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EMG 464 Family Business

Family Business Case Study

Group MI6 Gojko Dakovic, Violeta Cuba, Abdellah Benzidane, Marthe Oeller 28th April 2013 Word count: 5,229

Table of Content

INTRODUCTION HISTORY THE CLINICS CULTURE THE FAMILY AND THE CLINIC THE SUCCESSION THEORY TO THE CASE A POSSIBLE SUCCESSION SCENARIO QUESTIONS TO TAKE INTO CONSIDERATION REFERENCES APPENDIX

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Introduction
Die Fachpraxis fr Proktologie Bremen is a clinic specialized in proctology. The clinic is located in Bremen, Germany, and was founded in 1991. In 2013 the clinic employs 3 physicians and 5 medical assistants.

History
In November 1991 Dr. med. Andreas Oeller bought a proctology clinic in Bremen. The clinic was originally founded more than 25 years ago by then. Andreas Oeller bought the clinic, which means that he bought the file of all clients his predecessor collected over time. The building in which the clinic was located was rented. In order to take the clinic over, he took a loan from a bank. This loan was a 12-year plan loan, which indicates that he paid his debt from 1991 to 2003.

Quite at the start when he took over the clinic in 1991, he employed another doctor part-time. This was done, because the clinic provided enough space for another treatment room. Due to this he ensured that the capacity of the building was filled and the revenue was at a satisfying level for him. Moreover he hired four medical assistants, whereas one of those worked parttime. Himself and the other doctor offered 35 different treatments by that time. This number increased with time. He also bought the licence of Gesellschaft fr Proktologie GmbH when he first started the clinic. Due to this licence he was able to sell medical devices and medicines.

His wife was not involved in his business by this juncture, as well as his two daughters and neither his son were involved.

In 2001 he moved his clinic to another location, but remained located in the same city. The new clinic building was bigger and herewith made an expansion of employees and treatments possible. The new location provided a better infrastructure and came with a very modern outline. The improved link to transport paved the way for more patients and therefore an increase in revenue. Moreover the modern interior and design broadened the reach of the clinic. From this day not only his expertise and his good reputation attracted a lot of patients, 3

but also the up to date technology and appearance of the surgery. On the basis that the clinic provided a bigger space now, he employed an additional doctor and another medical assistant. The increased employee number indicated also an expansion of treatments. He introduced 7 new treatments over the next 2 years. One of the new treatments were the outpatient surgeries. This kind of treatment required the presence of an anaesthesiologist. The anaesthesiologist is working on a freelance basis, so she was not very involved in other activities of the clinic. In order to purchase new equipment for the new treatments and the clinic interior, he took another bank loan. The first bank loan was due in 2003 and the second loan is due in 2013. So by this year the clinic is without debt.

The Clinics Culture


Andreas Oeller founded the clinic and always kept an eye on a constant level of employees. In order to do this he tried to avoid a high rate of staff turnover. Also the clinic benefited from a good reputation. Nowadays his clinic is well known in a geographical radius by approximately 200 km. The clinic is well known for its high privacy standard and excellent medical treatments. Patients, who moved abroad, are returning to get their treatment at this clinic. This is also a reason to keep the employee turnover rate low, since the patients set also a great importance to the clinics staff. The surgery is the biggest clinic in Bremen, and with the decision to relocate to the modern clinic space; it is also the most innovative clinic in this radius.

The Family and the Clinic


Andreas founded the clinic, it is expected that his eldest son Sebastian is taking it over in the future. He started to study medicine in 2006, with the intention to take the business over one time. He always showed interest in this field and currently he is completing his training in a hospital, which will take him 6 years from now. He is expected to join the business in 2020. Before that it is planned that he will receive training over time to be fully prepared by 2020. The training requires that Sebastian is assisting Andreas once a week.

The wife of Andreas was not involved in the business until 2001. In 2001 she took over some small roles in the business, such as check on the employees performances, retaining patientclinic relationships, and the decoration.

