Abstract
Burma Drinx Group (BDG), a large family-owned conglomerate in Myanmar, operates in several industries but has the largest presence in the soft drinks industry, led by its flagship company, Burma Drinx Company (BDC). The case explores the challenges and issues that BDC and BDG are experiencing as a family-owned conglomerate operating in a ‘non-friendly’ business environment, and a turbulent political and economic context. It focuses on an urgent topic, the corporate governance transformation of BDC and BDG. The reader is invited to understand the specificities of BDG’s internal environment and to manage the idiosyncrasies of this family business conglomerate related to its corporate governance system. BDC’s decision-makers face critical challenges for the future and have to completely rebuild the governance system. This current case follows a first case (Degravel & Tun, 2021) titled BDG(A) ‘Strategizing for Succession in a Family Business’, which described and reflected on the process of succession that BDG implemented to successfully replace the former CEO and founder of the company, Aung Win. The current case proposes a consulting-case style where analysis enables the provision of relevant solutions to the top management. Material from the academic literature about corporate governance and change management is offered as a resource. This case continues the story of BDG after its CEO succession.
Keywords
Introduction
After a calm day at work, newly appointed co-CEOs Thi Thi Win and Myo Win, accompanied by Vice CEO New Ni, were sipping some fresh drinks in the largest meeting room of Burma Drinx Company [BDC] headquarters in downtown Yangon, the commercial and financial capital of Myanmar. They were happy about their new positions, and so far, everything was unfolding smoothly. Their cooperation with former CEO Win was a success. This current case (B) is positioned around a year after the succession of former CEO and founder Aung Win by two co-CEOs, Thi Thi Win and Myo Win. The new executive committee includes these two co-CEOs, as well as Vice CEO New Ni, advisors Mynt Mg, Thuzar Mg and senior advisor Aung Win (founder of Burma Drinx Group [BDG]).
Appointing two co-CEOs to succeed Aung Win, as well as younger family members as advisors to the executive committee, was a gigantic leap and a tectonic change in a group characterized for so many decades by the omnipresent shadow of the founder. This appointment constituted an enormous step in the right direction and a signal for BDG stakeholders. However, more work needed to be accomplished toward the construction of a modern and efficient large-size family business. But now, the first item of concern is the corporate governance system. BDG’s current corporate governance system is antiquated and does not function properly. It does not allow the various stakeholders to participate in the management of the group because it was designed at a time when the group management was hyper-centralized around the then-CEO and founder, Aung Win. Therefore, the corporate governance system at BDG must be completely revisited. Two appendices introduced later present more information about the issue of corporate governance in Myanmar in general and at BDG in particular.
As the trio was evoking ideas about how they should construct such a new corporate governance system, they realized that they had to be clear about the rationale behind the change. What should a new corporate governance system accomplish that the current system could not? The question appeared to be more complicated than the trio expected. How should they implement the change and according to which rollout plan? They decided to pursue the discussion with their close advisors belonging to the Executive Committee, Aung Win (founder), Mynt Mg and Thuzar Mg.
The case study provides a space for reflection on the corporate governance system. Myanmar and BDG are first described. Then, the corporate governance change is addressed via information about the current state of governance at BDG and via valuable inputs from the literature on corporate governance and change management in family businesses. The case is based on interviews with BDG’s top managers (see the References section).
Myanmar: A Country in Economic and Political Transition
Myanmar (formerly Burma), a country of around 55 million people, is located in Southeast Asia. A coup in 1962 installed a revolutionary council that closed the country and led it toward a cultural, economic and cultural disaster, implementing the ‘Burmese Way to Socialism’. The National League for Democracy (NLD) won the November 2020 elections by a landslide, but this victory was tarnished by the controversy about ethnic cleansing and the disfranchising of ethnic minorities. Myanmar citizens are hoping for more promising business opportunities and improvement in policies and regulations (New York Times, 2020). After a couple of years of the NLD as the ruling party, it seems that economic progress has not taken place as expected, and that decision-making is even slower than before (Nikkei Asia, 2019).
