Family businesses must focus on family, not just business: David Smorgon
“You could say we’re maybe hitting the economic peak. Others will disagree and say the future’s rosier,” Mr Smorgon told The Australian on the sidelines of a Hamilton Wealth Management dinner in Melbourne.
“Family businesses, I would say, are selling and also imploding for family reasons and not just business reasons.”
He declined to be drawn on Westfield or 21st Century Fox (chaired by Rupert Murdoch, executive chairman of News Corp, publisher of The Australian), saying “time will tell” whether now is a good time for generational asset owners to sell.
“I don’t think it’s any surprise that those two major families have made deals that effectively exits the family from most of their activities as well as capitalising on the economy at the time. So there is an interconnection there,” he said.
“But I know there’s a lot of families that are thinking about it, not from, ‘is it the right time for the business?’ but because, ‘I’m worried about (the fact) there’s no family continuity’.”
Mr Smorgon was a former director at Smorgon Consolidated Industries, once Australia’s largest private company, which was broken up in the mid-1990s.
He was disappointed not to be able to offer his children the same opportunity to work in the business he had, and has since worked tirelessly to help other families keep their businesses together, including at Pointmade, PwC and earlier as the chairman of Family Business Australia.
He works with families where relationships have broken down so badly that members aren’t speaking to each other, or refuse to spend holidays like Christmas or Passover together. The disputes can stem from unresolved conflict, in some cases dating back to childhood, that has never been aired. He shares an example of a time when his brother received a better bike than he did — and it hurt.
Some of the biggest issues can include governance, succession and a tendency to avoid difficult conversations, he said.
In terms of strategies, he recommends putting family on the agenda and setting aside time to discuss what is keeping the others awake at night, making sure to listen to each other.
Without giving children everything they ask for, he advises learning to have a warm heart.
He suggests holding family meetings with an independent facilitator in a neutral location, not around the kitchen table.
Writing down a charter for the family business with details such as pay, structure, dividends, exit and recruitment guidelines is important, he said.
“If we can connect families, if we can break down the barriers between generations, between siblings, and reconnect them, it’s a wonderful feeling that you’ve achieved something,” he added. “You’ve made a huge difference to families.”