The question of succession

Passing control of family businesses is not just a dilemma for the likes of Logan Roy, with local brokerages often forced to consider the issue

By Harris Pozderovic

Following the end of the critically acclaimed TV series Succession – several seasons of a family bitterly fighting for control of their media empire – viewers might get the sense that passing control in family businesses is a messy and nasty ordeal.  

The reality might not be as dramatic. After all, not every dad is as reluctant to give up control as Logan Roy, nor are most children as power-obsessed and self-destructive as Kendall, Roman or Shiv. (Connor can be forgiven).

Nonetheless, the issue of succession remains a sensitive conversation for many family-owned brokerages. While some present clear paths for the next generation to step up, others find difficulty in not knowing what to do with their beloved businesses when no obvious answer is present.

For some, the only option may be a bitter-sweet sale to a larger group, abandoning intentions to pass the business down to the next generation. As big-name brokerages continue to expand in the market, the diminishing number of local family-owned operations are facing a conundrum in deciding between the priceless value of keeping things in the family, or figuring out when, if ever, is the right time to sell. 

From his early years, Paul George, the Managing Director of Adelaide-based group MGA, was immersed in the insurance world. His father John opened his own brokerage in 1975 before forming a partnership business with fellow brokers Brian McInerney and Allan Amber in the 1980s – hence the company’s name. Mr George recalls an immediate sense of fascination with ever-changing developments in the business.

“I recall our first dot matrix printer,” he says. “Dad got us all in the office one night after dinner, and all of us, Dad, Mum, my sister and I stood there looking in awe at this new printing device which could print forwards and backwards.

“During this time, I always had a sense that the MGA business was growing. Dad was always on the phone talking with people in different regions, always travelling and always busy.”

By age 15, Paul had already made the “conscious decision to be part of the MGA journey”. 

“In those early days I didn’t understand a lot about broking. Simplistically, I knew if someone had a problem, Dad would help them out. I had a sense this was a good industry, and I knew MGA was a good business.” 

While he had to work hard to be judged capable and worthy of taking over leadership of the company from his father, Mr George says there was always an “understanding around stepping up” for the next generation of the McInerney, George and Amber families.

“I see myself as very lucky to be able to continue this legacy. I do know if I wasn’t up to the job, I’d need to look for a new one. I enjoy it, especially doing well and seeing people doing well around me.

“The succession discussion is a big one, and we have mechanisms in place to ensure communication channels are always clear.

“We understand that failed succession would easily be one of the greatest risks for a business.” 

MGA’s Future Directions Committee includes Mr George; his sister Cathy, who is a non-executive director at subsidiary company Whittles Body Corporate Group; MGA Marketing Director Steven McInerney (son of co-founder Brian); and co-founder Allan Amber’s sons Matthew, the Managing Director of Whittles, and Heath, the former managing director of MGA’s underwriting agency Millennium and now Austplacements Chief Executive.

“This forum is a really valuable check-in,” Mr George says. “It allows us to all get together and talk about what is happening now and in the future.”

In contrast to the on-screen Roys, the families have a “shared respect and desire” for the businesses they are involved in to be protected and to grow. Co-operation is at the heart of the arrangement.

“Our evolution has been interesting, where individually, each of the siblings/successors have evolved into specific areas of responsibility. I’m not sure if that has been good planning or good luck. However, in the main I think it has worked well.”

Mr George has been running MGA for more than a decade and operations have continued to expand. There are now 38 MGA branches across the country.

But he says the framework for success was laid by the generation before, acknowledging the influence of his father, who continues as Group Chairman. 

“Our way of doing things was really developed by him and whilst there have been some small adjustments, our model is the same today,” Mr George says.

“We talk a lot about business, we like the industry, and we like the people in it. We also know that a business is only as good as the people within it.

Keeping it in the family: Paul George with his father John

He’s always had this almost super-human ability to read people extremely well and I’ve enjoyed watching him frame a discussion, almost like a friendly magistrate getting to the facts, a trait of a good businessperson. I do hope some of that has rubbed off.”

Mr George says there is no plan for the family to step away from business, despite a previously planned acquisition from minority shareholder AUB Group in early 2020. 