Burma Drinx Group, A Family-owned Conglomerate
BDG operates in various industries, such as food and beverages, hospitality and consulting. Aung Win started a company in the beverage industry in Myanmar in the 1950s; his company has diversified over time, and currently includes several companies that de facto constitute the ‘BDG’.
The BDG conglomerate structure is described in Appendix 1.
As of the end of December 2020, BDG operated in the industries described below.
Soft drink industry
Press and publishing
Trade (international import and export)
Hospitality management
Food production and distribution
Consulting
This conglomerate structure, classic in economies in transition, emerged from an opportunistic allocation of resources based on the interest (even passion) of a family member in a specific industry. Each time an industry appeared to have potential or was appealing to the CEO, resources were devoted, without any due diligence and serious analysis.
BDG constitutes a group in the administrative sense of the word because the Win family owns 100% of the BDC, which itself owns 100% of the subsidiaries operating in the other industries (except for Burma D-Times). In practice, the group of subsidiaries is run like a holding, with control on financial results, a large autonomy and the quasi-absence of operational ties between the subsidiaries and between the subsidiaries and the flagship company, BDC. The BDC Executive Committee plays the role of the BDG Executive Committee. Most subsidiaries’ top executives, friends or relatives of the Win family, benefit from an ambiguous relationship with the family; they suffer from poor supervision. Synergies hardly exist between the subsidiaries and BDC. When Aung Win was the CEO, he managed the relationship with the subsidiaries in an opaque manner. The rumour is that Win had low expectations and always satisfied with the results because these subsidiary CEOs, appointed by him, were enjoying familial or friendship connections with Win. With the new co-CEOs, the situation had to change, but the top management team realized that modifying the structure of the subsidiaries’ top management constituted a large and sensitive undertaking. Consequently, they have not started to address this topic yet.
Burma Drinx Company: The Family Flagship Company in the Beverage Industry
Burma Drinx Company Overview
BDC operates in the soft drinks segment of the beverage industry and claims in 2020, an 8% market share of this segment. BDC, 100% owned by the Win family since its foundation, has created subsidiaries that are run by CEO Aung Win and Cho Oo’s relatives and friends.
The organizational chart of BDC is presented in Appendix 2.
Aung Win started the beverage business in Yangon, Myanmar, in the mid-1950s. BDC provided carbonated sodas and juices. BDC stayed number 1 in the segment until rival Myanmar Golden Star Company took over that position around 1998.
In 1997, the USA’s sanctions on Myanmar forced Pepsi to withdraw from the country. That was BDC’s lifetime opportunity to regain its former first spot. Unfortunately, this never happened since rival Myanmar Golden Star took over the production and replaced Pepsi’s brands with local brands, continuing to import the different concentrates and develop its activities.
BDC has also diversified, but the new businesses have always remained secondary to the main beverage business. Former CEO Win believes that the reason behind this stagnation lied in a ‘non-friendly business environment’ in Myanmar, associated with the lack of physical and business infrastructure necessary for firms’ development. For example, because the capital was not available; the government controlled such a large portion of the corporate world through rules and state-owned enterprises that private firms struggled to operate and thrive.
Aung Win’s oldest son, Tun Tun Win, admits that the playing field was not even. However, he acknowledged that BDC might have not done enough to develop connections with the relevant officials.
San Win, one of Aung Win’s grandsons, added that a lack of recognition and implementation of modern methods of management was also responsible for this stagnation. He also suggested that a generational effect could be at work in this lack of development.
