Western Australia has a generation of highly driven business entrepreneurs who have been with us for decades and continue running their companies well past retirement age.
Western Australia has a generation of highly driven business entrepreneurs who have been with us for decades and continue running their companies well past retirement age.
People such as Len Buckeridge, John Roberts, John Hughes and Stan Perron have been fixtures on the Perth business scene for many years but, like us all, they won’t last forever.
At some point they will have to pass the baton, perhaps to their children, or to new owners or professional managers.
Some of these people, like property magnate Stan Perron, have taken concrete steps to prepare for succession.
Others, like car dealer John Hughes, who loves his work and has no intention of giving it up, frankly acknowledge they don’t have a fully developed succession plan.
There is a wide array of options for family businesses as they tackle the succession issue.
The Bailey family sold its Mills & Wares business because there were no successors within the family.
Others like the Horgan family are planning to retain ownership and control of their Leeuwin Estate business.
The Paino family, owners of Sealanes, had a clear succession plan but the transition has been more difficult than expected (see page 14).
Many other family businesses are in a state of flux, with BGC a prime example.
Len Buckeridge has two sons and a stepson working in the business but succession and future ownership remain unclear.
Mr Buckeridge, who has been frustrated by planning delays for several major projects (see story, page 5), seemed to be qualifying his recently reported sale plans this week.
“I don’t think I will sell out, I was just pissed off completely,” he told WA Business News.
“But if somebody offered me a big cheque I would sell out.”
The D’Orsogna, Kailis and Green families provide instructive examples on how to balance the needs of a family business and the sometimes competing goals of disparate family members.
These families have retained influence over their businesses but with notable differences in their approaches.
The D’Orsogna family tackled these issues a decade ago when it put in place a corporate structure that removed family involvement from management of the iconic smallgoods business.
Under the current structure, the board of D’Orsogna Limited has four family representatives, giving them a majority of board seats.
The three non-family board members are led by UWA Graduate School dean Tracey Horton, who succeeded Neil Hamilton as chairman early this year.
Managing director Brad Thomason said the business, which has 300 staff and turnover in excess of $75 million, was now run along the lines of a listed public company, with monthly financials, monthly board meetings and audited accounts.
EG Green & Sons, the company behind the Harvey Beef brand, has adopted a similar structure but with one notable difference – the founding Green family has a minority of board seats.
The family members stepped down from their management roles in mid 2003 following an independent review of the business, which is the state’s largest beef exporter.
Alan Green, Peter Green and Harry Bakker, who represent the three branches of the founding family, continue as non-executive directors.
The other four directors include managing director Mark Hughes, formerly chief financial officer of IIuka Resources, and chairman William Ryan, who is managing director of rural consultancy Kondinin Group.
Prominent fishing and pearling company MG Kailis Group has had an interesting mix of family and external management.
Alex Kailis, a son of company founder, the late Michael G Kailis, is currently managing director.
His brother, George, also had a stint as managing director before opting for an academic posting at Notre Dame University.
The current chairman, Ken Palmer, has also served as managing director.
Iluka Resources and BankWest chairman Ian Mackenzie also sits on the board, while Pricewaterhouse-Coopers partner Geoff Totterdell is an adviser to the board.
Last, but not least, Dr Patricia Kailis sits on the board as governing director.
Alex Kailis said his father put the current structure in place in the mid 1990s because he wanted the business to operate like a public company.
He said shareholders had input through the board, which was responsible for key management appointments.
“I think that was probably the most important decision we made in managing succession,” Mr Kailis said.
“It’s important that managers don’t think the way to get ahead is just to appease family members.”
While the group has adopted a public company governance structure, Mr Kailis said “family culture and family flavour is still a very important part of the business”.
While some families have many children wanting to have a say in the future of the family business, others do not have any willing successors.
Stan Perron has four children but none has chosen to follow their father full-time into his property and motoring group.
Therefore he has put in place a board and management structure to ensure the business continues operating after he has gone.
The six directors include Mr Perron’s daughter Elizabeth Demarte Perron, Wesfarmers’ chairman Trevor Eastwood and long-serving managing director Ian Armstrong.
Having children working in a business is not the same as having a succession plan.
The children may decide that running a large business is not for them, or they may not be up to the task.
