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ISB Family Business Conference Hyderabad, February 7 th 2009. © Nigel Nicholson, London Business School. Classic Conflicts Some happy endings. © Nigel Nicholson, London Business School. The Issues. What are the internal and external forces that bring business-owning families into conflict?

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ISB Family Business Conference

Hyderabad, February 7th 2009

© Nigel Nicholson, London Business School


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Classic Conflicts Some happy endings

© Nigel Nicholson, London Business School


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The Issues

  • What are the internal and external forces that bring business-owning families into conflict?

  • What are the leadership failings that lie at the root of many family wars?

  • What kinds of behaviours and choices do families enact that typically create or magnify conflict?

  • What can business-owning families do to anticipate, control and resolve various types of conflict?

© Nigel Nicholson, London Business School


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1. Forces for conflict

Environment

Business Complexity & Challenge

Human NatureKinship Conflicts

The Unique Family

The Vessel Concept

Poor Structures & Decisions

Conflict – Triggers & Flashpoints

bad process/control

Escalation & Warfare

© Nigel Nicholson, London Business School


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Human Nature

Kinship Conflicts

Siblings

power & resources

Parents & Children

control & autonomy

In-Laws

rights & duties

Marriage Partners

values & interests

Non-family

trust & fairness

© Nigel Nicholson, London Business School


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Solid Waste & the Waxman Family

Greed, Deception & Destruction

  • Misfit personalities

  • Understand the forces working within the family

  • Communications & problem solving are critical

© Nigel Nicholson, London Business School


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The Unique Family

The Gene Lottery

+

=

Maybe!

You are not “just like” your mother, father, brother, sister…..

Unless you are IDENTICAL (monozygotic) TWINS

© Nigel Nicholson, London Business School


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The Vessel Concept

Family dynamics

  • The members

  • Personality types

  • Interests

  • Values

  • Abilities

  • The structure

  • Size & branches

  • Gender balance

  • Generations

  • Proximity

+

  • The process

  • Communications

  • Problem-solving

  • Emotions

  • Authority & control

x

© Nigel Nicholson, London Business School


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The Gucci Family

A Tragic Italian Opera

  • A Culture Uncontrolled

  • Know your weaknesses and manage them, before they destroy you

  • Bad blood doesn’t have to be passed on

  • “Shirtsleeves to shirtsleeves in three generations”

© Nigel Nicholson, London Business School


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2. Leadership Failings

Three challenges for family business leaders

  • Adapting to changing situational demands

  • Building capability and culture

  • Creating emotional ownership in the next generation

© Nigel Nicholson, London Business School


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Why leaders derail

Issues of alignment

Situation fitting

Leadership Situations

Leadership Qualities

ALIGNMENT

Situation sensing

Self –awareness and control

Leadership Processes

© Nigel Nicholson, London Business School


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Two Paths to Failure

And strategies for effective development

  • Mentors & role models

  • Projects & experiments

  • Self-analysis & reflection

Insight

Confidence

Wisdom

Adaptation & learning

Innovation & impact

Failure to read the situation and adapt to it

Failure to find a purpose or to exercise one’s will

© Nigel Nicholson, London Business School


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Seagram and the Bronfmans

The Runaway Leaders

  • Destroying fathers

  • Be aware of your parenting style & its consequences for the next generation

  • Watch the balance between letting go and control

© Nigel Nicholson, London Business School


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The Leader as Parent

PARENTING STYLES

How Attentive to Children’s Needs

Low

High

High

Authoritarian

Authoritative

Parental Authority over Children

Neglectful

Permissive

Low

© Nigel Nicholson, London Business School


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Ford family

Strategic Myopia

  • Patriarch derailed

    • Doing what comes naturally is not always a great idea

    • Effective entrepreneurs are not always effective leaders

© Nigel Nicholson, London Business School


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3. Behaviours & Choices

Common factors that escalate conflict

  • Errors of influence

  • Stories and theories

  • Games

  • Lack of basic governance

  • Conflict mismanagement

© Nigel Nicholson, London Business School


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Errors of influence

Who listens to whom?

.......and why?

Aristotle’s formula.....

