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Parallel Planning
for the
Professionally
Emotional Family
Businesses
Professor Randel S. Carlock
Berghmans Lhoist Chaired Professor in
Entrepreneurial Leadership
Founding Director, Wendel International
Centre for Family Enterprise
INSEAD – Asia, Europe and the Middle East
Why do Business Families Need to Plan?
•Increased business complexity
•Larger, multi-generational family
•Separation of ownership and management
•The conflict between family solidarity and the new nuclear families
•The division of shares create less resources to support the family
and the potential for ownership inequality
•Divisions into branches and the loss of a shared purpose when
making decisions
•The loss of order and the possible chaos created when the
matriarchs and patriarchs are no longer around
Carlock and Ward, (2010). When Family Businesses are Best.
Planning: Addressing the Five Family Business Issues
CAREERS
Who holds leadership
roles? CONTROL
How are
decisions
made?
CULTURE
What values drives
our behavior?
CONNECTION
How do we protect
CAPITAL family relationships?
How are
resources
invested?
Carlock and Ward, (2010). When Family Businesses are Best.
2
Five Action Steps of the Parallel Planning Process
Family
Contribution
Family
Values Business
Vision
Business
Culture Vision
Values
Family
Engagement
Plans
Family Governance Business
Meeting & Strategy
Investmen
Agreements t
Board of Family
Directors Human
Financial
Capital
Carlock and Ward, (2010). When Family Businesses are Best.
Family Strategy is a Capable and Committed Family
Encouraging talent development
• Family leadership talent development programs
• Internships and career planning
• Active roles in the family council and foundation
• Family talent bank for boards and leadership roles
Building family commitment
• Transmitting values based on performance
• Fair Process to ensure family expectations are considered
• Effective family agreements and family and business governance
• Long-term estate, liquidity and ownership planning
• Fun and social activities to strengthen family ties
Carlock and Ward, (2010). When Family Businesses are Best.
The Professionally Emotional Business Family
Families are about caring and businesses are about money; not a likely
formula for a successful partnership. Yet those are the facts and
successful family businesses around the world have found that using the
Parallel Planning Process for aligning a family’s emotional commitment
based on values and vision with sound strategic, investment and
governance thinking creates a new model for the entire business
community.
We argue that the best family businesses outperform their widely
traded competition because they plan and govern based on professional
process but they lead based on passion and emotions; they are
professionally emotional. This creates a unique and defendable
competitive advantage because widely-traded firms by definition strive to
eliminate emotions from their planning, decision making and actions.
Carlock and Ward, (2010). When Family Businesses are Best.
Family Business Commitment Drivers
Social Spiritual Emotional Economic
Individual •Power •Service to •Achievement •Freedom*
•Prestige others •Challenges •Security*
•Networks •Personal •Recognition •Self
meaning •Talent expression*
•Religious development •New ventures*
beliefs
Family •Family •Service •Cohesion •Wealth
legacy •Philanthropy •Relationships creation &
or heritage •Shared purpose •Shared protection
experiences •New
investments/op
portunities
Business •Industry •Corporate •Business •Wealth
reputation social relationships creation
•Products responsibility •Belonging •Dividends
•Employees •Economic •Liquidity
•Brands development •Growth
•Sustainability
Carlock and Ward, (2010). When Family Businesses are Best.
Professionally Emotional as a Competitive Advantage
Family constraints have their benefits
On Management Column
By Philip Delves Broughton
Randel Carlock and John Ward, professors at Insead and the Kellogg School
of Management respectively, have studied family businesses around the world
and report their findings in a new book, When Family Businesses are Best.
The best family businesses excel at two things: balancing emotion and
reason; and retaining a long-term perspective.
Carlock and Ward, (2010). When Family Businesses are Best. 7
Porsche also makes great cars, remember?
The global automobile industry is in a shambles with a share in Ford Motor Company
selling for less than a Starbucks latte and GM and Chrysler discussing a merger that
resembles two drunks hoping they can make it to the next lamppost (government bailout).
Somewhere in all this chaos the Porsche family has managed to create two highly
profitable automobile firms that are the world leaders in designing, manufacturing and
marketing cars.
The family's values and vision are the foundation for a planning process where each
critical factor adds synergy based on a unity of purpose between the family and the
business.
The Porsche family and specifically Ferdinard Piech,
the VW Chairman, sees combining Porsche (the firm
that bears his grandfather's name) with the much
larger VW (founded by his grandfather) as making
strategic sense and strengthening the family legacy.
Campden Families in Business Magazine, No 41 November/December 2008
By Randel S. Carlock
Carlock and Ward, (2010). When Family Businesses are Best.
Did the Porsche Merger Make Business Sense for VW?
Reuters, Oct 28, 2008
When you refer to VW and Porsche as two highly profitable firms, I am not
sure how much that will apply going forward given that Porsche, and to
some extent VW, produce high-end cars that are going to take a big
hit in the ongoing crisis (and this is what the hedge funds were betting
on).
As for whether a tie-up makes sense, here's an excerpt from a recent FT
article:
More crucially, on the car making side analysts have long described
the tie-up as an unequal match, benefiting Porsche far more than
VW.
“There’s very limited industrial synergy between the two
companies,” said Philippe Houchois, analyst at UBS.
Carlock and Ward, (2010). When Family Businesses are Best. 9
VW Blows its own Trumpet on Recovery
By Chris Bryant in Frankfurt and John Reed in London19 December 2011 Financial Times
When Martin Winterkorn, the 64-year-old engineer, took over as chief executive in 2006,
VW sold just 6.3m vehicles. The carmaker was struggling to make a profit with its
flagship VW brand and had to ask workers at some of its German factories to work
longer hours for the same pay. Five years later, VW now has more than 90 plants
building 200 different vehicle models for its portfolio of 10 brands. Its revenues jumped
by 26 per cent to €116bn in the year to September, and its €13.6bn net profit
underscored the carmaker's new regard for financial discipline.
Competitors increasingly view VW as the car industry's benchmark for profitability and
manufacturing efficiency - a spot formerly claimed by Japan's Toyota. As the year draws
to a close, industry forecasters are describing VW as the world's largest carmaker,
ahead of General Motors and a disaster-weakened Toyota.
While it was Mr. Winterkorn who took the floor in Wolfsburg, VW owes its rapid growth
mainly to the obsessive vision of another man: Ferdinand Piëch, its powerful
chairman and family patriarch. The grandson of Ferdinand Porsche, Mr. Piëch is
widely regarded as the sharpest strategic mind in the car industry and the driving
spirit behind VW's ascent. "VW is his life's work, he's absolutely driven to create
the biggest car company in the world."
Carlock and Ward, (2010). When Family Businesses are Best. 10
Defining Emotional Commitment
-A belief in family values and vision
illingness to invest talent and resources
-A desire for a family connection or legacy
-Expectations of personal and family rewards
Carlock and Ward, (2010). When Family Businesses are Best. 11
Parallel Planning Process: Systemic Planning
Family Planning Questions
What values drive What will the family How do we prepare How is family human How do we align
our family? contribute? the family? capital invested? the family actions?
Values Vision Strategy Investment Governance
What culture drive What kind of business How does the How is family How do we ensure
our firm? does the family business remain financial capital stewardship?
support? competitive? invested?
Business Planning Questions
Carlock and Ward, (2010). When Family Businesses are Best.
12
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