Bringing outsiders into the mix of a family business can increase the odds of effective succession, according to family business members and a veteran Auckland-based advisor.
Paul Jancys, director of contract pharmaceuticals manufacturer Jaychem Industries, says he, his father and his two cousins bring complementary skills to the family business. However the quartet have added key employees and support structures in to the mix as the business has grown.
“We all used to get involved in everything, but we found it far more effective to find people who know what they’re doing,” says Jancys, adding the company has made hires in procurement, line setting, team leadership and logistics.
Speaking at a conference for family businesses held in Auckland this week, Jancys shared his tips for effectively running a family enterprise.
He described how about four years ago his father asked him to return to New Zealand from England and work for Jaychem after the death of his uncle, who co-founded the company in 1976.
Jancys has a financial background, his father is the managing director, while cousins Richard and Catherine are the general manager and technical director respectively.
It was important to take time over a new shareholder agreement after his uncle’s death, Jancys says.
“We made sure we didn’t hurry. [We needed to] really get people to understand everything so they can reach agreement.
“As a second-generation family business member you’ll never get everything you want, but you’re all in it together. We had to try to get along. We had no choice but to make it work. We don’t have the luxury of a lot of wealth.”
At the top of KPMG partner Mark Kippenberger’s checklist of tips for handing over the reins to a family business is making sure the successor has the skills to build, rather than erode, the company’s value.
He tells family businesses to approach succession as a process, not an event.
And if you’re preparing your business to be sold, make sure you look after the right people once you’ve found them, he says.
“Understand those key individuals and put support and systems around them. Have effective systems for delegation and performance.”
Tips for successful succession
Paul Jancys, Jaychem Industries
- Get a good accounting firm and independent legal advice
- Be passionate about your business, not emotional.
- Make sure everyone is treated fairly.
- Communicate regularly and openly.
- Don’t bring family issues to work.
Mark Kippenberger, KPMG
- If your business is being prepared for sale, the memorandum of information should have background on the company’s operations to let buyers know what they might be getting into, the market the company is in, the company’s market position, the revenue model and financial analysis.
- Get the best return by having sustainable high profit performance, a stable and motivated team, a strong service culture and consistent free cashflow.
- Test how the company would perform if the general manager took a sabbatical. Day-to-day issues might be handled, but deeper issues could be challenging in the general manager’s absence.