Building & Operating the Business of Family

Mike0:00Welcome to The Business of Family. I'm your host, Mike Boyd. Multigenerational wealth creation involves so much more than capital accumulation. The most successful families cultivate values, stories, knowledge and resources to pass on to the next generation, and they do it very intentionally. On this show I sit down with members of some of the world's most interesting business families to hear how they do it. To see where your own family stands, take the Business Family Diagnostic at businessoffamily.net.

0:42I'm delighted to introduce Rob Robson, a founder, serial entrepreneur, and great student of multi-generational wealth creation. It was Rob who first introduced me to the phrase, the business of family, and ignited in me a passion to explore this topic deeply. The Robson family approach to structuring their family partnership and stewarding their assets for succeeding generations is some of the best work I have seen in this area.

1:15I have no doubt that you'll have many takeaways from today's conversation. Rob, I thought a fun place to start might be with your current role and title. You're the founder of One Harvest, Australia's largest fresh salads business, but these days you're often described as a pirate. How did that come to be?

Rob1:37Yeah, well, it's my grandchildren that describe me as a pirate. That's not a term I hear regularly from other members of my family, but my pirate side of things comes through the fact that for the last eight years, my wife Pamela and I have spent five to seven months each year sailing in various parts of the world, often in very remote parts of the world.

2:02And one of the things we do when we're visited with children and grandchildren is we raise the pirate flag on the boat and do lots of R-R-M-I-A-T-I's and that sort of stuff, which the kids love. And it's about as close as they'll get to a real pirate, I think, I hope. So that's how that comes about.

Mike2:26And five to seven months sailing a year for the last eight years, that's an incredible amount of time on the water. Is that something that you consider retirement or what was the decision to, in effect, go sailing?

Rob2:41Yeah, well, it sort of evolved. Mike, I regard myself as a late life sailor. Pamela and I bought a serious boat around about my 60th birthday and we really worked from a succession planning side of things. We worked in the family business to give me an exit by the time I turned 70. And in fact, we did that so well that I woke up one morning at age 65 and realized I'd worked myself out of a job.

3:18and so at 65 I got the opportunity to organize a boat to be built in Cape Town and one of the problems of building it in Cape Town is you've got to get it out of Cape Town and so we on completion with a couple of crew Pamela and I took the boat to Brazil and up to the Caribbean and then eventually across the Atlantic to Europe, back to the Caribbean, thinking we were on track to bring it through the Panama Canal to Australia and then decided we hadn't seen enough of Europe.

3:57So back to Europe again, some more time in the Mediterranean, up to the Baltic. In 2016, we brought it through the Panama Canal and Galapagos over to French Polynesia and on to New Zealand and the boat's been based for the last three years in New Zealand. Last year we had three months in Tonga, the year before, five months in Fiji and back to Auckland and of course the boat's locked up due to COVID so it's sitting in the river at Whangarei in New Zealand and this year 2020 is going to be a pretty quiet year sailing-wise for us.

Mike4:38I can imagine you're itching to get back on the water. Rewind just a step for me, a brief background on your business or perhaps your story prior to heading off sailing.

Rob4:52Well, my mum and dad had a very small fruit and vegetable business in Ipswich, 40 kilometres southwest of Brisbane. And my earliest memories as a young boy going to the markets in Brisbane with my father, him doing the buying and bringing fruits and vegetables back to Ipswich and actually servicing the mum and pop grocery stores that were on every second corner.

5:22This was in the 1950s. And also servicing the vendors that went, street vendors that went around to the suburbs originally with horse and carts, but then with old trucks, old utilities, and delivered fruits and vegetables to the inhabitants of a small country town, Ipswich. I have a younger brother and two younger sisters. We were expected to work in the business in the school holidays and on weekends, and we were brought up into an industry that we knew something about and eventually after I finished my education which included an accountancy major at the University of Queensland I worked in my dad's business for five or six years along the way Pamela and I were married and started having our family

6:22and one of the things that became obvious to me was that this business of my mum and dad's was going to be too small to support the families. In 1972, Pamela and I took some time off from my job in my father's business. And we travelled to Europe, UK and the United States over an 11-week period looking at the fruit and vegetable business and from farm gate to processing factory to distribution centre to supermarket to farm stalls, the whole length and breadth of the industry.

7:07And we decided that there were some opportunities to start new businesses in Australia with the learnings that we adopted or picked up on the trip to the Northern Hemisphere. My estimation was that the fruit and vegetable supply chain in Australia was some 10 to 20 years behind parts of the Northern Hemisphere and there was an opportunity to look at that supply chain and start to innovate.

