Paspaley pearl farm off the North-West coast of Western Australia Reportspecial growing wealth
✈ 92 family business / three iconic australian dynasties ✈ 105 Private banking / key lenders dynasties for the big spenders set their Some of the world’s greatest family companies In those companies that thrive there is typically an intense passion started out at a kitchen table, in the garage, maybe even on the back and pride. Above all, there is sacrifice, not only by the founders, but of an envelope, and some now straddle the globe: Ford and Colgate, their families – willing or otherwise. “There is a deep sense of owner- Barclays Bank, Wal-Mart, Samsung and Aldi all began as family ship, because if the business fails, the family home is on the line,” course businesses. In Australia, family endeavour was the genesis for some says Peter Strong, executive director of the Council of Small Business of our best-known companies: Westfield, Foster’s, Arnott’s and most of Australia, which reaches some 500,000 association members. major retailers, including Coles and David Jones. The businesses “If the business does go under, often relationships – and health – go Managing a family business is rarely child’s play. don’t always stay in family hands, or even in Australia – and on aver- with it. There is so much angst because of the enormous pressure Three dynastic business heads talk candidly about age don’t succeed much beyond a generation. when things go wrong.” On the upside, you get to call the shots and Some heirs cultivate their inheritance. Rupert Murdoch built a that’s a major driver, he believes. the opportunities and challenges, the pressures media empire from one small newspaper, employing three of his That is obviously an attraction for many, if statistics from Family and pleasures of keeping it all in the family. children, to date. Meanwhile, the scion of another media dynasty, Business Australia are a guide – family businesses account for Warwick Fairfax Junior, did the reverse. He took over a huge busi- around 70 per cent of all Australian businesses, employing 50 per ness and blew it to bits, chiefly through bad advice, amateurism and cent of the workforce. But is being your own boss enough to balance very bad timing. Family businesses can also crumble due to lack of the downsides? Maybe not in the long term, according to research words deborah light interest or internal battles – the like of which we see today in the conducted in 2011 by KPMG, which found 60 per cent of business bitter conflict among Lang Hancock’s successors. owners would consider selling out if they were made an offer.
92 QANTAS july 2013 july 2013 QANTAS 93 The minority, just above 40 per cent, intended to hand it on to family So is it possible to handle the pressures, juggle the expectations profitably, but also to keep it in Australia.’” This sense of duty spreads Hat tricks: Stephen Keir IV (opposite page) and his family members. So make way for an avalanche. With the average age of a and stay sane and in the black? The heirs of three iconic Australian beyond his locale. “Australians have passion for our brand names. company’s Akubra hat factory in Kempsey, New South Wales family business owner 55 years (according to the KPMG report) and businesses talk about being bequeathed a corporate legacy. My father was passionate about the brand, as my sisters and I are. some 80 per cent planning to retire within 10 years, there’s going to You feel like custodians of one of the last iconic brand names in says, “It’s a big plus because they have quite a different perspective.” be a radical change in the landscape. Among many ramifications, it Australia. There’s a fair bit of pressure in that.” He’s laughing, but He also values the input of others he has met through Family Business means people such as Don Manifold will be busier over the next Stephen Keir IV admits he sometimes feels the strain. “A lot of Australian brands Australia. “I’ve talked to people in exactly the same position as me decade. Working in mergers and acquisitions for accounting firm Chairman Akubra have gone overseas [among them: Speedo, Vegemite, Foster’s and and you can offload about things such as the costs of doing business. Ernst & Young, he’s typically called in when owners have made the Arnott’s]. You hear people talk about Akubra and it hits you what I’m not on my own.” call to sell a business. “It’s a challenging and stressful time. The vast When Stephen Keir looks at his office wall, three former Stephen your responsibilities are. The name has been here for more than 100 Since their father’s death last year, Keir says of himself and his majority have faced the decision: ‘Do I hand it on to my children or Keirs look back at him. “Often I look to the left and think, ‘Oh man, years and there’s a lot of pride in it.” sisters, “We’re all just finding our feet. Dad had a pretty good succes- do I sell it?’ Do the kids want the business anyway? Often, the answer I’ve got a bit of responsibility here.’” He feels their gaze as he weighs In recent years, it’s been challenging. Like many other employers, sion plan in place and we’re adhering to his wants. We’re trying to get is no. They’d rather be having a glass of wine in Pitt Street [Sydney] decisions, not only for the iconic Akubra hat brand his predecessors Akubra is feeling the pain of doing business in a climate of rising that balance, making sure that everyone’s open and honest and we than [working] out at the family factory in Parramatta.” established more than a century ago, but for Kempsey, the country labour and power costs – but there’s another pressure peculiar to this all know what’s going on so we’re all on the same page – because once Either way, don’t delay. “You should be preparing for sale for two town on the NSW north coast where his company is a major employer endeavour: the cost of the chief raw material – rabbit skins – which you lose any trust, you’re struggling from then on.” Of course, there or three years beforehand,” Manifold advises, “driving earnings, with about 85 people on the payroll, turning out 160,000 hats a year has rocketed by 125 per cent in the past three years due chiefly to are occasional strains. “There wouldn’t be a family business out there A spradakis working on management structure, looking at the balance sheet and for $160 or so each. It’s also where Keir has seen firsthand what the calicivirus disease that has devastated the Australian rabbit that wouldn’t have moments when there’s tension because someone ianni
tax arrangements.” Likewise, if you choose to hand it over to the kids. happens when a brand decamps. “After King Gee was bought by [a Y population. The rabbits may be coming back, but the shooters never doesn’t agree with what someone else is doing. It’s good for you. I’ve “Those discussions should happen when the patriarch or matriarch US investor], within 12 months they were being made somewhere returned in sufficient numbers. Now Keir is forced to import the furs made mistakes in my time and you need someone to tell you you’re is in their early 50s rather than older, when there is less ability to else and 65 people were out of a job. You notice that in a small town. from such places as Kiev in the Ukraine. not always right.” Their father also ensured the Keir siblings didn’t communicate openly about the transition and who’s getting what.” Our employees have got mortgages and their own lives to lead. You On his board, along with himself and sisters Stacey and Nicola, are need to tap into the company’s coffers for funds by establishing an
But that’s not always easy, he says, “There can only be one CEO.” sit back and think, ‘OK, my job is to keep this company running photography: two longstanding independent directors, of whose contribution Keir investment fund two decades ago. “If we ever need money to build
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I took such pride in what my father had achieved. he put everything into that vision
a new factory, we’ve got the money [set] aside. That was the plan – to keep Akubra safe.” Asked if he ever felt the burden of destiny growing up, Keir remembers his father sitting down with him when he was 17. “I didn’t know what I wanted to do and he said there was no pressure to come into the business, but it’s there if you want.” Keir did an accounting course, played rugby union and stretched a gap year into two. “Then I went home and haven’t looked back. It’s been hard. I’ve been there 23 years, but I’ve spent 15 years on the factory floor.” He’s had a similar chat to his Marilynne Paspaley, a director of own son, another Stephen, who is 16 Paspaley Pearls; jewellery atelier workshop, Darwin (left) and – as he was – unsure what he wants to do. The elder of Keir’s two Nicholas Paspaley into the family pearling daughters shows “a fair bit of inter- business. They were girls, after all. But both did, est” and Keir has four nieces and joining their brother Nick, who went on to develop nephews who may choose to come the cultured South Sea pearl industry. Several of into the business, although, “It’s not this generation’s children now work in the busi- a huge company so there’s not, say, ness, which encompasses 20 pearl farms and 10 different management jobs. One associated industries including marine engineer- day it’s going to come down to who ing, air transport and a major property arm. has the best qualifications. They’re going to have to do the As much as she treasures the intimacy of that family bond, Paspaley hard yards, like every generation before them.” Keir has time admits it can be a liability. Asked about the drawbacks of joining a family to work on issues such as succession because he’s just 43. company, she says, “You don’t always get rid of the birth order. If you’re the What he’s not getting is sleep. “My father had a unique way youngest [she is], you’re still the youngest.” A successful actor, Paspaley was of coming home and letting work go. I wish I knew his trick