ETHOS

PATHOS

LOGOS

Result: Emotion before reason

© Nigel Nicholson, London Business School


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Dassler Family

Racing for Supremacy

  • External influence

  • Liking and trust are not enough

  • External emotional pressures can pull a family apart

© Nigel Nicholson, London Business School


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False Stories & Theories

DESTRUCTIVE NARRATIVES

“We have been wronged”

“There’s something wrong with X”

“You are just like Y”

“It’s a dog-eat-dog world”

“I have the right to do this”

© Nigel Nicholson, London Business School


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Shoen FamilyShattered dynasty

  • Foolish old kings (Shakespeare’s King Lear)

  • The seductive power of your own story

  • Risks of addiction to family sentiment

© Nigel Nicholson, London Business School


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Dangerous Games

SET-UPS & PITFALLS

Succession games–

“Guess who’s next”

Competitions –

“Go on, prove your better than your brother”

Structural traps – “Get in the box – work together”

Power Games –

“See if you can take it off me”

Ego Games –

“Read my mind and follow my wishes”

© Nigel Nicholson, London Business School


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Reliance Story

The Myth of Unity

  • Game of unintended consequences

  • Watch out for poisoned games

  • Competition in a family can easily escalate dangerously

© Nigel Nicholson, London Business School


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Pritzker

Fighting for the Spoils

  • One man’s vision not the family’s:

  • Reliance on bad mechanisms (e.g. the law)

  • Need to engage the next generation

© Nigel Nicholson, London Business School


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Lack of basic governance

Leaves you vulnerable to conflict triggers over......

  • Succession

  • Business strategy

  • Rewards & opportunity

  • Ownership

  • Locus of decision-making

  • Roles & responsibilities

  • Financial management

  • Family involvement

© Nigel Nicholson, London Business School


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McCain

When the chips are down

  • Jousting for position

  • Bad structures lead to bad decisions

  • Lack of governance, oversight & independent voices

© Nigel Nicholson, London Business School


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Conflict Mis-management

Phoney harmony & buried divisions

Ignoring the elephant in the room

Treating money as the answer to all problems

Failures to decentre – see others’ perspectives

Reaching for the law

Escalation fever & chasing sunk costs

© Nigel Nicholson, London Business School


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Mondavi family

A Bitter Cup

  • Shattering the “family vessel”

  • Some combinations are explosive

  • Don’t force members into harness together

© Nigel Nicholson, London Business School


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3. Anticipating, Controlling & Resolving Conflict

Anticipating:

A check-list of warning signs

  • Sudden behaviour change

  • Complaints about unfairness

  • Unusual & basic errors

  • Communication gaps

  • Too long to make decisions

  • Disagreements about process

  • Unclear goals & responsibilities

  • Disconnected people

  • Perceptions of privilege

  • Not letting go

  • Inequitable rewards

  • Lack of independent voices

  • Poor planning

  • No open dialogue

  • Executive churn

  • Bad gossip

  • Factions

  • Nepotism

  • Hangers-on

  • Reluctant leaders

© Nigel Nicholson, London Business School


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Excellent Family Firms

Winners of the JP Morgan UK Honours Program– 2003-2008

Business Performance

Family Governance

Social Responsibility

Overall Excellence

2003

2004

2005

+ Caledonia Investment (public/private partnership )

2006

2007-8

© Nigel Nicholson, London Business School


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Controlling Conflict

An ongoing strategy

  • Know yourself – control yourself!

  • Read your family dynamic – buffer the bad stuff or quit

  • Celebrate creative conflict – learn how to handle it

  • Build EO (Emotional Ownership) in the next generation

  • Keep adapting your structures for growth and change

  • Do regular health checks and risk assessments

© Nigel Nicholson, London Business School


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Resolving Everyday Conflicts

  • Be ready to deal with your family patterns & pathologies

  • Watch out for the warning signs - investigate

  • Prepare for the common hazards of families in business

  • Don’t get cut off from the outside world – don’t be too protected, insular and private

  • Don’t believe your own stories

  • Set rules to make everyone a winner

  • Model healthy work/life balance

  • Forgive and forget

  • Remember your common interest

  • Nurture your culture

© Nigel Nicholson, London Business School



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