If Succession is anything to go by, family businesses have the potential to implode, as personal loyalties conflict with ambition. However, if leaders can implement strong governance, they can combine the best of both worlds, with family members striving to preserve the company’s values and instill resilience, while more neutral third parties provide guidance and fresh thinking.
Today, Dachser is a global leader in intelligent logistics, with 379 locations worldwide and over 30,000 employees, a far cry from its beginnings as a one-man company founded by Thomas Dachser in 1930. Dachser didn’t stay a one-man outfit for long. Thomas met his wife, Anna, when he subleased office space from her wholesale animal feed business, and soon the two were running Dachser together, at the same time as raising two daughters who would both go on to be involved in the company.
Dachser has now been a successful family business for four generations, and has received awards for green technology and sustainable urban logistics, as well as the 2019 IMD Global Family Business Award. Dachser has held tightly to its identity as a family company, allowing it to uphold its values through turbulent periods. But how will Dachser’s family structure stand up to the challenges of the future?
The success of a family company depends upon there being an engaged group of family members, and cultivating and channeling this engagement requires care.
An initial step is simplifying the rules for who can and cannot hold shares. The Dachser family decided that shares could only be held by direct descendants of Thomas and Anna Dachser (or family foundations and trusts represented by such descendants), excluding in-laws. Shares could be passed on to the next generation at any time. However, there was a high threshold for admitting any shareholder who did not fulfill these criteria: for the business to accept such a shareholder, they needed to be approved by family shareholders with a 75% majority vote. As a result, there are fewer than 20 family shareholders, ensuring it is a closeknit group with strong loyalties to the business and to one another.
The business added further rules to govern shareholder behavior and promote family unity. (Family members were already bound by the company’s constitution to seek the widest possible distribution of shares among themselves.)
According to former Dachser CEO Bernhard Simon, “The power of the company comes from the family, because it is the family that is emotionally bonded to the company.” Cultivating this emotional bond is essential, as is ensuring that family members can make informed decisions. Family shareholders are actively encouraged to get involved with the day-to-day running of the firm, with many young members taking on internships or writing academic theses on aspects of the company’s operations.
This importance placed on each individual family member is reflected in the share structure. While, in the past, the family had considered advice to put shares into a trust, they decided to retain a direct shareholding model, encouraging family members to take more personal involvement.
But personal involvement all too often comes hand in hand with personal conflict. With this in mind, the business set up a family office, intending to help establish a culture of togetherness and cohesion. The family office deals with governance in the spirit of compromise, aiming to avoid conflict and prevent shareholders from thinking as separate family branches, but rather as one unit, with the best interests of the business at heart.
But having an engaged group of family shareholders with a strong emotional connection to the company can be a double-edged sword and the implementation of rules governing the family’s rights and roles in the business has not always been smooth. Christa Rohde-Dachser, daughter of the founder, installed the first advisory board and first non-family spokesperson of the executive board. A key aspect of this reform was ensuring that all executives had the same rights; as a consequence, power started to drift away from family members towards the boards, where non-family directors outnumbered family.
Bernhard Simon, grandson of the founder, became CEO in 2005. He oversaw further rule changes, while ignoring calls to reserve more votes for family executives and again choosing to ensure that all executives had equal voting rights. He also created a rule of equal pay for equal responsibilities, seeking to avoid a situation where a family CEO could consolidate family support by doling out favors and thereby hoard power. The number of family members on the supervisory board was limited to two, and non-family directors had to outnumber family directors.
This board was given exclusive power to appoint and dismiss executives, sending a clear message that power was consolidated in the hands of non-family directors. Among the other rules limiting the power of family members was the rule that only one could have a long-term career at the company at any given time (although family members continued to be encouraged to intern with the firm).
“The power of the company comes from the family, because it is the family that is emotionally bonded to the company.”— Former Dachser CEO Bernhard Simon
A family member could rise to become CEO or chairman, but two family members could not hold these positions concurrently. Additionally, family members would be judged on the principle of “up or out,” meaning that family members who weren’t performing well would have to leave the business. There were also age limits on board membership: 60 for the executive board and 72 for the supervisory board, ensuring there were no family (or non-family) members outstaying their welcome into their dotage.
These measures ensured that the family’s emotional connection to the business did not lead to infighting or power grabs, meaning that the business could benefit from the positive aspects of family involvement, without fearing escalation of the negative aspects.
Nevertheless, strong governance can come undone should conflict arise around succession, a topic which is especially thorny for family businesses.
The introduction of a compulsory retirement age for board members allowed the company to plan for smooth succession far in advance. Ex-CEO Bernhard Simon began the process of finding his successor 12 years before he retired, for example. This involved an internal workshop, where participants established that the next CEO should be an internal candidate, who had already earned the trust of the company and of the family. Over the following few years, Simon continued the search for his successor, finally settling on Burkhard Eling, a candidate for a finance position, three years later.
Simon’s foresight transformed what could have been a tense, against-the-clock scramble for a suitable successor into a strategic opportunity that could be examined from all angles. Finding the delicate balance of family and non-family board members meant that the succession process became an opportunity to redefine the corporate structure and make the business future-ready, including ensuring a ready supply of in-house expertise in digitalization.
Family businesses walk a tightrope when it comes to governance. Others can look to Dachser’s example to see how to strike the perfect balance.
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