7:38with my brother. We started several new arms in the industry here, still working in the father's business as a base. And by 75, Dad sat us down and said, now look, have I got this right? You guys have several seven-day-a-week retail stores. you're shipping product from Queensland to New South Wales, Victoria, South Australia and you're buying product in the southern states and bringing it up here and you've just bought a stand in the Brisbane markets and I'm still paying you it doesn't seem to be right how about you let me do my own run my own business again and let you guys go and play in your own areas that you've And so we did that for the next 20 years.

8:36We really innovated that supply chain. In some areas, we were the leaders in the country. You know, first computer installed in Australia in a market operation. Our own trucking company to move product genetics, the importance of certain genetics that were new to Australia, seedless watermelons being one of those. There are a whole heap of areas where we just kept on travelling to the US and Europe, noting what was happening there, what the innovation was in those areas, and then coming back and starting those innovations in our own country.

9:21one of the ideas that i'd had that i'd put on the back burner was the idea of producing packaged salads and to me that looked a major step change for the industry here in australia and we embarked on the salad business and gradually it took a number of years but it gradually took the place of the market business. And by 2000, we were out of the market and we were full-time salad producers. That's another story, Mike, that could be a couple of books in the salad business because things didn't go all that well for a number of years there. And Pamela and I were watered down to 25% ownership of that business. But their business is now 100%

10:13owned by our family. And as I said, at 60 years of age, I set the goal to be out of the day-to-day operations by age 70, and we achieved that. So the business now is owned by the Robson family members. And one of our children is Sam, is CEO.

Mike10:38I first heard the phrase, the business of family, during a conversation with you about two years ago. Thank you for stoking in me the desire to learn more about this subject. For whatever reason, it captivates me and I felt compelled to explore it further. I'd love for you to explain what the business of family means to you.

Rob10:58Yeah, well, we picked up the phrase, the business of family, from Professor John Davis, who was, at the time, head of the Family Business School at Harvard University. And by having the two designations, the family business and the business of family, it highlights for us that there are two aspects with the potential in this whole area. So the business of family puts the accent on the family, whereas the phrase, the family business, the accent, is on business.

11:37And fortunately for us, we tapped into the concept of there being two specific areas here, not just one. And so often we see the emphasis on the business part of the family business. and over the years we've learned to spend as much time, as much effort and as much planning turning family into the business of family. It's a separate concept from the family business.

12:14There's a book we picked up somewhere along the line called Family Wealth, Keeping It in the Family by James E. Hughes Jr. And Hughes puts up the concept that family wealth really consists of three segments. It consists of the human capital, the intellectual capital, and the financial capital. And Hughes's concept is that if we as parents and as a family spend the time and effort into developing the next generation into being good people, good sound people with an understanding of the responsibilities of family and the responsibilities of ownership in a family business, understanding what business is all about, what families are all about. And if we create the right human capital, then with the right human capital, if we provide the best education,

13:21both formal education and global education that we can for those humans, then the human capital plus the intellectual capital will add up for the ability of the financial capital to take care of itself. There's a bit of faith in that equation. But if you think of the family wealth as the human capital, intellectual capital, and the financial capital, then wealth is something far greater than just dollars in the bank or assets in the ground.

Mike14:00Tell me, Rob, how have you gained your knowledge and experience in family enterprise? You mentioned briefly. I think it was Professor Davis at Harvard and a book or two, but this sounds to me like you've made a very intentional effort to gain an education in this area over the years. As someone setting out to do that now, I'd love to hear of any of the other resources that you found useful on your journey?

Rob14:25Well, our first exposure was in 1992 at a YPO session in Sydney, YPO family business session. And a young Professor Davis then was out from Harvard and was one of the speakers there. And we were fortunate. Pamela and I can't remember why, but it seemed important at that session that we take our young children and they were teenagers at that time but Pamela and I and the four children went to that session in Sydney and it was interesting because there were 45 or 50 people at the two-day seminar but we were the only ones there with our children and that started exposing them and by seeing their interest it actually fired us up to gain as much knowledge

15:27as we could about this whole family business area. One of the things that came out of that session in 1992 was the importance of regular family meetings which then became known as the Robson Family Council, but also the importance of a written constitution. A family called the Penfolds, who were in the printing business, were kind enough to share their written constitution.

15:57And the constitution laid out the guidelines for how members of the family would interact with each other, what their expectations of each other were, and how the members of the family would interact with the family business. And it sort of sparked a goal for Pamela and I to work towards.

