FA family business is a company owned or managed by family members, often across multiple generations, with a strong emotional commitment and shared vision for the future.

Family Business

1. Chapter 2 Building Trust and Commitment In Family Business MGT4101: Family Business Management

2. What you'll learn Zero-Sum Dynamics and Family Culture Family System Perspectives Family Emotional intelligence How Family Add Value Family unity and Family councils Planning and Policy Making

3. Zero-Sum Dynamics and Family Culture Zero-sum dynamics happen when the family business stops growing or is in decline. This occurs when the one party’s perceived gain is the other party’s perceived loss. This results in a so-called “us-versus-them” triggered by perceived differences such as - Male versus female - Active versus inactive in the business - Better educated versus less educated - Older versus younger - Blood relative versus in-law

4. Chinese Family

5. 3- 7 Unhealthy Family Culture Characterized by: Lack of information Low levels of family emotional intelligence Little knowledge of the business among at least some family members A result of: A founding culture that supported autocratic leadership The family’s belief in benefits of privacy Zero-sum dynamics

6. Family Systems in Summary

7. Family System Theory Family is building block of emotional life and uses systems thinking to understand the complex interaction between family members. Interdependence of family can benefits of connectedness and the satisfaction of social, intellectual, and emotional needs gives rise to unmet expectations.

8. FAMILY EMOTIONAL INTELLIGENCE Emotional intelligence = The capacity for recognizing their own feelings and the ability to manage emotions and relationships with others. Family emotional intelligence aims to improve the ability of individual family members to know their feelings in order to use them appropriately to make decisions . Family EQ enables family members to manage their emotional life without being hijacked by patterns in their family of origin and increases empathy for others' emotions. This can help teamwork and loving family relationships.

9. FAMILY EMOTIONAL INTELLIGENCE The core elements of emotional intelligence in highly effective leaders are the following: Self-awareness : the awareness of your own feelings and the ability to recognize and manage these feelings Emotional resilience : the ability to perform well and consistently in a range of situations and under pressure Motivation : the drive and energy you have to achieve results, balance short- and long-term goals and pursue your goals in the face of challenge

10. FAMILY EMOTIONAL INTELLIGENCE • Interpersonal sensitivity: the ability to be aware of feelings for others and to use this awareness effectively in interacting with them and arriving at decisions impacting on them • Influence: the ability to use insight and interaction to arrive at and implement decisions when faced with incomplete information • Conscientiousness and integrity : the ability to display commitment to a course of action in the face of challenges in order to act consistently and in line with understood requirements

11. How Family Add Value: The Family Business Interaction Factor Family business with a high degree of family harmony tends to be more effective in planning for business continuity. Family harmony exists when family members share values of accommodation and cooperation and handle conflict appropriately. Family meetings provide the opportunity for non-active family members to share their perspectives or concerns regarding the business.

12. 3- 18 The Benefits of Family Meetings Provide a reliable forum for delivering information about the state of the business, its financial performance, its strategy, and the competitive dynamics it faces Offers a sale haven in which to teach family members about the responsibilities that accompany being a business owner and manager Keeping family members updated on any potential changes to your plans or pertinent documents.

13. 4 Reasons Why to Schedule Family Meetings Meetings to maintain open communication Meetings to encourage innovation Meetings to create trust Meetings to resolve conflict 3- 19

14. Family councils Meeting Family councils offer a safe haven in which to teach family members about the various rights and responsibilities that accompany being a business owner and manager. This meeting is where important distinctions between ownership and stewardship. T wo reasons for the importance of family council meetings: 1) Family unity and continuity 2) Planning and policy making:

15. 1. FAMILY UNITY AND CONTINUITY Family unity is a strong predictor of the successful use of a set of best managerial and family practices by family companies. Family unity affects the firm’s ability to capitalize on the unique capabilities or resources that family members bring to the company’s business model

16. FAMILY UNITY AND CONTINUITY Well-structured processes that involve family members in developing policies and setting direction can increase trust, and commitment to business goals . Family unity correlates with the following effective management practices: - Planning activity - Performance feedback - Succession planning process - Advisory boards

17. 2. PLANNING AND POLICY MAKING Family meetings should be about education and communication . Open and safe processes for sharing information among family members Developing effective planning and policy-making bodies The council may suggest policies such as: Employment policies Board family council service policies Dividend and liquidity policies

18. 2. PLANNING AND POLICY MAKING Voting should be banned !!!!!, as it is not a relevant tool. The focus should be on conversations, deliberations, and policy making . Census agreements are important.

19. Useful policies in family businesses Policies An employment policy that outlines the levels of education and experience required for employment in the business. A subcontractor policy that offers guidelines for arms-length transactions in an open competitive marketplace . The processes should create a level playing field for relatives and nonfamily alike A board service policy that includes important for the selection of family members to serve on the board as at-large representatives of the owning family.

20. Useful policies in family businesses Policies A family council service policy that states the criteria for selecting family members to serve as group coordinators of the family council that may be formed. A liquidity policy that includes principles supporting the desired relationship between the controlling family and the company in the future and recognizing that individuals family branches may have cash-flow needs A family constitution , used primarily in older and larger multigenerational family businesses .

21. Guidelines for policy Making Involve as many family members as are relevant to the particular policy being developed. Look at the big picture , and formulate a mission statement that defines what is best for the extended family and the business. Focus on the future and let go of the past.

22. Guidelines for policy Making Use experienced advisors , who can play a vital role in helping a family business focus on the future, and benchmark your drafts of policies against those of other successful family-owned or family-controlled companies. Agree on the process you will follow to develop, edit, approve, and enact policies with confidence that people will support them.

23. CONFLICT MANAGEMENT Conflict is inevitable in families , especially when the families live, work and control assets together. A family council can play a critical role in reducing the potential for conflict. Anger over the unfairness of Lack of inclusion

24. Family Cultures A Kitchen Furniture Company VS

25. A Kitchen Furniture Company MR. G MR. G’s wife MS. E MR. W MR. B MS. J MS. S

26. Lacking: Visible commitment to continuity on the part of Mr. G, the chairman and CEO Never communicating his commitment to continuity or his plans to transfer voting control A board with independent outsiders spousal leadership as a trust catalyst family meetings Education, information, give-and-take communication, and emotional intelligence A Kitchen Furniture Company

27. Begins as a small family shop in Bangkok Thai clan of Chinese descent 5 th Generation More than 50 subsidiaries. Central Group - The Chirathivats Ref: Milestones | Central Group

28. Central Group Ref: เปิด 'ธรรมนูญเซ็นทรัล' ย้อนรอย 7 ทศวรรษ เส้นทางบริหารกงสี 4 แสนล้าน และวิธีปกครอง 'ตระกูลจิราธิวัฒน์' - Brand Buffet

29. Family Council & Relative Forum Executive Committee & CEO Management Board CG Board Family Family council 14 senior family members Total 232 family members Manage family fund and benefits Quarterly meeting Ownership CG Board Protect Shareholder Right & Benefits Allocate shares to members 7-13 members Monthly meeting Business Executive Committee >6 members Selected from CEO, Vice-Chairman, CFO Growth & Expansion Weekly meeting The Governance Structure of Chirathivat Family

30. Central Group Planned for the continuity of the business under family control Making family meetings a central governance body Need to value the extended family over the individual or family branch Stewardship responsibilities The enterprise they received from an earlier generation may be successfully passed on to the next At this family meeting, there was much information shared and much to be proud of Education and information-sharing that keeps patient capital patient The next generation was being prepared for stewardship and family unity .