His daughter Marthe is not expected to join the family business yet. Since she is not educational qualified to buy the clinic, she is only able to take over management roles. So far the clinic does not require a lot of administrative work, on this basis Marthe does not see herself working in this business. This can change if the clinic would expand and invest in more than one clinic location. Currently Marthe is doing ad hoc task, which depends on her availability. Those tasks include: monitoring emails, improving the web page, creating and implementing marketing activities and translating documents, if needed.

The second daughter Friederike is still attending high school and did herewith not yet decide if she wants to join the family business. She is starting to study medical-technological assistant in 2014, this will give her time for her decision since with this education she still has the opportunity to join the clinic.

The Succession
The succession of the clinic from Andreas to Sebastian is planned to happen in 2020. Sebastian is expected to finish his study by then and will be fully available to take over Andreas position. Andreas expects Sebastian to expand the clinic. This includes implementation of new treatments such as the procedure of gastroscopy. Also he is expected to uphold the sales in the future. Furthermore Sebastian should continue to always be informed about innovations in the field of proctology and if it is possible to implement those at the surgery. Another very important issue for Andreas is that he is expected to take over the staff. By the time Sebastian will take over the business; one doctor will also retire. This is requires a solution, which should be found. Either cooperation with a nearby hospital should be build or another doctor has to be found in time.

The expectations of Sebastian are mostly coherent to the above mentioned. Whereas he states that he still wants to have Andreas available after the year 2020. This is only meant for special

occasions or specific questions, but it differs from the view of Andreas. In order to purchase the clinic he needs to take on a bank loan. On the basis of the above-mentioned expectations, there is the possibility of a conflict between the father and the son. It can be that Andreas is planning to retire fully by 2020, but Sebastian is planning to have the opportunity that Andreas will be available on an occasionally basis. This can cause a problem not only in the business but also in the family.

Theory to the Case


Most of the issues and conflicts of family business firms are centred in the succession phase of the company. To solve occurring problems and settle conflicts the succession topic in family businesses received rising attention in the last years. When looking for solutions the arbitrator should always include the Three Circle Model of Family Business (Appendix 1) in his mind-set. This model explains that the family business not only consists of the family, but also combines the family with the issue of ownership and the business. The arbitrator has to take all three groups into considerations in order to arrange solutions, which satisfies each group. Furthermore to come to a conclusion, communication and decision-making are crucial for family firms. Effective and open communication between family and non-family members in the business can enhance and also rapid the detection of a solution. Additionally the communication can also lead to a faster and more profound decision-making and this can result to a successful succession. Potential errors in family firms are often a high level of secrecy. When hiding too much information from shareholders or even non-family members this can lead to a shift in harmony. Moreover bribery in family firms is also an important issue, which should be prevented. For example a family member is been hired without sufficient skills, this will increase the employees satisfaction level and also affect the harmony of the firm. In addition to this the current leadership of a family business is also an essential factor. There are two types of leadership: the transformational and the transactional type. The transformational type is characterised by building trust and respect, promoting creativity, supporting and encouraging employees and communicating in a clear manner (Seefeld, 2012). A transactional leader is typically described as very rewarding, not following the norm and tries to find different ways, avoiding making decisions and very libertarian. Those two types have different advantages and disadvantages when leading a business, but considering a succession it is easier to hand over the business to the same leadership type than to a different

type. This can be explained by a similar mind set and same goals the leaders are sharing for the business.