Horwath director business solutions Mauri Mucciacciaro said business owners needed to view succession as a long-term and essential process.
He recommends that business owners start planning for succession as early as possible, and that they formalise the process by developing a written plan.
This should include training and mentoring programs to bring the successor up to speed on all aspects of the business.
Mr Mucciacciaro said business owners should initiate a phased program for progressively reducing their involvement in the business, and set a definite date for leaving.
Deloitte growth solutions partner Luke Martino said the starting point for succession planning should be a close look at the strategic goals of the business and its owners.
He added that succession planning covers both ownership and management of the business, and while they are strongly interlinked, they need separate consideration.
Mr Martino said there was a wide range of options for succession and it was important to take emotion out of the planning equation.
He said the pressure for change often came from external sources, such as banks worried about margins or family members concerned about declining dividends.
He added that the success formula that worked for many business owners in previous decades may not work in future.
“These people are very passionate and they run lean businesses, and they were able to assess risk intuitively and manage that,” Mr Martino said.
“But when a business gets to a certain scale you can’t do that. When you corporatise the business and have systems, you lose that touch.”
Nick Tana has three children and, while they have spent some time working in the business, none is shaping as a successor for his fast food and horticultural interests.
“They’ve had their opportunities and chosen not to take them,” a matter-of-fact Mr Tana told WA Business News.
However, at the age of 53, Mr Tana is not thinking too much about succession.
“I’m not exactly over the hill yet,” he said cheerfully, adding that he has “very competent” people at his corporate head office.
The main focus for the three children is the Olive West business, which they have funded without any involvement from their father.
Olive West has one of six big olive groves established in the Moore River region north of Perth in recent years.
Other big growers in the region include Tony Fini, founder of the self-named construction company.
While Mr Fini focuses on his private business interests, including Fini Olives, his son Adrian heads the Mirvac Fini building company.
Deanne and Terry Bailey, who lifted sales in the Bailey’s Bakery and Mills & Wares businesses to about $25 million, had to come to terms with the fact their two sons did not want to run a large family business.
“We were grooming them to take over,” said Mr Bailey. “They both decided they wanted to move on about 18 months ago. It got too big.”
As a result, they sold the businesses last year to Sydney company Keith Harris & Co.
Ironically, their two sons, Alex and Scott, continue to work in the expanded business.
For car dealer John Hughes, whose group generates annual turnover of about $300 million, the topic of succession planning is awkward because he has no intention of retiring.
“I’m going to be in this business for as long as I can,” the energetic 69-year-old told WA Business News.
“This is very difficult.
“If you bring your family into the business, you have to give them enough room to move and try their own ideas.
“[But] I’m not prepared to step back in any way at all. This is my lifeblood.”
Having said that, Mr Hughes has started to put in place a management and board structure “for when I’m no longer around”.
Two of his long-serving managers Steve Fraser (operations) and Gary Fitch (sales) were appointed to the board last year, joining Mr Hughes and his wife, Margarita.
In addition, Messrs Fraser and Fitch each bought a 5 per cent equity stake in the business.
In the wings is Mr Hughes’ 21-year-old son, Jeremy, who has completed an economics degree and is now studying law.
“He probably will come into the business but he has to make up his own mind,” Mr Hughes said.
Leeuwin Estate managing director Tricia Horgan believes long-term family involvement is an asset in the wine industry.
“It is quite often only through such longevity of family ownership that the full potential of such a business can be achieved,” Mrs Horgan said.
She said the issue of succession was an integral part of long-term strategic planning at Leeuwin Estate, which she co-founded with her husband Denis.
Three of their children have been involved full-time or part-time in the business for 15 years.
“Finding the right entry level at the right time for each family member has been of importance and the next generation is well placed and experienced to take over from their parents,” she said.
SUCCESSION STRATEGIES
- Retain family ownership and management, eg Leeuwin Estate.
- Continue family ownership with outside management, eg D’Orsogna, EG Green & Sons.
- Reorganise the business and sell part of it, eg Heytesbury.
- Sell the business to management; eg Kailis & France Foods.
- Sell the business to competitors; eg Mills & Wares, Mirvac Fini.
- Wind-up and liquidate the business.
