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ISB Family Business Conference Hyderabad, February 7 th 2009

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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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slide1

ISB Family Business Conference

Hyderabad, February 7th 2009

© Nigel Nicholson, London Business School

slide2

Classic Conflicts Some happy endings

© Nigel Nicholson, London Business School

slide3

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

slide4

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

slide5

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

slide6

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

slide7

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

slide8

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

slide9

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

slide10

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

slide12

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

slide13

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

slide15

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

slide17

Errors of influence

Who listens to whom?

.......and why?

Aristotle’s formula.....

ETHOS

PATHOS

LOGOS

Result: Emotion before reason

© Nigel Nicholson, London Business School

slide18

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

slide19

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

slide22

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

slide23

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

slide24

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

slide25

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

slide26

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

slide27

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

slide30

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

slide31

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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