Succession Planning

Steinberg's, a Montreal grocery chain appears to be the picture of success. 

Focusing on customers

One key to the success of his business was the focus on customers.  The company performed extensive Marketing research on customers’ needs, population trends and suppliers to device ways to serve the customers.  For example, in one case, they took a whole year to measure the impact of a suppliers’ new line.  They tested different approaches including top shelf, aisle display, middle shelf, first-in-traffic flow among others. These were done in practical laboratories under close watch and experimentations. The focus on customers allowed Steinberg to direct different business activities towards meeting customers’ needs while building business relationships over time.

Differentiation

Among other achievements, the chain established self-service and grocery carts in Canada which enabled it to offer products and services at relatively lower prices compared to most full-service competitors. At that time, self-service as a new mode of grocery retailing was taking hold. He implemented the concept by opening a self-service store in Montreal in 1934.

Expansion and diversification

Steinberg opened new stores constantly, invested millions of dollars and developed new markets and new opportunities. For example, Steinberg’s expanded outside the grocery business in 1962. He also opened a chain of the drive-in as the business diversified towards fast food business.  The company also opened a chain of the gas station and pharmacies in 1965 and 1969 respectively.   In another case, the company purchased Cartier Refined Sugars in 1968 in a move towards vertical integration.

Why, out of all of the immigrants in Montreal, was Sam able to create this enterprise?

Sam was a unique retailing talent. He had a thirst for information, deep-seated interest in serving customers and insatiable curiosity. From his youth, he was an excellent and an engaging leader.  Though he would have preferred school, Sam was only 13 when he started making major decisions at his mother's store. He was not the oldest but had real managerial aptitude compared to his brothers.  Accordingly, it was Sam who grew the business by making the decision to the business’s floor space and continuing the cycle of growth, low prices through customer service and volume purchasing.  His entrepreneurial spirit enabled him to see a market opportunity in the early years of the Depression when other chains were closing stores. 

What does "success" mean to Sam Steinberg?

Success to Steinberg meant the ability to fulfill needs.

Family's role in the success of Steinberg's

Apparently, Steinberg's primary motivation was to create a means of support for his large family: a sister, four brothers, his mother, and assorted uncles, aunts, cousins, nephews, nieces and later, sons-in-law and grandchildren.  He worked towards meeting the needs of his family. This pressure led to expansion now that there was a huge load in terms of the family to support.  Family members also acted as employees in various chains.

Are there any negatives to the family nature of the enterprise?

Family Conflict

 Conflict is bound to happen in family-run enterprises. In their long histories, family nature of businesses experiences the kind of contempt that comes with familiarity. Long-lasting and Deep-seated bitter fights and quarrels can affect the operation of these kinds of businesses drawing divisive lines. Given that family members are involved, solving the conflict become more difficult and can result in difficult endings.

Unstructured Governance

Another problem that faces family run enterprises is a range of governance issues such as internal rules and hierarchies and rules. The ability to adhere and follow external corporate laws is taken less seriously in family businesses. Unfortunately, this can be gravely detrimental as the levels of trust inherent at family businesses are high. 

Succession Planning

Many family run businesses lack succession planning mainly because leader do not want to seem impartial in choosing the successor of the business when it is necessary.  However, it is of utmost importance that family businesses have a strong succession plan as close relationships, and long histories lead to wrangles. (Gome, 2000)

Many family businesses are unable to succeed in the transition to a new generation of ownership. Was the transition from Ida to Sam successful? What made it so?

The transition from Ida to Sam was successful. The success can be attributed to various factors. First, other members of the family were not much interested in running the business.  Secondly, Ida was certain that Sam was the most appropriate successor and, therefore, involved him early in her business before allowing him to take over. Ida, therefore, had planned for the succession in advance.

What are the family's values, and how do they impact the business?

Family values are the cores of who the members are and tend to be the result of not only what the families passes along to us but also the principles for which the family members stand for.  Such values are learned through experiencing in dealing with situations as well as watching the actions of others dealing with the effects of their decisions.  The values help maintain the business as family ownership group move out of the business. The enterprise is expected to grow to provide for future generations. Due to this, it is critical that family members view themselves as caretakers of the business with a focus on risk mitigation and long-term value maximization. Thus, the concept of value creation is important in family-run enterprises.  In a family business, it is about building continuity in the business to ensure value is preserved to maintain the long-term source of income and the family’s legacy. Family values affect the business as there can be a tendency to lose sight if there are value-eroding activities that can threaten the prosperity of the business. Values ensure that family members are aligned with the long-term vision and can react accordingly. (Gome, 2000)

Now that Steinberg's is a public company, is it still a family business?

