues’ puppets. Consequently, the shift to gender equality and thus more female business owners probably starts with economic development (as I explained above), but it is also dependent on “the media, educational policy makers and government agencies (that) should join forces to provide improved access to business development services (BDS) and the facilitation of a local, regional and national network for women entrepreneurs, thereby assisting them to become more integrated into the mainstream economy” (according to the journal Ed posted).

Unfortunately this whole debate does not directly have to do with the topic ‘family business’, but indirectly it does indeed. I think the way family businesses are managed is always closely linked to the country's culture and characteristics. To link this to Nkem’s last post, the success of family business succession is dependent on the fact if a really competent successor is found. This probability is immensely reduced if only men are entitled to a professional education and to make a career - because this reduces the number of employees and thus of possible successors. One can further argue that, as a consequence, the success of family businesses in Pakistan would increase if Pakistani women got the same right to go to school, university and to make a career, too - which sounds like a good reason to change something.

(Sources: 

*1:  https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html

*2:  https://www.cia.gov/library/publications/the-world-factbook/geos/pk.html

*3:  http://ehis.ebscohost.com/eds/pdfviewer/pdfviewer?sid=1a8f140c-c7b7-4e98-9367-cdb28a64293c%40sessionmgr114&vid=2&hid=111 )