“The circumstances which initially gave rise to the sale are no longer a factor, so the sale is no longer on the table and there are no plans to revisit it,” Mr George tells Insurance News.

“Every business has a different story and I personally believe we can be happy with our own succession story – we’re playing the long game.” 

Family-based conversations around succession are not always as co-ordinated and clear as those Mr George describes. It’s a sensitive subject if it’s not handled properly.

HLB Mann Judd Sydney Business Advisory directors Andrew Ash and Tom Roberts say they have seen their fair share of familial tensions and court-laden conflict due to poor planning, leading to ownership situations that are “more focused on retaining control than running the business”. 

“We often find that families don’t like to talk about succession, despite it often being on everyone’s mind,” Mr Ash says. 

“Most people don’t want to think about their own demise or have difficult conversations that could create conflict among their family. That is totally understandable, but the risk of not having a well-thought-out succession plan is far greater.” 

He says competing interests of businesses, ownership and family can dilute the focus of controlling parties and impact business performance. 

“Emotion can often over-ride logic when family is involved, and that’s why a clear, transparent and well understood succession plan is so important. Chaos can ensue without it, and that can put your whole legacy at risk.”

Mr Roberts says “misunderstood perspectives” see succession treated as an “event”, where the younger generation takes the reins following retirement or death rather than a multi-year “process” that allows for a transition between eras. 

“In order to set them up for success, you need to start early,” Mr Roberts says. “That’s especially the case in a relationship-based industry like insurance.

“Give the successors opportunities to build their confidence, help transition any key relationships and make sure they have the necessary education and skills to fulfil the role in future.” 

But he admits a critical component towards a successful transitioning of the guard comes from the desire and ability for a successor to continue the legacy of the family business. In circumstances where this is not present, the option of selling to a buyer becomes attractive. 

“Nepotism can be dangerous, and selling the family business may be the best option if the children aren’t interested or capable of taking the company forward,” Mr Roberts says.

For McLardy McShane Insurance Brokers co-founders Don McLardy and Mike McShane, there hasn’t been any confusion about the value of operating within a family-orientated framework, even as the business grows. 

Three of Mr McLardy’s children now work in the business, with his son Nick National Manager Broking, his daughter Sarah Head of People and Culture, and his son Tim General Manager of Victory Funding, an associated partner of the brokerage. Mr McShane’s daughter Georgia also works within the business. 

“We’ve got a good presence from our family coming in,” Mr McLardy says. “It helps us as we get older to stay current, and keep up to date with modern trends”.

He says the topic of family involvement in the business has never been one that he or Mr McShane have shied away from. 

“We’ve always tried to involve family,” he tells Insurance News. “The kids were very much aware of how our business was growing and what was happening. So when pathways open up, you take advantage of that.

“It’s probably more difficult for them than it is for us, because we’re quite excited.

“I think they probably spent a bit of time against [working in the family business], but maybe then they thought ‘that’s not such a bad idea after all’.”

But he says that any succession plans within the business must focus on doing what’s best going forward, rather than following a direct line of inheritance. 

“We’re very conscious about our next generation of good people coming through and we’re trying to build people in the business that belong in its infrastructure – whether they’re related to us really isn’t the point,” Mr McLardy says. 

“Some of them could be our children but others will be just people who are integral parts of the business.”                         

Proud Dad: three of Don McLardy’s children work in the family business

On the issue of increased market consolidation, Mr McLardy believes there’s a “cyclical loop”.

“Depending on how the market is going, there is a place for small businesses and there’s a place for larger groups,” he says.

“I’ve been doing this for a long time now and I’ve seen larger companies be very successful, but then as the market changes places open up for smaller partners to get started, each year. It’s a very fluid market.”

He says successful family-oriented brokerages operate by understanding the advantages a business of their size can provide, and keying in on their unique opportunities.

“One of the things that big companies have as a challenge is ensuring competitiveness, keeping staff motivated, making sure they know there are pathways in the company.

“Smaller private business can often offer better career paths and potential equity as part of succession plans.”

Reflecting on the HBO series, he says parts of it reflect real life. 

“My wife often jokes that we’ve got all the kids locked up like in the TV series,” Mr McLardy says. 

“I suppose some of the challenges you have are similar, but certainly our business is nothing like that. I think we’re much more caring people.”