Yes. The unique ownership structure gives the family a long-term orientation and influence just as the previous Enterprise. It is still a family business as 52% of the shares were held by Sam and other trusts he controlled.  Sam also maintained a vote of 100% of the stock which made him the decision maker. Thus the immediate family holds 52% while the rest of the family held the remainder of the voting stock. This means that the company still retains the powerful role like any other family-controlled enterprises despite the incorporation. 

Why does the overlap between the business and family seem relatively minor and benign?

A family business involves the interaction between two separate but connected systems:  the family and the business. The two systems have different rules as well as uncertain boundaries. The overlap between business and Family seems minor as it involves various combinations of family members in various business roles, including parents and children, members of immediate and extended family as well as multiple generations playing the roles of working partners, stockholders, and employees. (Lindhe, 2010)

What should Sam have done to prepare better the company and the family for the challenges they now face?

The greatest legacy of an effective leader is to have great people that can effectively take over when he is gone. Therefore, it is important to prepare for it.  For family closely held businesses, succession planning is one of the most critical steps.  However, succession planning offers a great opportunity to create a multi-generational enterprise that embodies the founder’s values and mission long after he is gone. It also ensures that it maximizes opportunities for the survival of the business. Sam should have to establish a business succession plan as a necessity to avoid the challenges facing the family-owned businesses. Often, the business stands to lose when the leader steps down with no plan is in place.

What issues does the succession question raise?

The succession issue raises several succession questions such as the family variables that need to be considered. The family dynamic is often more challenging as it becomes difficult to determine which family member can appropriately step into the main leadership role. On the other hand, there is often a large cost where there is no adequate planning. Businesses lack the convenience of having an executive prepared and ready to step in to fill top leadership roles. The qualities to choose from may also bring about complexities as several candidates may be competent to fill in the role.  The Leader must have forethought and self-awareness and when it comes to the longevity of the business. (Nelton, 1997)

Who should Sam select as a successor?

Mel seems most appropriate to be considered the successor of the business. 

What do you think Sam's goals/criteria are in this process?

Sam’s criteria in selecting the successor should be based on two factors.  One, the most appropriate successor is one who is interested in running the business and demonstrates a passion for the business.  The second criterion is the successor’s skills that are relevant to the continuity of the business. 

What should Sam's goals be?

Sam’s goal should be to ensure the successful running of the enterprise even after he is no longer in the business.  A suitable successor should be able to continue without the initial owner as they typically have a diversity of management and ownership rather than goodwill linked to one person.

Should the outside directors play a role in the selection? What should that role be?

It is important for outside directors to play a role in the selection process. The business directors have an active role as the family business can benefit from independent directors' expertise. It is imperative to complement the family’s knowledge a strategic perspectives of qualified directors even when a family holds the equity in the business.

If he picks Mel, how should he explain/rationalize this choice to the non-family executives?

He can rationalize the choice on the basis of experience. Mel has served as the vice president of the stores operation, executive vice president of retailing and as a director of the corporation. He was also a qualified accountant making him suitable for the position. He worked with the business since 1950.

Predictions for the company in the next two decades

Family businesses seek steady long-term performance and growth to avoid risking the family’s wealth and control of the firm. The approach shields them from pursuing maximum short-term performance at the expense of long-term business health, for example, Samsung and Wal-Mart. Moderate risk taking and longer-term planning horizon make a family business successful. The company is likely to have grown in the next two decades.

Texts Cited

Nelton, Sharon. "Family-Owned, Professionally Managed." Nation's Business 85.8 (1997): 43.

Lindhe, Jane. "Keep It In The Family." Brw 32.44 (2010): 42-43.

Gome, Amanda. "Taking The Family Out Of Family Businesses." Brw 22.30 (2000)

Lindhe, Jane. "Family Businesses Lack Structure." Brw 29.34 (2007): 17.

Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in College Essay Writing Service if you need a similar paper you can place your order from cheap essay help online.