Mike16:24Fast forward 30 odd years now, how is the family enterprise structured today based on all that you've learned and no doubt evolved over the years? What structure do you operate with today.

Rob16:38Let me throw something else in, Mike. We made it a goal to make our business interesting for our children. And I think this is important. This is critical. Our children really became great critics of our business. And they were pretty tough on the business because I guess in those early days, even working as school kids in the school holidays, the business was pretty tough on the kids. And we listened and watched the reactions of our children to the business.

17:19Our kids were no different to other young people that were coming into the business and working. And if we made the business interesting for young people, including our kids, then it made common sense that we would continue to attract young people to the business. So during that 30-year span, we just did our best to make the business a great place to work. And if it's a great place to work that we were proud of, then the family became proud of that as well. Now within that, there was a lot of structure. You just didn't get a job in the business because your name was Robson. You had to work there on the school holidays, of course, but you didn't get a serious

18:05job because your name was Robson. The rules of engagement and employment were firmly written down in the constitution. And of course, we're up to iteration eight or 10 of the constitution now, and we've gradually upgraded that as our situation has changed. But let's go back to your original question, the legal position is that our four children are now members of the family partnership. There is a formal partnership agreement between Pamela and I and the children, and there are certain legal obligations on their side and on our side. One of the important things is that if it comes to a vote, they must vote as a group. They can't decide with either of their parents in the voting. And there's all those legal implications. We've done a lot of thinking

19:04about the scenario planning on what could go right, what could go wrong. But basically, the children are now in an evolution of where the control will move fully to them. And Pamela and I will be truly just the founding generation.

Mike19:28As a follow-up to that, Rob, beyond the legal structure, what is the business of family operations like in practicality? How often are you having family meetings? I think you called it the family council early on. You've got a constitution. How often is it reviewed? How often does the family meet? What does it look like in a more day-to-day sense in operating the business of family?

Rob19:55So the family partnership consists of the six family members and the family partnership meets normally and formally on a quarterly basis. I think it's important, Mike, to explain where we got this from. We went to Harvard University for the family business course with Professor Davis in 2003. There are four rules put up by Harvard, and rule three is surprise is the enemy.

20:27Rule four is structure is your friend. And one of the things that's always stood by us as a family is that we've been ahead of the game with a structure. So we first formalized the family council. With that came the constitution and the first iteration of the constitution was really quite simplistic as our children grew older and more interested.

20:54We upgraded that constitution and that time we were meeting about twice a year. One of those meetings would be at an interesting place. Maybe we'd be skiing or we'd be camping or whatever. and we just put aside time on a whiteboard and we would revisit our family values, the family mission statement. We would work on the constitution.

21:21So the partnership now meets quarterly and we have an agenda each meeting. There are minutes taken. There's a timekeeper. It's quite a formal structural process, but it's part of the deal. We're just used to that now because rule number four, structure is your friend. And to change anything in that, we've got to change the structure. As the family's grown, and there are 14 grandchildren now, we need a process to start integrating the next generation into the concept of the business of family.

22:03and the structure we have for that is called the family campfire. And the family campfire is a day or two away with some activity, bike riding or camping out, sitting around the campfire at night and starting to integrate the third generation into aspects of the expectations of the family and expectations of the business.

Mike22:31Rob, you mentioned Harvard had four rules for a family to operate within. You mentioned surprise is the enemy, structure is your friend. Can you share with us the other two rules?

Rob22:43Rule one is family is family and business is business. And I guess this is what drove the distinction for Pamela and I to understand the difference between the family business and the business of family. So rule one is vital. There's got to be that time where you sit down and discuss family values, family communication, family expectations. and then on the other hand, for the business to survive from generation to generation, there's got to be that time for the business to have its own structure and its own separateness as well as connection to family.

23:32So family stuff is family stuff and business stuff is business stuff. Rule two is families grow faster than businesses and that's pretty much held true. We've got lots of photos of the family at the yearly or six-monthly meetings and for a long time there just seemed to be six members there. And then as our children found partners and became married and children started to arrive, suddenly there's 23 of us now in the photo and it that seems to Pamela and I to have happened in a very very very quickly and there's no doubt that our family has grown faster than our business has has grown so that that rule two is important surprise is the enemy so that's a communication issue and

24:32the big savior in rule four structure is your friend structure will always come in our experience come to your aid if the structure has been agreed to, the detail put in place with the agreement of all and everyone adhering to the structure. So they're the four rules. Family is family, business is business, families grow faster than businesses and surprise is the enemy structure, who's your friend.

Mike25:00All that you're learning about family enterprise. How do you disseminate that and share those learnings with the wider group?

