- Managing Me
- Big Ideas
- Managing People
Family companies love to appoint insiders to key positions, and the Pratt family company, Visy Industries, is no different.
Visy’s chief operating officer, Chris Daly, has retired after three years in the job, according to a report in The Australian, and John Wheeler will take over his job. Visy, which makes packaging, is the third-biggest private company in Australia, with an estimated $3.9 billion revenue in 2011-12, and 9600 employees, according to research company, IBISWorld.
The company says Daly is leaving of his own accord, for “family reasons”.
Wheeler has a long history with the Pratt family and is described in the newspaper report as a confidante of the late Richard Pratt, who founded Visy, and died in 2009. The company is now run by his son, Anthony, who is executive chairman, and owned by Anthony and his two sisters, Eloise Waislitz and Fiona Geminder.
Wheeler first worked for the Pratt family business in the 1990s. He then created a joint venture with Visy after buying a stake in another packaging company, Glamapak. After 10 years, Visy bought Wheeler’s 50% stake and he was back in the fold.
Why companies love insiders
Family companies love insiders because they understand the “DNA” of the corporate culture, says the CEO of Family Business Australia (FBA), Philippa Taylor. “Some of our members document the history of their company, and that forms a key element of induction training. They see it as crucially important. If you ask family businesses about their culture, they say, ‘it is the way we do things around here’.”
But this can also be a risk of insider appointments. Outsiders can represent a challenge to decades of family thinking. Insider appointments may become “cronies”, appointed to maintain the status quo. Especially those who are close to the family can give the appearance of bringing in change without the risk of it really happening. Not that this will be a case with Visy, necessarily.
In the two years that followed the company scandal relating to charges of cartel pricing, Visy did put an outsider – John Murphy – in charge. He was there for two years.
Betwixt and between – in a good way
Anthony Pratt’s move to appoint Wheeler is in some ways typical of a new generation of leadership keen to stamp the family business with their own style of leadership and strategy.
The fact that Wheeler was outside the company for a decade in the joint venture gives him some advantages: as an inside-outsider.
Wheeler is intimate with the skills and insights of Richard Pratt, a tough, skilled leader. But his decade-long distancing means he is not part of the “inner circle” of advisors that many next-generation leaders see as proxies of the old guard.
Says FBA’s Taylor. “We often find, from our research, that when a transition takes place, the senior advisors are the first to go. The next generation is champing at the bit to put their own imprimatur on the business. If they keep on the financial advisor, for example, it is like having Dad around.”
Richard Pratt’s succession plan for his businesses was very well thought out. Three children of his children ended up as leaders of parts of the family business empire – a characteristic of many family businesses – but Pratt appointed them five years before his death in 2009 at age 74, to make sure they were up to the job.
When outsiders are appointed to run family businesses, jobs for the family’s children is a common source of friction. Outsiders, being independent, will question the skills, experience and ability of family members to hold leadership roles, and may refuse them.
When the board is still controlled by the family, all hell can break loose. There is no simple solution. When the family chooses to employ its own, they risk more than the potential for incompetence: talent tends to flee companies in which leaders are appointed for who they are and not what they can do.
However, family boards that have the courage to appoint an independent leader face the risk of testing familial relationships. Intense conflict is not unusual.
A chip off the old block
So, if Wheeler is a chip off the old block, what are some of Richard Pratt’s qualities that he could restore to the company?
Pratt senior was renowned as: