09/09/2010 - 00:00

Succession planning: where to from here?

09/09/2010 - 00:00

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The reigning heads of some of the state’s leading family businesses face a myriad of challenges going forward, none more pressing than deciding who will take over the company.

Succession planning: where to from here?

The reigning heads of some of the state’s leading family businesses face a myriad of challenges going forward, none more pressing than deciding who will take over the company.

At a recent WA Business News boardroom forum, the businiess owners agreed that succession planning was a key challenge.

While inherent differences in each business meant that each organisation required its own plan for future leadership, there were also some common challenges.

Founder and managing director of Leeuwin Estate Denis Horgan greatly valued the experience of sharing thoughts on succession across the boardroom table.

“I’m finding a lot out because you’ve got to stop and think, ‘Where to from here?’,” Mr Horgan said.

“We’ve kept our cards close and we’re one of the more successful companies of our type in Australia.

“But you can only do that for so long before the rest of the mob comes along, and I’ve got nine grandkids.”

From 5000 companies surveyed, the MGI Australian Family and Private Business Survey 2010 highlighted that succession planning was now a major concern for 20 per cent of businesses, a jump of 11 per cent since 2006.

Sadleirs Transport executive director and Family Business Australia WA chairman, Steve Samson said depending on the size, structure and stage, each business owner faces their own set of obstacles.

“Look at a first generation business that has been built through a passionate owner-developer, passing that on is a lot different to a fourth or fifth generation family business,” Mr Samson said.

“Each of those maturity areas has its own challenges and idiosyncrasies.”

Galvin Engineering managing director – finance/marketing Chris Galvin said he and his business partner and older brother, Paul were considering grooming their children to eventually take over.

“We’re 80 years old and going into the fourth generation,” he explained.

“So my brother and I are looking at his kids coming of age and mine, who are 10.”

A recently established Galvin family charter will prevent any of their kids joining the business before working elsewhere for at least three years.

Prominent Western Australian businessman Gordon Martin indicated that he has already considered tailoring his existing board to create an environment that may see his son, Tim (currently an executive director on the Coogee board) enhance his role within the business in future years.

“Handing onto another member of the family, a younger generation person should have people he can relate to on the board as well,” Mr Martin said.

“Young Turks with a bit more understanding of what the next generation is looking to.”

Other attendees, however, have far less advanced plans for succession.

Managing director of engineering contractor Marsh Civil, Philip Marsh, said he doesn’t expect any of his three daughters to follow in his footsteps.

“I’ll be honest, I don’t really see them coming in,” he said.

“And being in the construction industry it’s a fairly male dominated industry, not that that should deter them but it’s definitely not an obvious fit.”

It’s a similar story for WD Moore & Co managing director Geoff Moore, who said his century old windmill and water-pumping business may go without a successor from within the family.

“We’re still in limbo quite frankly,” Mr Moore said.

“So it opens up a whole Pandora’s Box of problems, but at the same stage we’re heading towards some different solutions where the business will carry on and it will be managed by a family board.

“So there’s lots of work still to be done.”

Without that apparent heir, Mr Moore and Mr Marsh have adopted similar views.

“My view is more that my role is to maintain the family wealth as opposed to the family business,” Mr Marsh explained.

“Maybe it’s because I don’t have that obvious successor.”

Mr Moore agreed, suggesting wealth management was his key concern.

“So what the business might look like in the future could be quite distinctly different from what it is today,” Mr Moore said.

JWH Group managing director Julian Walter already has his children Jay and Alicia working in the business (as general manager of The Rural Building Company and as an accountant for Plunkett Homes respectively).

However, Mr Walter said an increasingly common problem involved the partners or spouses of incoming successors, and the unfortunate situations where these relationships break down, causing problems for the business.

“There’s issues now occurring that’s quite dangerous where, in the case of separation or divorce, this other external party can now lock up the business for years in court,” Mr Walter explained.

“This mate of mine, his ex is now suing him for what he might ultimately get out of the business.

“And while that’s happening, the entire business, a well known Perth company, is locked up: they can’t do anything and it could go for two or three years.

“In my case I’ve got two kids both with partners, and I’m thinking, ‘Holy cow!’.

“And they won’t sign pre-nups.”

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