Property empires: is blood thicker than water?
Family businesses are the unparalleled champions of the world's economies; in fact they make up over 80% of all businesses says Tony Balshaw author of the book Thrive - Making the Family Business Work.
Despite the long-term view of growing the business for their heirs - many don't it make past the first generation. "But when a family owned company gets it right, they can be very successful" says Balshaw.
There are lots of good reasons for starting a family business. Traditionally family members are prepared to work harder. There is a sense of teamwork, of all pulling in the same direction, all profits going back to a strong unit of people who fundamentally care about each other. There is a great drive to make the thing work.
But there are many negative ones as well. One of the biggest being the emotional baggage that comes with families - strong emotions, entrenched ways of behaving, established hierarchies, ancient enmities and opposing factions.
For a family business to succeed it is important that potential conflict between family emotions and the goals of the business are dealt with otherwise they can pull a business apart says Balshaw.
CASE STUDY ONE - THE JAWITZ FAMILY
Eskel Jawitz started his own business in Johannesburg in 1969. He eventually merged with JH Isaacs because there was no indication that his two sons Herschel and Damon were interested in joining the business.
However in 1995 things changed dramatically with both sons deciding to come on board in quick succession. Eskel bought back all the shares and it became a 100% family owned and managed business. Damon says: " Suddenly there were three family members involved with different ideas, thoughts and processes."
LETTING GO OF THE REIGNS
Tony Balshaw stresses the importance of long-term succession and continuity planning. "This is often swept under the carpet and if the leader dies or retires, it can ignite an inferno and become very confrontational. It is often complicated by reluctance on the part of the founder to let go."
But 72-year-old Eskel Jawitz says: "I thought I let go very well, almost too well! You have to know yourself. I laid the foundations of this business, but I think that it needed the second generation with new ideas and a better understanding of economics and technology to take it to the next level without jettisoning the first generation's values. I hope that I will realise when I am no longer adding value to the business. At the moment I still feel I have role to play as a mentor. I don't believe in compulsory retirement because people leave long before their sell by date. I'm not anywhere near my sell by date yet!" says Eskel.
THE SUCCESSOR - BLOOD OR MERIT?
By family consensus Herschel, the eldest son is now Chief Executive. He says that when the company's name changed to Jawitz Properties in 2004 it signaled acceptance of the second generation. But he would not have been able to take over the reigns if his father had not been willing to pass on the baton.
Tony Balshaw says it's fine to give opportunities to the family but, "The company must put the best talent into leadership positions." Herschel is adamant that their business is run on the basis of merit. "We are a meritocracy. My brother and I had to prove ourselves, gain the respect of the staff through hard work, example and commitment to show we deserved our positions."
But he acknowledges that it has not been easy. "There has been a lot of give and take. We've taken three steps forward and two steps back at times. There are a lot of pros to a family business. There is trust and a shared vision of what it means to the family. But it's a bit like a marriage, at times very personal and sensitive."
Herschel says that his management style is very different from his father's. "There will be shifts in culture based on the character of the new family leader. I am tough and performance driven. I felt there was a need for the business to evolve in the areas of technology, systems and processes."
FAMILY EMOTIONAL BAGGAGE
Herschel says that handling the family emotions can be volatile. "There are times at the dinner table when not a word is said because of a bad day in the office or we don't get together because we can't spend another minute in each other's company. But the best way to handle it is to depersonalise business. It's very difficult, but we have to contain it or else it can destroy the family. My mother insists on no shoptalk at the family table. We plan to create a Family Council where all concerned family members can get together and talk openly about things."
SIBLING RIVALRY
Younger brother Damon, who is Franchise Director of Jawitz, says that when he and his brother first joined the company, there may have been a bit of jockeying for position. " But now we recognise each others strengths and we each have very different roles in different parts of the company which lessens the pressure of family conflict."
Gerry Robinson, British author of the book I'll Show Them Who's Boss, says one cannot expect family to accept low pay or poor working conditions simply because they are related to you. Aware of this problem, the Jawitz family approached a professional benchmarking company to decide on salaries that were market related. In fact all issues such as remuneration, contracts and procedures have been legally formalised.
OWNERSHIP VERSUS MANAGEMENT
In his book, Gerry Robinson says it is important to separate ownership from management. Problems arise when owners without the necessary talent think they have to be managers. Family can own the business without their actually running it.
Damon Jawitz says the company has already made another bold step in recognising that the way forward for the family business may not necessarily be 100% ownership. A non-family member, Russell Berkman has become a fourth shareholder. " He is very neutral," says Damon. "He is not as emotionally involved as a family member and often acts as mediator. He has brought in outside business experience which we feel will grow the company. We saw that growing the company purely as a family concept could be restrictive. But our essential family values still underpin the company."
"Look, it's been ten years and we're all still talking to each other!" says Damon. " The company has quadrupled in size and it is the second generation which has taken it to the next level"
BIRTH ORDER RULES RIGHT?
Wrong! says Gerry Robinson. In family businesses people are often treated according to their family position in the birth order. They will often defer to the oldest child because he or she is older. "But I think it is true that siblings in a family slot into different roles - the brains, the peacemaker, the conformist which can mean a nice mix of talents within a family".
Tony Balshaw points out that gender roles have also changed dramatically. In fact female-led businesses have dramatically increased, as is the case in the Ortlepp family.
Don't miss part two of Michele Alexander's investigation into family businesses in the property world, soon on Realestateweb.co.za. (Copyright: Michele Alexander 2007)
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Comments
I have no idea how good Ms Michele Alexander is but her theme of human engagement, connections, relationships for business success are critical issues. I attended a satellite broadcast that speaker Connie Podesta gave and I was very impressed and would . .more
by Relationships on April 29 2008, 20:26
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