persuaded by her siblings to establish a retail arm, beginning with a store because I toss and turn. I worry about it all the time.” in Broome. That’s when she realised pearling was in her blood. “It just came out. I was like a missionary. There was so little understanding of this extraor- dinary gem – people thought Japanese pearls were the best. I took such pride Marilynne Paspaley in what my father had achieved. He was really the initiator of the pearling Director Paspaley Pearls industry in Australia and he put everything into that vision.” Working towards that vision meant, “Everything went into the business You go into a family business for reasons other than the to keep it going.” It also meant no family holidays for five years. “Darwin was usual accomplishment or reward, according to Marilynne a hard place to live,” she says of her childhood. “There were no little niceties.” Paspaley. “There’s a desire to be connected and to do some- Life might be more comfortable today, but any family member who joins thing together,” she says. “Then when your children decide the business begins at the bottom. “All the children have to work on the ships, to come in there is a passing-on of knowledge and a pride in even the girls. My first son, Nick, spent seven years on the ships. All of them seeing their passion and desire to be a part of it. The bond do a minimum of one year to understand what the business is about, the and the purpose of doing it together are actually more impor- people who work with us and what their conditions are like; how it all works, tant than the achievement sometimes.” Like her older sister, from skippers to deckhands to the people in the grading room and jewellery
Ros, she was never expected to follow their Greek father workshop. [It is important] to understand how difficult it is to grow these portrait: george fetting
96 QANTAS july 2013 special report family business
Sandy Oatley with six-time Sydney-Hobart that’s how you learn. winner Wild Oats XI i was always wrong and he was always right. we agreed on that, so it was fine
pearls. The shells have to live in an environment as natural as it can possibly be, a pristine environment and that’s how you must preserve it.” Paspaley stepped down as executive director of retail in 2006, to move into hotels. “It’s an incredibly difficult thing to do in this country,” she says of such hurdles as high labour and construction costs, and the until-recently soaring Australian dollar. She has three upmarket hotels in the Kimberley under the banner of Pinctada Hotels & Resorts. Marilynne remains a director of Paspaley, with her siblings, and their board meetings are attended by other family members in the business. “It’s a better way to communicate what’s going on.” There are no independent directors. “We just haven’t felt the need.” Family tensions are settled informally. “We get together, generally in the boardroom, and talk it through until there’s a consensus. The family has the ability to overcome issues more easily without interference from any other party.” Among 800 employees, there are many non-family members, some at senior levels, and others who’ve worked there for decades. “Selection is really important,” she says of hiring outsiders. “They have to fit. With a family business, it’s never hands-off, you’re always going to have an opinion about what they’re doing, so they have to be strong. Often they bring skills you don’t have because they’ve had another career path.” Of those among the next generation who join the enterprise, Paspaley says, “It’s not something you’re obliged or expected to do. You must decide you want to be a part of it because that’s when it becomes the bond. If you want to be a part of it, you have to work for it.” Her son Nick is in the property side of the business, while second son, Chris, works in retail. The youngest, Milan, is a diver on the pearl farms when he’s on university leave. Now their cousins Clare and Christine are working on the next generation. “A number of my nieces are having babies. They’re doing very well at bringing up the next board, by the look of things.” Sandy Oatley Executive chairman Oatley businesses
One advantage of being a family company is not having to mollycoddle a mob of shareholders. “You can respond quickly to a market change or take an investment risk because of your intimate knowledge of the business,” says Sandy Oatley, executive chairman of the Oatley family interests, which e
di encompass tourism, wine, cattle, property and associated ventures. l
o On the downside, being sacked every other day by your father can’t have
w g been fun. “You just turned up the next day and got on with it,” he says of his re informal apprenticeship. “That’s how you learn. I was always wrong and he
t: andt: was always right. We agreed on that, so it was fine.” No other career; no ai tertiary education was considered for or by Sandy Oatley. “I was taught by rtr
po my father and I wouldn’t change it for anything,” he maintains.