Jerome Phillips, an analyst at the Beverage and Carbonated Drinks Observatory, a US-based think tank, and specialist of Myanmar, described his perception of BDC’s situation in a January 2019 report on the soft drink industry in Myanmar. He claims that several causes explain BDC stagnation: (a) a hyper-conservative style of management; (b) a lack of external orientation; (c) family conflicts; (d) a lack of managerial efficiency; (e) a lack of investment and internal renewal; and (f) a strongly centralized structure associated with an ‘apparent’ participative mode of management. However, BDC is number 2 in the industry, thanks to the dedication of its employees. According to Phillips, BDC missed major steps in development a long time ago. Talking privately to BDC’s CEO in Summer 2020 about the need for corporate governance, Phillips described some issues currently plaguing BDC. These issues are (a) the absence of a voice for the family members about the management of the group; (b) the absence of a real role for the Board of directors; and (c) the absence of an organized system of checks-and-balance that should enable debate and innovation.
Burma Drinx Company’s Internal Strategy
Why does BDC need to alter fundamentally its corporate governance system? The short answer is that BDC and BDG do not currently possess a corporate governance system, which is reduced to the BDC hierarchy and chain of command. Let us listen to a discussion between the members of the new executive committee about the reasons for changing BDG’s corporate governance. This executive committee, chaired by Thi Thi Win (TTW) and Myo Win (MW), includes New Ni (NN) (Vice CEO), Mynt Mg (MM), Thuzar Mg (TM) and Aung Win (AW) as advisors. This committee has been in place for a little less than a year.
MW (Myo Win): I am concerned by, hmm…, the rationale we are going to push forward to justify the development of such a new system. Why are we changing the corporate governance system? Is the current situation non-satisfying? Does this make sense when we have so much to do for the business itself and its operations? Are we not somehow wasting our time and resources here?
TTW (Thi Thi Win): We need to do it for several reasons. Let me put my thoughts together here, and come with a structured response… Well, first, we need to comply with the legal requirements of the regulators in this area. I confess that I am not an expert in these legal aspects and we will need to investigate them seriously. Second, we need to align our governance with the modern format shared by most of our rivals but also by most companies in other industries. That will show that we are embracing a modern era of management and strategy…, hmm, sorry Dad, I do not want to be mean here; we all appreciated the enormous work you have accomplished. Our companies exist thanks to you.
AW (Aung Win): No offense taken, Thi Thi. I know that you are right here.
TTW: Third, we need to balance the powers in our group because the family is going to expand dramatically with time. We do not feel it yet but that will come quickly. We need to have mechanisms to ensure that the family members involved in the group have a say and that all family members who are owners of the companies can exercise their legitimate rights of ownership. Fourth, inside the companies themselves, a clear mechanism for different levels of a decision must be created, to offer transparency, stability, the richness of the inputs and of the decision-making itself, as well as the approval of all the stakeholders. Currently, we do not know how decisions are made; decision-making is characterized by opacity and conflict inside BDG companies. We want to end this. Well you see, … that leads to my fifth point. I realize that conflicts and a lack of cooperation are plaguing BDC operations, and even more the development of our group. We need to kill these conflicts ‘early in the egg’, and to build mechanisms that enable the expression of resentment and claims, even if they are painful to hear and to heal. We have to push for stronger links and collective work in the organization. We are stuck in the past because we do not open ourselves to the external world, and the family works as a closed shell for the group: it fuels it but keeps anything from the outside to get in for enrichment.
TM (Thuzar Mg): Yes Grandpa, that is true, and we do not know how to manage conflicts, because we are somehow afraid of what you would think of us. We love and respect you so much…
AW: Yes, I understand that better now. I never realized how much resentment was caused by my centralized style of management, but also by the existence of jealousies among family members.
MM (Mynt Mg): We all believed that you knew about it, Grandpa…
AW: In fact, I had no ideas about it. But please, Thi Thi, pursue your explanation…
TTW: To conclude my comments on the rationale behind the governance change, I would like to add this, and I think that we will all agree on that. Why are we changing governance now, so close to the CEO succession? We believe that it is the right time to do it; we do not want to create new habits and routines in the old governance system (currently an empty shell). Let us benefit from the opportunity to use this massive change to pursue the effort in the direction of openness, clarity, and transparency, the richness of inputs, debate, decision and modernization of the entire group. Other major changes will follow but the critical point lies in the logic in the continuity of addressing the issues from the most general to the particular: the CEO succession was the most urgent. Then a new corporate governance system will offer a stable and clear base for a global change of structure.
