Family features strongly in the succession plans of many entrepreneurial businesses

GOOD DNA only gets a business founder so far.

Motor vehicle dealer John Hughes is one who believes the genes passed on to him by his forebears give him plenty more time in the driver’s seat at his successful business.

He plans to keep running the business until he physically is unable to continue doing so.

But when the 76 year old was asked last year about his succession plans at a WA Business News Success & Leadership breakfast, he stated that he had no answer.

“You are like all the lawyers and accountants that advise me,” he responded to his inquisitor in the audience.

“I keep shutting the door.

“I have no answer to that.”

While somewhat flippant in his response, Mr Hughes runs a lean business with a flat management structure. Unlike many other private sector players he does not have relatives in high profile, prominent positions within his business.

His only deference to his mortality is the move to change the name of his business, including the well-known Skippers brand, to reflect his own.

“I wanted the brand to carry on after me,” Mr Hughes said.

It is possible such a powerful force in sales cannot be succeeded easily and that the only real legacy of Mr Hughes’ outstanding career as a car retailer will be in the property assets and the brand that he leaves behind.

That is a very different story from many of the other leading private companies in Western Australia, many of which have far more complex businesses requiring greater levels of middle management and executive expertise than John Hughes appears to need.

Outside management

Businesses such as Perron Group and Coogee Chemicals have opted to bring in outside managers to run them in the absence of a suitable family member.

In the case of Perron, the business is already in the hands of its second non-family manager after Ian Armstrong stepped down from overall control in favour of Ross Robertson.

In recent years, the company has made important moves, including getting its Toyota franchise deal for WA in writing rather than the deal struck on a handshake by Stan Perron, upon which it had relied for decades.

The Perron Group model has provided a different mechanism for family involvement, based around its charitable work, which receives funds equal to that taken out of the business as dividends to the owners – as a subtle way of dampening enthusiasm of family to pull money from the company. 

Australia’s oldest family-run company, Lionel Samson & Son, now known as Lionel Samson Sadleirs, has just brought in outside management in the form of Neil David, who joins from Toll Group to take over from Ian Cook – a descendant of the original founders who has mainly run the Sadleirs transport business. Mr Cook took over from another outsider, Dick Erskine.

Coogee Chemicals is another example; while Phil Thick has taken on the role of CEO from founder Gordon Martin, who remains as chairman, among the senior executive ranks is Tim Martin who has the title director and manager, human resources and Asian operations.

Clearly, there is a succession plan that is likely to put the 38-year-old Tim Martin at the helm of the business at some stage in the not-too-distant future.

Media magnate Kerry Stokes has taken a similar approach, albeit by using public company structures rather than his formerly private approach with Australian Capital Equity. At ACE, although very hands-on, he has had a long-running lieutenant in Peter Gammel, who handles much of the executive workload.

With ACE’s sale of its Westrac Caterpillar franchise into a listed company Mr Stokes owns, there is little of the private empire left. Instead, it is all tied up in shares in the listed Seven Group Holdings, the major shareholder in another listed company Seven West Media.

Mr Stokes’ son, Ryan, has become an active executive within Seven Group Holdings. He was put in charge of the Vividwireless internet service provider, which was recently sold to Optus for $230 million. Ryan Stokes has also been on public display in the past year or so, indicating that it is likely he will follow in the shoes of his father within public companies controlled by the family – a strategy not unfamiliar to Australian media barons.

Direct transition

Of course, some of the state’s leading private businesspeople are able to pass the baton on directly.

A good example is Michael Wright, who last year outlined to WA Business News his plans for succession to two of his daughters. 

While the Wright family retains a significant amount of secrecy, Mr Wright said he wanted an orderly succession in which he remained in a position to help keep the peace. Mr Wright’s own family became mired in legal hostilities based on the huge wealth his father, Peter, left to them from his partnership with Lang Hancock. The pair worked closely together in discovering numerous major deposits of iron ore in the Pilbara.

BGC founder Len Buckeridge has also taken a direct approach. While he has had outside management in key roles in the past, BGC’s two key businesses are now split between his son, Sam, and his stepson Julian Ambrose.

Sam Buckeridge runs the manufacturing side of the business while Mr Ambrose heads up residential housing.

The unknown for BGC is how these two would work together after the business’s founder steps away, most likely due to ill health. There is also the question of the company’s strategy in the absence of Len Buckeridge.

BGC has long been known for its act-first-ask-questions-later approach to business, which has increasingly been fraught with controversy and legal action. 

As BGC has become bigger, its projects are also becoming bigger and harder to develop without major bureaucratic involvement.

Is this strategy sustainable without the founder? If not, can BGC maintain the same aggressive industry dominance via vertical integration that has been its hallmark?

For Australia’s richest woman, Gina Rinehart, the question of direct transition appears to have been made more clear due to an unpleasant legal fracas within her own family.

Three of her four children – Hope Rinehart Welker, John Langley Hancock and Bianca Hope Rinehart – have started proceedings against the iron ore baroness trying to oust her as trustee of the multi-billion-dollar family trust, set up by Lang Hancock before he died, of which they are beneficiaries.

John Hancock, Mrs Rinehart’s son from her first marriage (who changed his name by deed poll), and Bianca Rinehart have both previously been touted as future successors to the business.

Mrs Rinehart’s youngest daughter, Ginia Rinehart, has joined with her mother in the dispute.