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Family Office – Board’s Role in Setting Family Office and Family Enterprise Strategy

The contribution of the outside directors of Cadbury Schweppes was to ask the right questions. These questions were sometimes uncomfortable, like whether parts of the business should be sold to put more resources behind those that were to be retained, and they were not questions we would necessarily have raised from within the business. It was up to the executives to provide the answers, but from this board dialogue between insiders and outsiders a bolder and ultimately more successful strategy was hammered out than had we not had the benefit of that external view of the firm and its prospects.

— Sir Adrian Cadbury, Chairman of Cadbury Schweppes

Customer-oriented businesses are always changing, always adapting to customer-induced changes in competitive dynamics. These businesses recognize the need to change in order to remain competitive. Families, by their very nature, are about stability, consistency, enduring values, love, and caring, all of which support individual development and family harmony. They tend to focus on legacy and continuity, not change. As a result, family companies often have difficulty dealing with conflict rooted in different visions of the future. And yet, quite naturally, the visions of successive generations are likely to be very different. Some owning families seek out psychologists and family therapists in the hope of resolving conflict. Others decide to gun the engines of growth so that conflicts may be seen more dispassionately in the context of an enterprise growing in resources and opportunities. Still other families decide to talk
extensively across generations, aided by their boards and advisors, until a new direction can be supported by all of the generations involved.

Adaptation is not easy. If it were, the average lifespan of a U.S. corporation (family and nonfamily) would not have shrunk to a mere 10 years; nor would 2/3 of all first generation family-owned businesses fail
to survive in the founding family’s hands to a second generation. The conflict between the old and the new in a family enterprise is more often than not a personal conflict between a parent and his or her child. It cannot get more subjective than that. This creates an opportunity for board members to mediate, facilitate, cajole, illuminate, provoke, and ultimately get the two generations to jointly create something they both can support. After all, it takes two generations to supply the two critical ingredients for sound adaptation in a family enterprise: (1) the wisdom to
know what has made the company successful thus far and (2) the passion to seize today’s opportunities, embrace change, and thrive in the decades ahead.

Sir John Harvey-Jones, former CEO and Chairman of Imperial Chemical Industries, once commented that the job of the board is to create momentum, improvement and direction and that precisely because
of the failure of boards to create tomorrow’s company out of today’s, famous names in industry continue to disappear.

For further information please contact us directly.

Sources

Cadbury, A. (2000). Family Firms and Their Governance:
Creating Tomorrow’s Company from Today’s. London: Egon Zehnder
International.

Zook, C. (2007) Unstoppable: Finding hidden assets to renew the core
and fuel profitable growth, Harvard Business School Press, Boston,
MA; and Ward, J. (1987). Keeping the Family Business Healthy. San
Francisco: Jossey-Bass.

Harvey-Jones, J. (1988). Reflections on Leadership. New York: HarperCollins.

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