Business Question

1/24September 1972- Generation 1
Arnold got into the honey business by accident. Hard-working and resourceful, he left school at a
young age to care for his parents, now deceased. He worked odd jobs in a rural town in Canada
supporting his wife, Victoria, and their three young children, Gayle, Liam, and Benoit.
One day Arnold was asked to clean out a beehive at his employer’s farmhouse. While he was
removing the hive, he saw the honeycomb with honey and wondered if there was a market for it. His
boss wasn’t interested in the honey, so Arnold asked if he could sell it on his own. Victoria helped him
pack it into small jars and designed a label for them.
Arnold sold the honey to a local store, which very quickly sold the jars to customers. When the store
owner asked for more honey, Arnold went back to his boss and asked if he could have a small parcel
of land in his employer’s farm to keep the hives. His employer encouraged him, and in return Arnold
assured him a lifetime supply of honey.
Continue
Current Page 1/24
2/24
May 1976- Generation 1
Arnold increased the number of hives to 200, and his little operation became a booming business. He
began to put hives in other properties around the area, starting with his neighbors, who were happy
to have bees pollinating their gardens. Once he made the rounds of his neighbors, he began to go
further afield. He knew many of the larger houses in the countryside were second homes of wealthy
families who only came to visit during holiday times or occasional weekends. They, too, were happy
to have Arnold maintain his bee boxes on their properties.
Growing at this rate became very time-consuming. Arnold soon left his odd jobs work and
concentrated solely on his honey business. He realized that he had limited knowledge, so he went to
other beekeepers to learn the business. Victoria stepped in to handle the honey production and
packing, first in the family kitchen and then in a small, closed factory when the business outgrew their
home.
Arnold: I need to focus on the business and make it grow, it is my only priority right now. There will
be time to enjoy life and luxuries later. I need to do this for my family and kids.
Victoria: We hardly see you as it is! But this business could soon support a full staff, and you could
have more time with your family in the future. Even still, your children hardly know you; try to strike
a balance.
Select One:
•
•
Arnold focuses time and money on the business
Arnold spends quality time with his family while maintaining business responsibilities
Continue
Current Page 2/24
3/24
March 1980 Generation 1
A typical day for Arnold was to gather honey from different hives all day long before returning to the
factory.
The company was running very efficiently, but Arnold was in the midst of everything. Every decision
needed his approval. He managed the retailers and the distributors. He signed every check. He knew
all the employees and customers, and most customers preferred to speak to him directly. Arnold was
happy to speak to them at any time and was also known to travel great distances just to meet them
should they have a problem.
But his work was taking a toll, and Victoria expressed her concerns.
Victoria: Arnold, we are so proud of all you have accomplished. I am worried, however, that you are
not taking proper care of yourself. You are working such long hours, you should be sleeping in
comfort. You should upgrade your plane tickets and hotels so you can be refreshed.
Arnold: I’m fine, I sleep well when I get home.
Continue
Current Page 3/24
4/24
May 1983 Generation 2
All of Arnold’s children grew up watching him work hard at the honey farm and feel a deep
connection to the family business. While at university, Gayle met Mathieu and they fell in love. At the
wedding, the family gave Mathieu two drops of honey from Andre to welcome him into the family and
symbolically bring him in as part of the company as well. This soon became a tradition at all family
weddings.
Arnold and Victoria were touched by the idea of their children and future in-laws caring about Andre
after all their hard work. They dreamed that one day they would give each of their grandchildren two
drops of honey on their first birthday to welcome them into the honey farm tradition.
Continue
Current Page 4/24
5/24
January 1989 Generation 2
After graduating from university, Gayle, the eldest of Arnold and Victoria’s children, began to take an
interest in the philanthropic activities of the company. It was important to Arnold and Victoria that
Andre give back to the communities it operated in. They earmarked 5% of their annual profits toward
charitable giving, which was becoming a significant amount.