july 2013 QANTAS 99 Family business special report
The enterprise his father, Robert, founded, which Sandy has helped hospitality outside the company before starting in Hamilton Island’s nurture and diversify, now employs some 1500, among them several reservations department. The board also gets a say here, and it of Robert’s grandchildren including Sandy’s younger daughter, includes two independent directors. “It has to approve these appoint- Nicky, who is now brand manager for Hamilton Island in the Whit- ments and can be quite critical of family members coming forward.” sundays, one of the Oatley family assets. (His elder daughter, Lyndal, Not that there’s been any grief because none of the upcoming is an Olympic-class equestrian, living in Germany.) Two nephews generation is yet old enough to cause it, Oatley says. are also in the business: James in graphic design and Robbie in The transformation of the family business began when Rosemount finance. Robert, at 85, is in the office four days a week, and Sandy Estate was sold in 2001 to Southcorp for $1.5b. Two years later, the welcomes that. “He’s a wise mentor.” Oatleys bought Hamilton Island, reportedly for more than $150m, The foundation of much of the family’s eventual wealth was a then spent some $350m bringing it up to scratch. They re-entered Hunter Valley vineyard that became Rosemount Estate. The teen- the wine business in 2006 under the Montrose, Robert Oatley and aged Sandy and his younger siblings Ian and Ros helped plant the Wild Oats labels – the latter named for Robert’s ocean-racing maxi, vines, burying cuttings from the boot of the family’s Kingswood six-time winner of the Sydney-Hobart. Meanwhile, the family has while their mother drove. “Dad always felt that doing things from established the largest commercial Charolais cattle herd in the the ground up was the way to learn about anything,” he recalls. Same country, selling chilled beef, largely to Japan. applies to the upcoming generation. “You can’t just walk in at the When there’s need for extra capital, “We try to self-fund it and we top; you’ve got to understand what makes the business tick. We like have a good relationship with our banks.” The GFC’s impact on share them to work through the ranks so that they earn respect. They grow market and property investment didn’t help. “It’s been fairly stressed up with their colleagues and learn from them.” His daughter Nicky, with the development of Hamilton Island because we reinvested for example, who “got the bug” like he had, trained and worked in a lot of money there. If we weren’t a family company, our vision Family business special report
The family figures for the island wouldn’t have succeeded; shareholders would have said no.” The second wine venture has also taken patience. “It’s a long haul, but the wine business F amily businesses account for about has been good to us in the past and will be in the future. Again, it’s a quality product 70 per cent of all Australian businesses that wins through.”
Average turnover: $12m per year 3 Oatley is an advocate of outside directors on family boards and outside expertise
Average number of employees: 372 2 in senior positions. “You need someone to ground you because young heads do get
E stimated wealth of the sector: $4.3 trillion 3 wild ideas. You need someone to pull on the reins, to make sure that all the boxes 81 per cent of owners intend to retire in the have been ticked – you can’t be an expert at everything. We have professionals run- next 10 years, generating a wealth transfer ning Hamilton Island, the wine business, the vineyards, the cattle and also, with our
of $3.5 trillion 3 investment portfolio, we use investment advisers.”
Average age of family business firm: 32yrs 2 For senior non-family employees, he concedes it can be tricky. “It probably makes
Average age of family business owner: 55yrs 2 it harder for some of them, knowing these kids are coming forward in the business
Average tenure of family business CEO: 17yrs 3 and might take their jobs.”
41 per cent intend to pass business to family members 1 At the age of 61, Sandy still has a long time yet at the helm, if his father’s track 61 per cent of owners would consider selling record is anything to go by. On possible successors, he wonders, “Who knows what
if approached 2 they will want to do in the future?” He admits to having qualms when his daughter
44 per cent of owners are planning to sell 1 Nicky joined the family business, paradoxically because she shows the same passion Sources: (1) KPMG & Family Business Australia Survey of Family for it that he has. “The worry is that it becomes all-consuming. You get obsessed, Businesses 2009 (in conjunction with Bond University) (2) MGI that’s one of the downfalls. When you go home you’re always thinking about it and Australian Family & Private Business Survey 2010 (with RMIT University) (3) MGI Family & Private Business Survey 2006 (with RMIT) how to make it better. The business does possess you.” c