The largest BDC divisions, Production and Sales represent almost 80% of the workforce. The second generation of the Win family is running these divisions, with few exceptions. Few non-family members are involved in BDC’s management. Rivalries exist inside the company.
BDC’s corporate governance system had never enabled concertation and discussion in decision-making because CEO Aung Win used to control very closely every aspect of the company. The replacement of CEO Win by a new top management team has not yet changed the degree of centralization for the lower levels of the organization: a Committee rather than a single individual makes decisions now, but this does not affect the lower levels of management. Managers (heads of divisions) are still running their divisions as fiefdoms; they avoid involving any external element in their division’s operations and decisions. They apply the principle of ‘good fences make good neighbours’. These managers often congregate for family events but never talk about work in these settings. Work and family remain completely separated. However, conflicts and rivalry exist, but, until recently, Aung Win had crushed these conflicts. No specific procedure exists to discuss business matters regularly, solve conflicts and make decisions in an efficient way among the different stakeholders. Divisions and departments do not communicate; some divisions look down at departments.
The new executive committee wants to change this situation and wants to foster discussion, debate (with) and participation of the members of the family and the owners of the group.
Several other issues constitute obstacles to the development of BDG; a new corporate governance system could likely solve these issues or at least part of them.
Disorganization and even mismanagement are plaguing BDC. When a top manager makes a decision, other top managers often disagree without justifying their opinion, triggering several inefficient meetings to try to solve the issue and to achieve a consensus still tainted by resentment. Decision-making requires a long time, delaying practical actions and instructions, disturbing the chain of command and confusing employees. Middle-level and low-level managers are de facto encouraged to behaving the same way, hiding information from the top and solving their conflicts internally. Very often, former CEO Aung Win was stepping up to reach a solution, even for minor issues, and was wasting his precious time there, whereas these managers should have dealt with the issue themselves in the first place. A collegial Executive Committee is now in place, and Aung Win’s role is neither as visible nor as central as before. This is likely to allow resentment and conflicts to emerge more, as an individual or as collective engagements in the perceived ‘battle for the throne’. Observers note a ‘wait-and-see’ attitude from the managers, learning the dynamics at the top.
Another critical issue is the significant gap between family members and nonmembers related to recruitment, pay, promotion and daily requirements. As reported by the Executive Committee members and some managers, judgement, evaluation and managerial treatment are skewed toward family members in these areas. These issues affect everyone’s morale because the legal and ethical components of the issue are in all minds. It is bad for the morale of everyone, and the ethical perception that BDC projects towards its environment. Managers are systematically more lenient with family members; this is not acceptable in a modern family business. Nepotism and cronyism are rampant practices inside the company. They create resentment, a lack of innovation, and a lack of motivation for everyone.
Structural problems are plaguing BDC’s development and its daily operations, such as the lack of communication, leading to a silos effect between divisions/departments and businesses; and the absence of exploitation of any synergies that should exist in a group of this size. The group is oriented inward and not outwards. The corporate centre contribution to the subsidiaries and BDC divisions is unknown. BDG does not possess mechanisms to leverage its synergies and to provide a space for debate and conflict resolution. This ultimately leads to disorganization and subpar efficiency. Many issues arise from BDC’s culture that is unfit for its current environment. BDC is too self-centred, lacks openness and appears to resist change.
Since founder Win’s succession during 2019, the nomination of an entirely new top management team has improved the transparency, the discussion and the consideration of multiple opinions and facts before decisions. It provides a well-accepted, more efficient, effective, more structured and future-oriented decision-making model. However, there is still progress to be made in all the hierarchical levels below this top level of management.
How can BDC engineer and implement this large corporate governance change? The conversation continues.