Liam, now 23 years old, graduated with a masters degree in business administration. Arnold was
happy to have Liam join the company, and soon Liam was helping in every aspect of the business. He
had been an average student, but proved to be a hard worker and was eager to please his father.
Benoit, the youngest, had grown up during a time when the business was more successful than it had
been during his siblings’ early childhoods. He was not very enthusiastic about education, but Liam
persuaded his father to insist that Benoit get a professional degree before joining the family business.
Benoit reluctantly agreed and enrolled in an engineering program.
Continue
Current Page 5/24
6/24
January 1997 Generation 2
In 1993, Benoit married Charlotte, a woman he met during a foreign trip. He insisted that it was love
at first sight. Charlotte, by her behavior, managed to convince all the other family members that she
was not the right person for Benoit, but Benoit was adamant and refused to listen. Arnold and
Victoria were against the marriage, but Benoit went ahead with the wedding.
Fights broke out after the wedding, and only two years later they got divorced. They had not signed a
pre-nup, and Charlotte claimed half of Benoit’s share of the business.
Benoit was depressed about his failed marriage and upset that he no longer held as much ownership
of Andre. Eventually, he met Maude and fell in love again. They got married in 1997.
Continue
Current Page 6/24
7/24
November 1997 Generation 2
Arnold began to rely on Liam to run the business more and more. Under Arnold’s guidance, Liam
had proven himself a careful businessman, and Arnold began to take a back seat.
Andre was on track to become a leading player within the honey industry in Canada. There were
offices in several major cities within the country, and much of Liam’s time was spent traveling
between locations.
Benoit, having finished his education, wanted to work in business development. He enjoyed the
international travel that was taking too much of his brother’s time, as well as the nomadic lifestyle
that came from living out of a suitcase.
At this point, the philanthropic activities managed by Gayle were more work than one person with a
young family could manage, so she began to build a sizable department of her own.
Arnold considered all three of his children as equal, and therefore paid them all equally. Workrelated expenses (such as travel and accommodations) were covered by drawing funds from the
company.
Continue
Current Page 7/24
8/24
May 2003 Generation 2
Liam has now been running the company most of the time and has earned Arnold’s respect and
confidence on business matters. Still, Arnold has reservations about formally handing control of
Andre to Liam. Tension is starting to rise, as Liam has ideas about new markets within honey
confectionery, but Arnold is not eager to change from their core business of pure honey. Liam’s
frustration is increasing, and he threatened to quit the company if he is not given independent charge.
But can Arnold bear to let go?
Arnold: I’ve become used to the respect and prestige that comes with creating a successful business
from the ground up. Plus I love Andre; I just don’t think I’m ready to be put on the sidelines. And
there is so much at stake! If Liam makes a mistake and the business fails, what will happen to the
family?
Victoria: We are not as young as we once were, and we should consider how best to enjoy our
twilight years after all of this hard work.
Liam: I have been running the business under your guidance, and have been happy doing so. But you
need to let go or I will quit!
Arnold asked Jean, a long time family friend, for advice.
Jean: How long will you continue? The business needs fresh blood to continue growing, and you
need to let go. Your son has been working long enough to understand what the business needs. You
should hand over the reins and take a step back.
Select One:
•
•
Continue to oversee business operations
Let go of the company
Continue
Current Page 8/24
9/24
November 2003 Generation 2
With his new-found executive power, Liam launches formal research into the plausability of offering
different product lines within the category of honey-flavored and honey-infused foods. After receiving
a positive response, he launches several new products.
Gayle and Benoit are proud of their brother, and glad to see him implement new product launches
and operational efficiencies which prove beneficial to the business’s bottom line.
Continue
Current Page 9/24
10/24
August 2012 Generation 2
Liam instills a more participative management as the CEO, where the siblings discuss issues and, in
the case of disagreements, defer to Liam.
Liam has spent significant time consolidating the business after Arnold’s passing, and now faces the
issues of professionalizing. Gayle and Benoit have been running their branches of Andre for quite
some time, and the business has become so large that outside expertise could be a good option.