A Possible Succession Scenario


In 2014 Sebastian will be in his second year as junior doctor. This year will also be the start of his involvement in the clinic. He will be working one day per week with Andreas. This process will be last for six years. These six years will help Sebastian to get confident in managing the clinic and also treating the patients like Andreas used to do. Additionally due to this procedure, the patients who are treated by Andreas will get to know Sebastian and his methods. This should prevent a mass leave of the patients to other clinics in Bremen. Also the 6-year period of training will help Sebastian to let go Andreas leadership of the clinic. As above-mentioned Andreas wants to retire by 2020, but Sebastian wants his availability occasionally at this point in time. The training period will train Sebastian to manage the clinic without the help of Andreas and will reduce the need of Andreas availability to a minimum. This training phase will buffer the possible conflict and a successful succession is more likely to happen. Concerning to the succession and the leadership types, both key players are transformational leaders. Due to the similarity in leadership types the succession will be smoother than other successions. The majority of expectations are similar and herewith conflicts are not very likely to appear. Moreover Three Circle Model of Family Business is relatively easy to apply to this case. Since just one family member is taking over the business and he will be the one and only stakeholder of the business. This results in the business and the ownership aim the same goals for the firm. There is only the possibility of interventions from other family members. This possible involvement of the family can lead to conflicts. At the other hand as mentioned above as long as the clinic remains the same size and is not expanding Sebastian will remain the one and only stakeholder of the firm. I do not plan to expand the clinic, because the German healthcare regulations do not make it profitable for me to employ more people and neither to build a second clinic in the future. (Sebastian, 2013) This quote describes the feelings of Sebastian concerning a possible expansion of the clinic in the future. Besides expanding the clinic, he has to build a relationship with a hospital to replace the second doctor in the clinic who is retiring in 2020. This project will be more important to retain the business than to expand it. The relationship with a cooperating hospital, which is doing surgeries, will be build while he is employed as an assistant doctor in a hospital in Bremen. While he is working in the hospital he might be able to recruit a suitable 7

candidate from the hospital for the clinic, but this will happen by chance since the specialized doctors of proctology are very rare. If he is not finding a doctor for outpatient surgeries, he will use his relationship to the hospital to provide the cooperation with the clinic. Also mentioned above are the possible errors in family business, which can happen. Bribery is not very likely to occur in a clinic since the profession requires a medical education, which has to be proofed by a certificate. However a high level of secrecy can be an issue for this succession. It is highly advisable that Andreas is introducing Sebastian to the staff as his successor and he should also involve the staff in all changes the succession will entail like the implementation of gastroscopy. If Andreas will keep the level of secrecy low, fewer conflicts will occur in between of family and non-family members of the business. By taking all expectations and facts into consideration this succession has a high possibility to go smooth and without many conflicts. Due to the relatively long taking over and letting go phase the potential of conflicts during the succession decreases.

Questions to take into consideration


How do the expectations of the father and son differ when it comes to the succession?

How can the succession be implemented with regards to minimize potential conflicts?

How can the problem of management, ownership and family be solved in the future?

Is it advisable to expand the clinic in the future for the son?

Should the son change something concerning the staff and the structure?

References
Cabrera-Su rez et. al. (2001) The Succession Process from a Resource- and KnowledgeBased View of the Family Firm Family Business Review; Mar. 2001; Vol. 14, No. 1; pg. 37 47 [online] Available at: http://fbr.sagepub.com/cgi/content/abstract/14/1/37 (Accessed 27th of April 2013) Chirico, F (2008) The creation, sharing and transfer of knowledge in family business Journal of Small Business and Entrepreneurship Vol.21 Issue: 4

Davis, J. (2001). Governing the Family Run Business. (online) Available at: <http://hbswk.hbs.edu/item/2469.html> Accessed 01 April 2013. From Success to Succession (2007) The family business and the three-circle system [online] Available at: http://fromsuccesstosuccession.com/ (Accessed 27th of april 2013) Jurinski, J. and Zwick, G. (2002) Transferring Interests in the Closely Held Family Business. USA: Amer Law Inst. Leach, P. (2007) Family Businesses The Essentials London: Profile Books Ltd. Seefeld, A. (2012). Transformational vs. Transactional Leaders, Which is more effective? (online) Available at: < http://www.strategicsolutionsconsulting.com/transformational-ortransactional-leaders.html> Accessed 01 April 2013.

Oeller, A. (2013). Die Praxis. (online) Available at: < http://droeller.de> Accessed 01 April 2013

Appendix

Appendix 1 Three Circle Model of Family Business (Source: Taguiri and Davis, 1996)

Appendix 2 Logo of the Clinic

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