Smorgon offers a few home truths
David Smorgon travels the country talking to family businesses with a common weakness.
“A lot of people are very good at what they do in their business but they’re not spending enough time on their family issues,” says the businessman, who now works with PwC mentoring on wealth and succession issues.
“And then they wonder why their children aren’t interested in the business, aren’t capable of running the business or want to pursue other things.”
The founding chairman of Family Business Australia and a former president of the Western Bulldogs AFL club, Mr Smorgon says business owners who don’t talk to their children about money, wealth and succession put the businesses at risk.
He has first-hand experience of the pressures, unsuccessfully opposing the break-up of his family’s Smorgon Consolidated Industries 20 years ago.
One of Australia’s great immigrant success stories, SCI grew from a Melbourne butcher’s shop established by three Russian-born brothers in the 1930s into a $1.5 billion manufacturing empire straddling four generations of Smorgons.
In 1995, however, the seven family streams behind SCI voted to sell off the business.
“As much as everyone thought we had the right recipe over 65 years, a track record of business success and continuity and togetherness, in the end we failed for family reasons not business reasons,” says Mr Smorgon, who is now working in a near-full-time role as PwC’s executive chairman of family business and wealth.
With family businesses the bedrock of the economy, succession looms as a crucial issue over the next 20 years as $3.5 trillion passes from baby boomers to the next generation.
“We are dealing with clients that are into the third and fourth generations who are still having issues with their children or grandchildren understanding that wealth should be a benefit not a burden,” Mr Smorgon says.
He recommends honest and regular communication between family members via formal meetings chaired by an independent outsider. And there needs to be mutual recognition of expectations and aspirations.
“Assets aren’t just on your balance sheet, they are each and every member of your family. Not everyone is a brilliant business person, (but) they’ve all got something to offer.”
But still too many owners make the mistake of “hanging on too long”. “They destroy what they’ve created because they can’t let go, haven’t trained up their kids or don’t communicate with the family. So when they do pass, the kids are desperate to get their hands on the money and do their own thing, and that’s when money becomes a burden not a benefit.”