Talented high-level managers could help run the company and handle the operations that are
overwhelming the three siblings.
Liam: The family business is my responsibility, my legacy. How can I trust someone else to run this
properly? What if they ruin it all? I am not sure what good they will do, but can I take the risk? I
don’t want to be the person who ruined the family business. And will I be allowed to contribute to the
business if the professionals take over? My external advisors are saying that professionals have run
other companies successfully, and these companies have grown and achieved great heights. What
should I do?
Beth: What? You are not capable? Professionals will probably take the company underground.
Outsiders cannot be better than family members. If you think you are not able to handle the company,
then hand it over to your brother or nephew!
Jean: Every person has limits to their capabilities. The business has grown to a level far beyond your
capabilities, which is a good thing, and now it could be run better by professional management. You
need to have processes and systems in place so that the business runs independently of you: this is
what professionals can do.
Benoit: (Calling from Paris) I can take over and handle this better than any professional can! As long
as it doesn’t prevent me from traveling, of course.
Gayle: Would they replace the need for family members? Having more help would alleviate some
stress, but I still want to be involved in the company.
Select One:
•
•
Hire professionals
Keep all major roles in the family
Continue
Current Page 10/24
11/24
April 2013 Generation 2
Gayle, Liam, and Benoit work together to find a chief operating officer (COO), who hires three
outside professionals to manage the finances, operations, and marketing, respectively. The new COO
comes from a large organic foods company and quickly demonstrates a thorough understanding of
Andre’s retail business.
Liam: I think that, although many of you expressed doubts, we needed to take this step. We need to
have good people to rely on in order to grow.
Victoria: I was afraid of this. You have taken the first step toward the destruction of the family
legacy. These professionals will drive the company into the ground. They will never have the same
level of commitment as family members!
Aline: I wonder if we really need all these people, which only add to our costs and would reduce our
profits. Why not give additional responsibility to those who are already here?
Benoit: (Calling from Las Vegas) Yeah, you could have asked me to run the business! Anyway, the
trade fair here in Las Vegas was tough; I’m late for my flight to a conference in Honolulu, you guys
figure it out.
Continue
Current Page 11/24
12/24
December 2016 Generation 2
Until now, the company’s board of directors has been a fairly informal gathering of family members
meeting on an ad-hoc basis. Gayle questions the wisdom of this practice, as her professional work
with nonprofits exposes her to a variety of governing boards.
Gayle: External people can enrich our board discussions by offering different points of view.
Sometimes you need that, especially in cases where groups may think alike.
Benoit: (Calling from Honolulu) I think we should give preference to family members; after all, who
knows our business better than us? Our mother died distressed that you brought in outsiders, Liam.
Do you want to dishonor her memory by bringing in even more? I’ll call you when I land in Rome;
you can brief me on what happened.
Liam: Having independent directors has been recommended by a lot of people. Does this makes
sense for our company? We are now a market leader. How would an external person help? What
would they know about our business? Can we trust a stranger with the confidentiality of our trade
secrets?
Select One:
•
•
Build a mixed board
Retain a family-only board
Continue
Current Page 12/24
13/24
January 2018 Generation 2
Liam: I think it is a right move. I hope that we get an alternate point of view which can serve as an
independent sounding board to vet our decisions.
Benoit: Well, we have professionals in management positions already, what are a few more outsiders
telling us what to do? I don’t know why this is needed, but I will go along with your decision.
Gayle: I think you’re being paranoid; this is a great step toward creating a big company that will
really last long after we’re gone!
Jean: It is a wise choice, but I only hope that you choose a person who can be effective and more
importantly, you listen to them!
Continue
Current Page 13/24
14/24
June 2019 Generation 2
Andre has been growing steadily, and some of the younger managers believe that internal funds are
not enough to cover their growth. Someone suggests that the company should turn to external
investors for their funding requirements. The company has a good track record and the fundamentals
are excellent, so attracting good external investors would not be a challenge. Outside funds would
help Andre grow faster, and external investors could also bring in additional expertise.