Rob25:14The dream started off as Pamela's and my dream. And for a number of years, we shared that dream with our children and communicated about the advantages of having a joint dream and agreement on family values and there came a time where the evolution of the dream changed from being our dream, Pamela's and my dream, to the dream of the family members and then on to where it became the next generation's dream. There were quite painful times when I had to let go of my dream in certain areas because it wasn't necessarily going to be the next generation's dream.

Mike26:08How do you distinguish who you're talking as you're the founder of the business, but you're also a founding generation member and you're talking about the next generation, but does the next generation mean your children or the grandchildren or the one that is yet to come?

Rob26:28those definitions have changed over time i can remember not so many years ago pamela and i were this generation our children were next ng next generation well at some stage we sat back and we became the founding generation pamela and i ng became tg so next generation became this generation, which is our children today. And so even notionally, as well as from a definition point of view, they are the most important generation in the family and in the business at the moment. And they contribute most to the upkeep and changes in the constitution and in the direction of the businesses and the direction of the family. And next gen, we actually refer to as the Cousin Consortium.

27:26NextGen have already started now from a business point of view. We've had our first internship of the oldest NextGen member, and we're all paying close attention to the schooling and the intellectual capital that we're trying to create. But so much of that is driven by the current TG, this generation, and the founding generation is sitting back looking on, nodding and shaking their head and mostly with smiles on our faces. The key is in the letting go and the taking up of responsibility as time goes on and the family evolves.

Mike28:09Do your children and your grandchildren have the automatic right to work in the family business? Are they preferenced over others?

Rob28:21No, the constitution clearly outlines both the employment process and the responsibilities over and above non-family employee. From an understanding point of view, we've developed internship, that does not mean that the next generation will automatically be offered a position or be accepted if they apply for a position in the business. It's pretty tough to get a job in any of our businesses and this gen understand that.

Mike28:59How does the family think about and manage its money?

Rob29:02One of the things that has helped us as a result of the regular formal communication through the family council, family partnership, the family campfire, is this common language and common understanding that this is how the family does things. And we have this concept of what needs to be bundled and what needs to be unbundled. And as the family grows, it becomes important to make calls on what we're going to keep bundled within the family and what we're going to unbundle, break away from the family and do things individually.

29:50So we have an education fund to supply the ongoing intellectual capital to all family members. And some families in this gen have two children. Some have up to five. And the education fund is unbundled to the extent that the fund will finance the education of individuals, individual children, rather than divide up and supply equal amounts to each family.

30:25So if you're a part of this gen that has five children, then the education fund will supply the five children. It will fund them to private schools, to public schools, to extra education. And the unbundling comes about if you're part of this gen and have two children, then the education fund will fund the two children. We have broken down the expectation of equality about individual families getting the same amount for education.

31:05We've unbundled it where the education is more important than the sum of money. And there are other areas where we still remain bundled. And part of bundling is dividends paid to partners. They're bundled together as equal amounts. I guess the importance of this concept is written into the Constitution, then the expectations of family members is firmly agreed on and the structures in place to allow us to take this concept of equalness and to replace it with fairness.

31:45Sam came along with a business that he wanted to invest in and put it to the family partnership that he'd like the FP to have a small share of this business because he wanted to use some of the knowledge and the IP, if you like, of the salad business in this other business. So we unbundled. The family bought 50%, but of that 50%, the family is 35% and the family are 15. That's the first unbundling. What that's going to evolve into, we just know some of these grandkids are going to come and say to the FP, oh, listen, I've got this great idea for a business.

32:41Can the family provide some funds for this? And so we've got to work out, okay, does the family take a share in this or do we loan or whatever? And we see this as being part of the encouragement of entrepreneurship, which is part of the intellectual capital that the next generation is going to need and that we can encourage.

Mike33:02One thing I remember from a prior conversation is you made an offhanded comment to me along the lines that I should ignore what other people tell you about starting a family office because you started with a rather small sum of money, if I remember correctly. Are you comfortable sharing that story with us?

Rob33:24We realised that as the number of family members grew, we were going to have members that may have had no interest in the original business. And as funds became available, we set up a family office. Once again, we were ahead of the game. The current thinking with family offices is that you need a certain amount of free capital to set these up. And that amount's generally got a lot of noughts on it and we certainly didn't have the ability to put a lot of money into the original concept of the family office. We started up with $100,000 but we put the structure in place.

34:14The family office has a separate mission and part of that mission is diversification and part of the mission's experimentation with the hope that as next June, become involved and get an understanding of the businesses we're in, there'll be some areas there that create a spark of interest or a spark of entrepreneurship.

