“Hope is not a strategy”, that’s the message from Adele Dennis, one of the family members behind the Dennis Family Corporation.
The Dennis Family Corporation develops residential communities in Victoria and south-east Queensland and currently constructs approximately 1000 homes a year in Victoria and New South Wales.
Dennis outlined how Dennis Family Homes has dealt with the issue of succession at yesterday’s launch of the report Succession Reset: Family Business Succession in the 21st Century.
While Dennis Family Corporation was founded by Dennis’ father, Bert Dennis, in 1960 it wasn’t until 1992 that Dennis says her siblings really began to think about the future and “what if” scenarios.
“At that point we knew we were going to become stewards and custodians in our business rather than just traders,” she says.
“We wanted to keep [the business] together and leave it in better shape for the upcoming third generation than we had found it as our father was passing it on to us.”
One of the first hurdles was to acknowledge that the Dennis family was now really five individual families as each of the Dennis children has their own family.
“My father thinks we are just one big family, we kind of are but we are also five different families,” Dennis says.
“As you introduce more and more in-laws, some people call them out-laws, you get different ideas and different upbringings and different expectations and all those things need to be managed.”
The Dennis family also knew that a lot of the business’ intellectual property and history was all in Bert Dennis’ head.
“The family really needed to understand and to be able to work out a plan for how to unlock that knowledge and IP to be able to withstand the ‘run over by a bus’ scenario happens,” he says.
Here are Dennis’ tips for creating a succession plan:
1. Start by scenario planning
“If I was asked to give advice to a family contemplating a succession journey I would say you need to start by doing some scenario planning and go from there,” Dennis says.
“The key decision to make is are you going to be stewards and custodians of the business or are you going to sell the business?”
If you are going to sell the business the path is fairly straight forward but keeping the business involves creating a succession plan.
2. Map family roles
“We had a consultant map each of our family member’s roles as they were at that time and we reset our family roles removing the day to day operational roles from family members,” Dennis says.
“We currently have no family members in senior management roles we are all in strategic roles, we are all at board level.”
3. Work out market rates
The Dennis family then engaged consultants to benchmark the new roles against industry.
“We began paying market rates, that was a pleasant revelation,” she says.
4. Separate ownership from management
The Dennis family separated ownership from management of the company and held strategy days, one for family members, and one for the business.
5. Flatten your structures
Dennis says the Dennis Family Corporation had always operated as a pyramid structure where “nothing happened unless Dad made a decision at the top”.
The new flattened structure encourages employees to make decisions and removes the bottle neck.
“We were paralysed by indecision as there was so much work going on that not any one person could possibly be across it,” Dennis says.
6. Understand the next generation
The Dennis family engaged consultants to map the education and career aspirations of the next generation.
The family now has a “very clear idea” of who likely candidates will be for board positions.
“We don’t want family members sitting on the board just by default because they can’t get a job anywhere else, because for sure the business will fail if that happens,” Dennis says.
7. Consider setting up a family office
The Dennis family has created a family office, which Dennis heads, which looks after all the matters pertaining to the family and shareholders that are not relevant to the business.
“We started the family office because we recognised we did not want all of our future and wealth tied up in one enterprise,” Dennis says.
“We needed to better manage the risk and strategy going forward.”
8. Don’t stop
Dennis says succession is an ongoing process.
“Succession for our family has been a long journey and one that will never be over,” she says.
Dennis says a result of the succession planning has been increased deal flow and investment opportunities.
“Basically what we have done is to de-risk our business and our future by managing all of the risks as closely as we can.”