TTW: How can we now move forward to deal with the corporate governance issue? The fact is we do not have any system at all now, besides the classic hierarchy of the companies, and the current Board of directors. These mechanisms are not effective because they are rooted in a hyper-centralized system. The Board is a registration body and not a real analytical, support, and recommendation entity. Its members are used to just automatically approve Aung Win’s decisions. Where can we find guidance to do that?
MW: We have to build something from scratch. I believe that the challenge is not the corporate governance construction, but its family’s buy-in and support.
NN (New Ni): Yes, I think the same. However, I believe that the new generations will applaud the change because they know that evolving toward modern corporate governance is critical. I agree with the idea of a completely new system. We can find guidance in some management literature about corporate governance in family firms. We should also benchmark some similar companies in Yangon to see which governance they have and how they designed it.
MM: I do not know much about management since my field is chemistry. However, I think this is a great idea. Could not we ask our consulting experts to help us with this?
AW: I thought about it and I recognize that we have real capabilities in our Consulting division. However, I believe that we should hire an external consultant to help us because internal guidance via the Consulting division could be perceived as the dominance of one family branch, a lack of objectivity, and the risk of ‘insider knowledge’. What do you think?
TTW: Dad, you are probably right. We must make sure that we appear completely objective, and committed only to the interest of the family as a whole, and to the success of the business.
TM: Yes Grandpa, I agree with you too. I would perceive the involvement of our Consulting division as a breach of the principle of objectivity, even if we know that it would be perfectly capable of handling the project.
AW: I concur with your beliefs and I am ready to support you in the construction of the new corporate governance system. Well, the Executive Committee has the authority now and does not need to have my approval. However, as I said, I will support your actions because I know we are working for the benefit of our companies.
NN: Sorry to interrupt, but what about resistance from the family members about this change?
TTW: Yes New Ni, I thought about it. Resistance to change is a natural tendency among humans. We have to work to fight this tendency. The best remedy is explanation, justification, inspiration, and communication about the change. Myo, do you have other insights about our issues?
MW: Actually, I do. We also have several specific operational and managerial processes, which require significant improvements such as production, HRM, and administration, and strategic processes. This is only for BDC and I am sure that each subsidiary will bring its own set of issues as well.
TTW: We are all collectively responsible for it. We will manage these issues once the governance issue is stabilized. It relates more to the modalities of decision-making lower in the hierarchy.
MM: Talking about subsidiaries, how do we include them in the corporate governance change? You know we have to hold them accountable and be aware of how decisions are made there… How do we integrate them into the ‘corporate governance change package’?
MW: Yes, of course. The subsidiaries are also an area that we need to address. I believe that the best option is not to touch them for the moment, and to focus exclusively on the BDC, which represents by far the largest company of the group. We should address the subsidiaries when we change the corporate structure, which is our next big project after this governance project.
AW: Our national culture will likely play a role in this change and the acceptance of it.
NN: I have the feeling that we are going to be busy in the next years to come…
AW: Yes, and I am so glad that you are all here to manage this. You know, however quite recent, I am enjoying my life as retired CEO. And your grandma even more… Talking about grandma, I have to leave the meeting now because she is waiting for me for a walk. I cannot be late…
The discussion ends relatively quickly; before it ends, Thi Thi Win and Myo Win ask New Ni, Myint Mg and Thuzar Mg to provide them with some guidance. Three days later, the Vice-CEO and the two junior advisors meet again to discuss the matter. Here is an abstract of their conversation.
NN: From a skill standpoint, our team is strong in marketing and communication but weak in management and consulting.
MM: That is so true, New; for me it is obvious. We need consulting support. We should call on board someone who can guide us in the process of hiring consulting support.
TM: I completely agree. I have an idea. Why not ask Min Ko to help us? He is a consultant in management outside BDG. That could be the solution. Then he could guide us to establish a Request For Proposal (RFP).
NN: Great idea. Let us write this on our notes for our feedback to Thi Thi and Myo. Oh, I would also add, if you both agree, to contact Chan Aye Win, the Head of our internal Consulting Division, to explain why we do not use our Consulting Division that has the skills to do it.