Mike34:43What advice would you give to a smart, driven entrepreneur who aspires to be the founding generation of a multi-generational family enterprise?

Rob34:52So my advice would be to spend as much time, give as much attention to the family side, to the business of family, as you would to your family business. Now that's difficult. As an entrepreneur in the business arena, there's a sense of excitement and a sense of surety. and a sense of understanding of the business environment. I certainly didn't have that same sense of confidence in the family environment. And I'm speaking personally now, I think Pamela handled this much better than I did. I was much more confident in having critical conversations with team members and members of my industry than I was in having critical conversations with my family. And it takes a certain amount of trust and going within oneself

35:54to conduct twitchy, critical, sometimes difficult conversations from a family point of view. We went to school. We went back to school. Part of our intellectual growth as a family There was some work we did with a consultant called Alan Parker, who's a professor now, I think, Professor Alan Parker, and how to conduct critical conversations and the concept of pre-framing a conversation.

36:32So if I go back a decade or so, I could come at a conversation with my founder's hat on. I could come at a conversation with my director's hat on as the director of the company, come as a conversation as CEO of the company or as a father. And it became really important that between family members who are sometimes wearing several hats that we knew what the conversationalist had on at the moment.

37:12So a conversation would start, well, look, with my father's hat on, here's what I'd like to see. Or with my founder's hat on, here's what I think should be done. And this whole concept of pre-framing saved a lot of angst within both the family, but also within the family business.

Mike37:37Rob Robson, what is your legacy?

Rob37:41My legacy is really if I divide it up into business and family. I think in a lot of ways, Pamela and I hit the ball out of the park business-wise. We've got a great business with a great product and some wonderful people helping us on the way in that business. But the real legacy of the family business has been in the business of family area whereby I can still spend time with my children and my grandchildren as really my best friends.

38:20My family have become incredible advisors to me. They're not afraid to pull me up when I step out of line. And I still turn to them for advice. and some people say that you only need about five good friends who'll tell you when you're going wrong or when you're going against your beliefs and he'll be game enough to pull you up and certainly my wife and my four children are in that category and we can see the the human capital into the next generation, developing in a way that pleases us and certainly gives us a wonderful, warm feeling.

39:11And part of the key to this is the business was the catalyst for us finding this whole delight and joy into the business of family. And it just gets better and better for Pamela and I. We just had an FP meeting maybe five weeks ago, and we finished up back here at home in tears, just tears of joy.

39:36It was just so emotional, you know, what went on in the discussions, and just to see the strength and the humility, the strength and humility of our children. And to know that we've left, that somehow we've been part of that legacy, that's sort of proof of your legacy. That's been the joy. It's superseded the business success by 100 times.

Mike40:11Imagine you're writing a letter to your children. What is one lesson or idea that you don't think many parents would mention, but you consider important to understand?

Rob40:21In my letter, I talk about the randomness of life. Now, what do I mean by that? If I'm departing Panama to the Marquesas in French Polynesia, that's a trip of 3,600 nautical miles across the Pacific Ocean. and it's 13 to 20 days. I think that's a great metaphor for life because you can leave on a good day and you can have a plan but you accept the randomness of the weather and particularly the sea.

41:00The sea doesn't care. It just does. And in that 13 to 20 days, you've got to accept what is given out by the weather and by the sea and you've got to make decisions along the way that allow you to adapt to whatever is happening about you. And I think life's a bit like that. We can all have a plan for our families. We can have plans for our businesses. But the randomness of life plays with those plans and we've just got to accept what is and what can't be changed and adapt to that. Sometimes it's not fair, but fairness is not what it's about.

41:51It's about the ability to accept what is and to adapt to the situation. So I'd use the analogy of a sailing trip with some examples of life and just prepare or remind my children that sometimes life isn't fair, but it's livable. And it's the ability to adapt and change. And I think this current situation that we're in with COVID is just another great example of that.

Mike42:28Rob, you've been a great inspiration to me and my passion for this subject. I always cherish the conversations that we share together. This one is no different. Thank you so much for sharing your time with us today.

Rob42:40Thanks again for giving me the opportunity. I really appreciate the experience, Mike, and I commend you on your tenacity to get this thing going and actually doing something about it. I think it's fantastic.

Mike42:54Thanks for listening to The Business of Family. You'll find the transcript and key ideas from this conversation at businessoffamily.net, along with the Business Family Diagnostic. It's free, and it shows you where your own family stands. And if someone in your family should hear this episode, please send it to them too. I'm Mike Boyd. Until next time, take care.