Liam: I wonder if we need external funds? They would allow us to grow much faster and not be
dependent on our internal business funds. On the other hand, it might mean that we will be subject to
the wishes of those who have invested in our company. But if we want to take the company to the
next level we will need a large cash investment.
Gayle: Why do you want to grow so fast? We have enough to take care of the family needs and
growing bigger would probably mean letting go of control or sharing control with others. Do we
really need to do this?
Independent Board Member: Why not consider external funds, especially when you are growing so
fast? And you said so yourself, the internal funds are not enough.
Select One:
•
•
Continue to self-fund
Acquire external funds
Continue
Current Page 14/24
15/24
August 2019 Generation 2
Liam: We need more money in order to grow, and at the rate we are growing our internal funds are
just not enough. If we are going to take on the international giants, we will need to go public. This is
the first step in that direction.
Benoit: Well, I guess we are beholden to even more people. I hope the cash is put to good use now.
Gayle: This feels like you have sold our company. I still am unsure why we need to grow so quickly.
Continue
Current Page 15/24
16/24
October 2020 Generation 2
So far, Andre has diversified from pure honey only as far as honey-based confectionery, candies,
syrups, and other treats. The COO shares ideas about branching into new products, such as personal
and household products.
Liam: Should we diversify? The business is doing quite well, and diversifying would mean that we
are diverting our profits into another field that we may not be best at.
Beth: This would mean lower dividends for all, would the rest of the family agree with that?
Henry: Diversification is a good strategy as it would help to avoid a situation where all our eggs are
in the same basket. What if something happens to the honey business?
Benoit: (Calling from Beijing) I am not too happy with funds being invested in risky activities when
they could be distributed directly to us.
Select One:
•
•
Focus on and enhance current product lines
Launch R&D effort into personal products
Continue
Current Page 16/24
17/24
July 2021 Generation 2
Liam: I don’t want to move away from pure honey. This business runs in our veins, and it’s the only
business we know.
Gayle: Our dad would be happy that we are staying true to his legacy.
Benoit: I’m happy with this decision, although if we had diversified I was looking forward to
traveling even more than I already do to handle new divisions.
Continue
Current Page 17/24
18/24
January 2024 Generation 2
Now that he is 60 years old, Liam is thinking about stepping down as CEO. He had always hoped his
daughters Aline and Katharine would take over the family business’ leadership after him. His
youngest daughter, Celia, has a bee allergy and always avoided the business because of it.
Liam prepared Aline and Katharine their whole lives (sent them to the best schools, offered them jobs
he hoped they would enjoy within Andre); sadly, neither of them thrived. Aline conflicted with most of
her direct reports, and Katharine lacked ambition and failed to advance through the ranks.
More broadly, Liam wonders if the business would continue to grow under the third generation. More
family members could mean more disagreement and conflict. Who should lead? Would everyone else
be able to follow?
Liam: I wonder what I should do? If I keep qualifications as a criteria then the business will have
capable people running it, but that means some family members wouldn’t progress in the company.
Some family members could get very upset since this would prevent some of them from joining the
business. Is the business a right for the family members to join, regardless of their qualifications?
After all, if they were not family members, would I hire them? And what should I do about my
daughters? I had always imagined Aline and Katharine taking my place when I retired, but most of
the family considers them unfit for leadership. I have dedicated my entire professional life to Andre, I
don’t want to make the wrong decision.
Beth: What difference do the qualifications make? Our children are our children. They are part of the
family! It is their right to join the family business, regardless of their education or experience. Why
should there be any conditions for them to join?
Gayle: A business should be run by competent, capable people, even if they aren’t family. That is the
only way a business can be successful. Look at how well we’ve done since hiring an outside COO and
bringing in other board members.
Aline: The business is for the benefit of our family, so it is our right to use it for the benefit of our
family.