MM: Yes, great thought. However, that does not help us with the content. We need more substance to be able to start.
NN: You are right Myint. You know, I have done some research after our first meeting. I found articles that describe how a corporate governance system could look like for a family business. I think they could be a great start, even for the RFP. They were written respectively by Gnan et al. (2015), by Botero et al. (2015), by Suess (2014), and Suess-Reyes (2017). In my view, the articles by Suess are particularly valuable. Please refer to Figure 1.
Their central idea is the existence of three poles that each represents a group of stakeholders that requires representation in the management of the company or group. These three poles are first, the Business pole that encompasses all the functions of an internal corporate governance system, with the board of directors, the CEOs, and the shareholders. Second, the Family pole, which represents the interests of the family as a whole, including of course the business but also interests exterior to the business (other investments, foundation, caritative activities, etc.). Third, the Ownership pole represents the owners of the business, currently mostly the family but that will naturally change with the extension of the family. These three Poles work together as a system of checks and balances with rules for the management of the business.
MM: That seems interesting, but I do not understand one thing. Since our family owns completely BDG, the three Poles are now identical and composed of the same people. Why bother with establishing these three Poles then?
NN: Because they have different functions, and will be with time progressively composed of different people. They will be already different right at the start: the Executive Committee is exclusively composed of family members now, but that might change. The Board will have nonfamily members, as will some committees. The Family Pole and the Pole Ownership will share the same family members; however, the Pole family includes all family members and deal with all family matters, business, and nonbusiness. The Pole Ownership includes all the owners of the business, be they family members or not. This Pole Ownership represents the interest of the owners of the business, and not the family’s interests. The overlapping of membership between the Poles will decrease with time, as the family and the number of shareholders grow, as outside directors will join the Board, and as non-family investors join the group of owners.
MM: Oh yes, that makes sense now. I did not think about that. So the three Poles take care of the interests of all stakeholders?
NN: Yes. Additionally, the authors of these articles provide some content for the three Poles. So we can adjust their recommendations according to our needs and our capacity of absorption. Look, I drew a small diagram about this. Here it is… It is just a synthesis… You have to go back to the original articles for more detail.
MM: Oh New, that is great. You have something solid here, that we can use as the basis of our work. I am impressed. Thank you for doing that.
TM: I agree, this is superb, thanks New. I can add something to complement New’s work. We should probably identify some contexts or situations of decisions, and unfold how the components of the corporate governance system would function for these decisions. I have identified some of these instances. Let me show you my slide. Sorry, New, it is handwritten, not as polished as your contribution New but here it is…. Please refer to Figures 2 and 3.
TM: I also thought about a consultant to help us do this. Do you remember LDZ Consulting? We already worked with them on an unrelated topic but, if I recall correctly, this consultancy had a generalist profile with strong experience and expertise in strategy and Organizational Development. LDZ Consulting had also a solid legal capability background.
NN: I am with you on that. Great suggestion. I suggest we first converse with Min Ko to have him on board, at least for the RFP. I would suggest asking our Consulting Division to help in the implementation stage of the project in collaboration with LDZ Consulting (if Thi Thi and Myo approve this choice). We have to follow the purchasing procedure and the RFP.
MM: Well I think we have advanced the matter substantially. Thank you for all of this. Now, let’s share all of this with Myo and Thi Thi.
A year ago, then CEO Aung Win asked a dear and trusted friend of his (Mark Sho-Hun) to understand the family situation more in depth. Mark conducted extensive interviews with the senior members of the family. He had discussions with almost all the members of the family, through formal interviews or informal discussions in various settings, such as family reunions or events outside the family. Mark has been a close friend to Aung and Cho Cho for four decades and has seen most of the family members being born and becoming adults.
The reader can refer to Appendix 3 to understand the complexity of the family situation and to Appendix 4 for information about the members of the Executive Committee present in the dialogues.
