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Essential Factors for Succession Planning

Kevin AuCentre for Family Enterprising and Business Advising

Asian Horological Trade and Industry Promotion ConferenceOctober 2012 PUBLIC HEALTHCLIMATE

ENVIRONMENTPOLLUTIONPOVERTY GAP

AIR POLLUTIONDRUG ABUSE

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ProblemConsumptionMaterialismGlobalization - BusinessCapitalism but in its deformed wayHegemony of market - EfficiencyQualification, organs, uterus, sex, loveIndividualizationDeterioration of social values, ethics, identity

Value differencesBusiness systemsProfits, revenue, efficiencyImpersonal, formal proceduresFormal position in organizationConditional on performance, fired if neededRetirement, promotion, departureShort-term horizonFamily systemsDevelopment and supportPersonal, Informal expectationsFamily position, seniorityRewarded for who they are, unconditional on lover & supportDeath, divorce, or illnessInter-generational; based on identity to familyBut, The Evidence Demonstrate A Lack Of Sustainability In Family Businesses1st Generation2nd Generation3rd Generation4th GenerationSale of the business Loss of family interest Unpredictable challenges Industry changes Missed opportunities Family conflict Succession problems Mismanagement 100%75%50%25%0%Culture & Philosophy Aligned To SustainabilityPrimacy of sustainabilityClear sense of purpose & roleEtc.Creativity Able to change Able to deal with change Development & Growth For Org & IndividualsConstantly upgrading & renewing skills & capabilitiesHealthy & PrudentConsistent good decision making Operational efficiency Stable quality income Strong people/ organization

The Key To Family Business Sustainability Is An Organizational / Cultural Strategy And Not So Much A Business StrategyBusiness strategies deal with business trend over the next 5-10 yearsBusiness sustainability / Family business sustainability strategy deals with how the organization can maintain internal and external alignment to successfully adapt to change over the long term it is an organizational strategy / an organizational culture strategy

In Order To Sustain Long Term, Organizations Need To Have:Then The Organization & Its People Will Manifest:Beliefs & Action That Are Guided And DirectedThey Will Be Mindful & DisciplinedThey Will Be Innovative & Strategic They Will Be Competent & Able To Lead, To Manage, To Change / AdaptThe Tsao Family IMC Family Business ModelA Potential Way To Address The Family Business ChallengesFamily TrustBusiness TrustFamily CharterBusiness MandateSocial Enterprise & EntrepreneurshipLearning CenterEast West (Non-Profit)Family Trust BoardBusiness Trust Board+RepsRepsThe Family SystemThe Business SystemFamilyBusinessFamily Members Take Role In Biz Based On MeritSeparate Family Trust System And Business Trust SystemFamily TrustFamily CharterFamily Trust BoardThe Family SystemFamilyBusiness TrustBusiness MandateBusiness Trust BoardThe Business SystemBusinessDescription:The Family will have it own Family Trust Family Trust will be governed by the Family Charter and administered by the Family Trust Board & Family OfficeClear and transparent policies, expectations & standards for family members to access & benefit from the Family TrustA safety-net for family and support for worthy initiatives by family membersThe Business will have it own Business Trust Business Trust governed by IMC Sustainability Business Mandate and administered by Business Trust BoardTransparent business re-investment, dividend & executive reward policies

Targeted Impact:Prevents the Family from being overly dependent on the Business financially removes the familys financial motivation / conflicts of interest in leading the BusinessEnsures Business will have adequate capital for grow and reinvestmentFamily & Business Each Has Its Own Trust / Fund1.Joint / Cross Stewardship Of The Family And The BusinessFamily TrustBusiness TrustFamily CharterBusiness MandateFamily Trust BoardBusiness Trust BoardRepsRepsThe Family SystemThe Business SystemFamilyBusiness2.Description:Family Trust administered by the Family Trust Board comprised of representatives from the Family, the Business and outside experts as appropriate protect the Family CharterBusiness Trust administered by the Business Trust Board comprised of representatives from the Family, the Business and outside experts as appropriate protect the IMC Business Sustainability MandateOnly the willing and able will lead and steward with clear rules, clear processes, clear responsibilities Cross-Joint governance allows close coordination / collaboration between Family and Business w/o formal controlTargeted Impact:Clear governance of the culture of Family & Business guided by Family Charter & IMC Business Sustainability MandateClear governance of expectations & performance for Family & Business Performance Mentality, help prevent Family Conflict from disrupting BusinessProfessionalization / Transparency / Meritocracy Diminish Familys focus on control in favor of Stewardship, able to attract & retain outside talentSustained & positive Family-Business engagementSenior Business leaders can continue to steward after retirement long-term management alignmentJoint / Cross Stewardship Of The Family And The BusinessFamily TrustBusiness TrustFamily CharterBusiness MandateFamily Trust BoardBusiness Trust BoardRepsRepsThe Family SystemThe Business SystemFamilyBusiness2.Family & Business Engage In Stewardship Of One AnotherFamily Participation In Business By Choice And By MeritFamily TrustBusiness TrustFamily CharterBusiness MandateFamily Trust BoardBusiness Trust BoardRepsRepsThe Family SystemThe Business SystemFamilyBusinessFamily Members Take Role In Biz Based On Merit3.Family Member Participation In Business By Choice And By MeritEast West Also Contains The Learning Center To Help Family & Business Members To Acquire The Awareness, Skills & Mindset To Lead And ContributeFamily TrustBusiness TrustFamily CharterBusiness MandateSocial Enterprise & EntrepreneurshipLearning CenterEast West (Non-Profit)Family Trust BoardBusiness Trust Board+RepsRepsThe Family SystemThe Business SystemFamilyBusinessFamily Members Take Role In Biz Based On Merit4.The Learning Center Provides Training & Coaching To Help Family & Business Members Enhance CapabilitiesFamily TrustBusiness TrustFamily CharterBusiness MandateSocial Enterprise & EntrepreneurshipLearning CenterEast West (Non-Profit)Family Trust BoardBusiness Trust Board+RepsRepsThe Family SystemThe Business SystemFamilyBusinessFamily Members Take Role In Biz Based On Merit

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