Katharine: The family business supports our lifestyle. Our holidays, our houses, our cars, all of these
come from the business. Our family has put so much sacrifice and hard work into the company, so it
is only natural that the family should benefit from it. I have the right to join and work in the business,
because I am part of the family. And family members should get more, since they are adding value to
the business.
Select One:
Announce Aline as the new CEO
Open a formal CEO search
Continue
Current Page 18/24
19/24
June 2024 Generation 2
Now that Simone is the CEO, Aline and Katharine withdraw from operational roles within the
company but remain on the board.
Liam: I need to ensure that the business runs with capable people at the helm. We cannot have it
otherwise. I know that family members will be a little upset, but I will face it. I needed to make the
right choice for the business in the long run, no matter the consequences now.
Beth: I can’t believe it! You have passed over your own daughter and trusted a complete stranger to
take care of our family’s heritage? I am furious!
Henry: I’m surprised you went this route, Uncle; but if you have found the right outside candidate for
the job, then I know she will be someone I can work with and learn from.
Continue
Current Page 19/24
20/24
May 2028 Generation 3
After discussing with the board and some outside advisors, Simone proposes that the best thing for
Andre in the long term would be to create governance processes. Setting up governance includes
creating rules for employment, compensation, and qualifications for the current and present
leadership. The need for governance is felt as the family is becoming a lot bigger, and the business
more complex.
Olivier: I really don’t understand the purpose of governance process. Though the advisors and other
families are insisting that this process helped them grow, I still cannot figure out why would anyone
willingly put constraints on what they can or cannot do.
Gayle: But if the others are saying it works then there must be some wisdom in this.
Family Business Advisor: A governance process is essential if you have to grow. It is not a
restriction; rather, it puts the rules in place. The rules can be defined by the family, but this is the best
way to ensure that there is accountability and responsibility for managing the business in the best
manner possible. It regulates the relationship between the family and the business.
Katharine: Why do we have to restrict the powers? Why should we want to change when things are
going fine?
Select One:
Minor shareholders do not set up governance
Minor shareholders set up governance
Continue
Current Page 20/24
21/24
June 2028 Generation 3
Gayle: This will help the company move forward. I’m glad we listened to Simone’s suggestion.
Henry: This was absolutely the right choice for our business. Having standard processes in place will
reduce the confusion that is currently spread throughout the company.
Olivier: I suppose anything that gives us a say in the outcomes is acceptable.
Katharine: I still don’t like this idea at all, but at least this move will ensure that we get some benefits
from our shareholdings.
Continue
Current Page 21/24
22/24
January 2029 Generation 3
Andre has been growing steadily using bank loans for growth. However, there are competitors
growing faster, and the company has lagged behind. One path to faster growth would be to initiate an
IPO (initial public offering) to raise funds. Some family and board members feel that an IPO would
help raise the profile of the company, attract more talent, and enhance the company image in the
public eye. Listing Andre would also provide the possibility for liquidity, should any family member
want to sell their shares.
However, management feels that even faster growth could mean compromising on product quality, so
they prefer not to take that risk. Additionally, the company would be under constant public gaze and
subject to increased compliance and regulations. The family would have to consider that their
freedom to operate would be drastically reduced as they would now have to consider the views of the
public shareholders.
Aline: I don’t like this idea at all! How can we trust the public to make good decisions? Professionals
and external board members make sense, but not random people who might not know anything about
our business.
Henry: Our competitors have grown tremendously and we need funds to compete with them. Plus,
some of our investors are considering leaving. We are faced with no alternative: we need to go public.
Olivier: I think that you have conspired to sell our family jewels to the public and extinguish
whatever we have left of our family assets, Henry !
Family Business Advisor: It looks to me like your growth will stall if you don’t file for an IPO.
Select One:
No IPO
IPO
Continue
Current Page 22/24
23/24
February 2029 Generation 3
Henry: We have no choice but to issue an IPO. The pressure from some family members has
prevented us from doing so right now, and I hope it doesn’t affect us too badly.
Aline: We shouldn’t sell Andre. We don’t want to subject our company to quarterly performance
reviews and have some external people question how we are running our business. We have always
been family controlled and owned, and will continue to be so.
Family Business Advisor: Your growth will be severely affected by this choice, and you could lose
the possibility to raise additional funds. Then again, this is a family decision.
Olivier: I think it is a good move. We need to back our products with quality and trust, which our
customers and other stakeholders have in us. It is okay if we grow slowly or profit less, our values
should come first.
Continue
Current Page 23/24
24/24
Epilogue Generation 3
It has been over 50 years since Arnold started Andre, and the fourth generation is taking over the
family board seats. Market analysists believe growth will slow down because many people prefer
artificial sweeteners to honey. Even though they aren’t expanding the way they used to, the cousins
on the board do not want to diversify; they are concerned that moving away from honey could disrupt
the growth they do have and they aren’t willing to take that performance risk. The family’s lifestyles
are totally dependent on the company performance, which is certainly a factor in the cousins’
hesitation to move away from something they know.
You’ve reached the end of the simulation. Review your results below:
Andre eventually grows to become one of the top three honey producers in Canada; however, it finds
itself unable to expand. Several offers came in to purchase Andre, including one from French
cosmetics company La Ruche, but the remaining family among the leadership cling to independence.
All of Arnold’s descendants continue the tradition of giving two drops of honey to each new baby on
their first birthday.
Family
Your family relationship is Medium
Family members would prefer a little more say in running the business.
Ownership
Your ownership value is Medium
Most of the shareholders have stayed with the company.
25/24
1970 1 Event
1972 The beekeeping business is incorporated under the name Andre.
1975 1 Event
1978 Super-focused management and reinvestment of revenue back into the business pay off; in two
years, the income grows by a factor of 10.
1980 1 Event
1983 Gayle marries Mathieu.
1985 4 Events
1985 Gayle and Mathieu have a son, Henry.
1986 Liam marries Beth.
1987 Liam and Beth have a daughter, Aline.
1989 Liam and Beth have a second daughter, Katharine.
1990 2 Events
1993 Benoit marries Charlotte.
1994 Liam and Beth have another daughter, Celia.
1995 4 Events
1995 Benoit and Charlotte divorce.
1996 Andre is now a household name across Canada.
1997 Benoit marries Maude.
1998 Benoit and Maude have a son, Olivier.
2000 2 Events
2003 Arnold gives executive control of Andre to Liam.
2004 Benoit and Maude have a daughter, Belinda.
2005 3 Events
2007 Henry gets married.
2008 Henry’s wife gives birth to a daughter, Talia.
2009 Due to the subprime mortgage crisis in the United States, the world slumps into a recession.
Your revenue falls, and some competitors fail.
2010 4 Events
2010 Arnold dies.
2011 Aline gets married.
2012 Liam, Gayle, and Benoit launch a formal hiring and onboarding process for successful outside
job applicants.
2014 Aline gives birth to a son, David.
26/24
2015 3 Events
2015 Victoria dies.
2018 Andre invites qualified professionals from all over Canada to take positions on the board of
directors.
2019 Liam found several investors eager to help Andre grow and invited them to join the board.
2020 3 Events
2020 Bees worldwide have been dying and scientists agree the use of pesticides is partially to blame.
Unfortunately, the loss of bees has affected Andre and production costs have increased.
2021 Andre continues to focus on its core business.
2024 Andre announces an opening for CEO, available to both internal and external candidates. Soon
Simone, a former COO for a multinational agriculture business, joins the company.
2025 5 Events
2025 Liam dies only a year after retiring.
2027 Cheaper honey from neighboring countries is flooding the market, depressing profits.
2027 Charlotte dies.
2028 The shareholders of Andre agree to formalize governance processes.
2029 Andre does not issue an IPO.