Hay Group highlights modern threat to family firms

When the world’s most famous Austrian abroad made his last film he could not resist a plug for his favourite snack. As a result in Terminator 3 the cyborg played by Austrian-born Schwarzenegger grabs a bunch of Manner wafers when shopping for food at the gas station in the desert – and the merciless killing machine proves itself also to be a fan of the distinctive Viennese wafers.With such high powered support as a Hollywood A list actor and booming sales it would seem that the firm of Josef Manner whose logo is a picture of St Stephen’s Cathedral would have little to worry about. Yet until recently the Austrian based firm did have a major concern – and it was one that was faced potentially by four out of five companies here in the Alpine Republic.Austria may be the 4th richest land in the EU and have the 3rd highest per capita spending power, but Manner like eighty per cent of Austrian companies is a family business, and as a result despite the economic prosperity of the region is threatened by an entirely different problem.Falling birthrates, divorce and other modern social trends mean that the larger family units may no longer exist to continue the family tradition. In the case of Manner the owner Dr. Carl Manner, who is 82, has no children, and an era is about to come to an end at the firm that was founded in 1890.It is not an isolated problem. Austria has one of the lowest birth rates at 8.68 per thousand or in other words, for each Austrian woman on average just 1.3 children are born. A sustainable population is estimated at requiring 2.3 children per female. Coupled with the extremely high divorce rates which see on average fifty per cent of all marriages ending in divorce, with Vienna seeing two thirds of all marriages being legally dissolved, the problems facing family business concerns are very real. In fact family companies like Manner as well as others like Swarovski and AVL, that form eighty per cent of Austrian companies, are all potentially at risk from social changes to the family unit and with these companies employing seventy per cent of the workforce it gives an idea of the scale of what lies ahead.Recognising the problems and the need for change and making smooth planning to meet the challenges were the subject of a seminar organised this week in Vienna at the rooftop K47 bar by the Hay Group, specialists in tackling exactly this problem.Hay Group’s Senior Vice
President Dr. Dietrich Schramm told the audience at the K47 executive club in
Vienna’s central business location that there were difficult times ahead and
Austrian businesses need to embrace professional ‘change management’. The
current situation, he said, is simply not sustainable.

He said: “Hay Group believes that Austria’s family businesses have to keep ahead of the game and adopt survival strategies to meet the inevitable changes they are facing. “We offer comprehensive workable strategies to help Austria’s family businesses change. “Hay Group is internationally renowned for working with many big name companies to facilitate change to improve efficiency and effectiveness in the modern economies.”The Hay Group has a pedigree of detailed analysis and is on record as devising successful strategies which companies can use.  This in turn gives the changed companies that added value needed in the market place. “Passing the inheritance on to the next generation is not as simple as it seems.”The next generation must be professionally equipped with the necessary skills and competence or those inheriting must surround themselves with the best available team.”He said Hay Group identify four key problem areas. Planning the inheritance, the potential lack of skilled professional talent, financing and the increasing prices of raw materials. These issues have to be professionally addressed to avoid melt-down of family businesses. And he added: “There is also the issue of dividing the inheritance between family members which often results in conflicts and is not conducive to modern business needs.”What does one do when wealth is divided up among descendants. It sometimes causes a splitting up of the business rather like the medieval strip farming system which frequently undermines a company’s effectiveness. Professional, high quality ‘change management’ is therefore essential for market survival. Dr Schramm highlighted the example of Manner as a company that had successfully solved the problem.Albin Hahn is Manner’s CFO and supported Hay Group’s view. “I used to work for Unilever, a major multi-national PLC, and now I work for Dr. Manner. This means I work for a person not a conglomerate. On the face of it, Manner is facing real change but it is one we have prepared for.”Manner has managed to establish a company board with two members of families holding company shares and two members with experience from international companies. “The four members always have to find a solution taking into consideration the interest of the shareholders and the professionalism of the business. With this organisation and the listing at the Austrian stock exchange the owners have guaranteed that the company is acting in line with the Austrian Corporate Governance Codex and Compliance Guidelines. “It also  guarantees that business is managed according to the vision of the founder Josef Manner back in 1890. Manner’s ‘change management’ has allowed a sustainable business model to emerge using external support brought into the family business. It is a success story along the lines Hay Group is promoting. Dr Schramm added in conclusion that in the aftermath of the global financial crisis some trust has been lost and to prosper, organizations and especially Family Businesses must regain it – with their customers, investors and employees. It means that like the Californian governor who will continue to enjoy his favourite snacks, the Austrian company success story will also continue.

* For
those interested in learning more the Hay Group is offering a Trust Building Conference
in Vienna May 18-20, 2011 at Vienna Hilton Hotel