The situation in Myanmar regarding corporate governance is presented in Appendix 5 which develops the institutional view, corporate governance in practice, and the legal requirements for Burmese companies. In Appendix 6 three examples of companies in Myanmar are presented and compared with BDC’s situation. The scope of these comparisons is only BDC. The situation of the subsidiaries is not studied in the case because the top management team decided to address the issue in BDC first, which already represents a significant task.
Appendix 7 offers guidance to the reader to navigate the case.
Way Forward
Various challenges, such as organization issues, family disputes, decision-making processes and strategic questions, have strained BDG’s development. The new leadership team is well aware of these difficulties; it has established a plan of action to tackle all these challenges.
Despite this plan, these challenges are keeping the two senior members of the Executive Committee up at night. They are concerned about the acceptance of the family members of a new corporate governance system, and by the actual quality of functioning after the new system is implemented. However, they are comforted by the energy and brainpower of the new generations that are now on board to manage the company.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Appendix 5
Appendix 6
Appendix 7
Elements of Literature on Corporate Governance and Change Management
Corporate Governance
Corporate governance is defined as the relationships between parties with a stake in the firm and is concerned about how the influence of these relationships on strategic corporate decision-making is shaped by institutions (Dinh & Calabro, 2019). Corporate governance includes both individuals and collective mechanisms in charge of directing and controlling an organization (Gnan et al., 2015).
Dinh and Calabro (
) state three fundamental problems related to the corporate governance in inherited family businesses: (a) the absence of heirs’ business acumen, (b) the absence or weakness of career prospects for non-family members and (c) the disqualification of family members because of their upbringings.
Family businesses governance is a complex and delicate matter because it attempts to reconcile three related poles of the phenomenon: (a) the family, (b) the business and (c) the business owner. The success of a family business has been shown to depend on the quality of the intersections between these three poles. An excellent governance system acknowledges the existence of all three poles and achieves a balance between these three poles in tension (Suess, 2014). Issues such as succession or equity control constitute critical points that could be addressed through these 3-pole mechanisms (Brenes et al., 2011).
The second pole, Family, can include mechanisms and tools such as a Family Council and a Family Constitution. The family pole manages the life of the family in general which includes the family business but also topics other than the business.
The third pole, Ownership, would entail a Business Council, composed of family members active in the business, which manages the ownership of the family in the company (Brenes et al., 2011). The quality of the relationship between the family and the business affects the firm performance and even its survival, as well as its leadership effectiveness. The Ownership pole possesses a dedicated mechanism of representation and management (Fahed-Sreih, 2009).
Critical events or situations where corporate governance plays a central role can be identified: (a) Appointment of a new CEO; (b) Appointment of a Board member (members’ time is limited and therefore every year some Board positions are up for renewal); (c) Evaluation and compensation of top management, of the CEO and the Board members; and (d) Strategic decisions.
Change Management
Change is difficult to master and is present in all aspects of the business universe. Many changes fail but some principles and tools are available in the literature to help organizations be successful in changes they want to implement. We recommend the reader study the material that follows to design his/her recommendations for the change process. We provide two models for this guidance.
The first model is well-known. J. Kotter’s 8-step change management model, created in 1996 (with 6 steps) and revised in 2014 with eight steps, is described in .
Jeff Hiatt created the second model called ADKAR that focusses on the individuals impacted or involved in the change. The ADKAR model focuses on the people behind the change (champions), but also on the people involved and impacted by the change. It does not propose a set of steps, but a list of five goals that should be achieved to limit resistance and maximize the likelihood of change buy-in. It is based on the premise that change ultimately occurs at the level of the individual who must go through the five steps sequentially and in order.
The implementation of these two models may lead to the existence of overlapping material, and the implementation at BDG must take this into account. The ADKAR model recognizes the other side of the coin, the business component of a change, and states five steps of change management, namely (a) identify a business need for change; (b) define the change project; (c) design the change in its different components; (d) develop the new components; and (e) implement the change in the organization.