Families who have persisted and prospered beyond three generations

Thank you for your numerous responses to my April piece “Keeping the Family in Business” (still showing below).

  • Firstly you endorsed the piece, and thus McKinsey’s research.
  • Secondly, you provided vivid examples of your family’s business stories which amplified the lessons from April
  • And thirdly, you described additional techniques and methods within your families’ paradigm, which add to our knowledge.

I have selected two particularly apt “blogs” from international colleagues who are regular readers.

1. See response from an American reader, Generation 5 member of a very wealthy family

“An anecdote or two from our story.

Warren, An interesting article. I’m forwarding it to a friend who may be in the 3rd generation freefall.

However, an anecdote or two from our story: – Our generation of cousins is known as the G5s. Our kids, their cousins and 2nd cousins are G6s. We will be around for many more generations because of the way we have set up the management and how ‘great granddad’ set up the trusts (can’t be done today); i.e. it was the 3rd generation that re-created the wealth and created the dynasty. The 3 remaining G4s are known as ‘the story tellers’ and 3 are dead. Our generation now owns and runs the family company, the G6s are in training, e.g. 2 work for the investment wing.

We have professional management of our family office. The CEO is not only a strategic thinker for the business; he is inspirational in getting family members to feel worthwhile (task & people talent being important criteria).

A family member is chairman, and 3 others form the ‘governing council’. We have one trusted outsider on the board. The family has several committees that are all family, no outsiders, however we often get a professional consultant for Audit committee, etc.

We use consultants who are very forward thinking: one for trusts, one for family businesses, one the moderator/counsellor, etc.

The trustees who used to make the investment portfolio decisions are now in a governance role and professionals manage each section of the portfolio. Our investment horizon is generations, not quarterly. We define what percentage of the return on the portfolio is available for beneficiaries & management costs, so there is always sound growth for the corpus and hence what I call the ‘rabbit phenomenon’, exponential growth of beneficiaries.

The beneficiaries are the owners of the capital, not the trustees, not management.

We decided a decade or two ago is that any family member has the freedom to leave the family. We believe that if there is an exit available, you don’t feel trapped and you don’t leave.

In-laws are involved as much as direct descendants.

We believe in meritocracy (but boy, that’s hard sometimes!).

We have a family retreat/annual meeting that is both fun and business and includes exec staff, trustees and their wives, and some invited advisors.”

(Emailed reply from a member of an American Fortune 500 family dynasty, who is a regular reader of Altiora Associates’ Opinion Pieces. April 2011)

2. See response from a long-serving top executive of a global dynastic group, headquartered in Central Europe. 

Success factors from Europe the Wise

“Hi Warren,

Your article resonated with much poignancy. The observations in the McKinsey material are spot on.

As you know, I have worked for some time at a senior level for a large international company (range USD$10-20 billion), now in its third generation of family and noted for being very successful in multi sectors and multi geographies. This business started a century ago and is still going strong with one family ownership.

Our group can be characterized as follows:

1. Fiscally conservative –no debt accumulation and discrete businesses with no interconnected financial obligations. Separate bank lines.

2. Independent, autonomous, and disconnected business groupings.

3. Long term planning horizons –at least five years out.

4. Committed and engaged management rewarded for specific achievement in the business in which they work.

5. Professional management (the best we can find). Family work on the business but not in it. Family seen as enablers more than managers.

6. Independent boards made up of a balance of executives and recognized business leaders from outside the company.

7. Very strong financial disciplines, regular reporting, independent audits and a disciplined approach to strategy and business development.

8. Worldly view with local focus from shareholders who are committed to the businesses they own for the very long term.

All this has produced a very strong corporate culture and an enduring business model. Management know that they can plan for the long term good of the business and build a career provided they can achieve the goals they have articulated. The shareholders have reaped above average returns accordingly. All in all this makes for a wonderful company to work for and it will no doubt endure for a couple of more generations at least!” (Emailed reply from a long-serving President of a major division of a dynastic global group, who is a regular reader of Altiora Associates’ Opinion Pieces. April 2011)

The shareholders have reaped above average returns accordingly.

All in all this makes for a wonderful company to work for and it will no doubt endure for a couple of more generations at least!”

(Emailed reply from a long-serving President of a major division of a dynastic global group, who is a regular reader of Altiora Associates’ Opinion Pieces. April 2011)

However you safeguard and build your wealth or that of your clients, the clear message is that great wealth grows best from very long horizons and holdings.

Best wishes to you all,