Lessons in leadership, management and family advisory

With David Smorgon OAM, CEO of Pointmade.

David Smorgon OAM, CEO of Pointmade, shares his learnings in leadership, values and family business succession from his journey with Smorgon Consolidated Industries, his experiences with family-owned companies and saving the Western Bulldogs football club.

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Transcript

Matt Heine: Hi, my name's Matt Heine, and I'm your host today on Between Meetings. Today's guest has had absolutely fascinating life, and has covered many industries, many jobs, and really experienced life's highs and lows. As a young man, he studied Law. He did his apprenticeship for three years, I believe in an abattoir, and went on to lead the Western Bulldogs as the president of the football club. Today, I'd like to welcome David Smorgon to the show.

David Smorgon: Good afternoon, Matt.

MH: Now, David, I haven't done your history any justice at all, and it's often best to hear it from, from yourself. Can you give us a little bit of background, as far as where you've come from, and more importantly, how you actually ended up doing what you're doing now, and we'll get onto that a bit later in the show.

DS: So, you want me to give then 72 years into 30 minutes?

MH: That would be wonderful.

DS: Okay, okay.

MH: Maybe leave out the boring bits.

DS: All right. We'll only talk about the highlights. Well, I think the important first step was that to understand that my family came from Soviet Union, from Russia, from the Ukraine in 1927. And, like so many other millions of Australians, they came here with nothing else but the suitcases they could carry, but a grim determination to create a bit of lifestyle for themselves, their children and then the grandchildren. And, I'm one of the lucky beneficiaries of that brave decision. Back in Melbourne in 1927, it was obviously very hard to get a job and so the family scattered throughout Victoria. And after a couple of years, they poured their fairly meagre resources together, and they leased a tiny butcher shop in Lyon Street, Carlton.

MH: Do you happen to remember why they picked Melbourne in Australia. Is the destination-

DS: They were able to get a permit there, and they had some distant cousins and friends that had moved to Melbourne a couple of years earlier. And, compared to where they were in the Ukraine, this was unbelievable. Although I remember in Melbourne in 1927/28, it was just pre-depression days.

So, it wasn't as good as what they were hoping for. But, that little butcher shop was the first business venture, and that lead to the development of the whole Smorgon empire. So, without that little butcher shop, who knows what would've happened.

MH: And, were they butchers back in home country?

DS: Yes, they were in the tannery business, and also in the meat business. And, they went back to starting something they knew of. They wouldn't, didn't have many other skills as I understand, but they're very entrepreneurial and were looking to create the better lifestyle. So, I was very fortunate. I grew up in a very loving and caring home. Didn't see much of my dad, because he was always at work early and home late. Had got two brothers, Barry and Rodney, that are two years apart. I'm the oldest and went to school at Brighton Grammar School. We all went to Brighton Grammar School. I enjoyed school. But, I suppose one of my most memorable occasions, Matt, was my Year Seven report card. I don't know whether they do it these days, but in those days you used to have to get a report card with your marks on it, and the comments from the teacher.

And the worst thing was your parents had to sign the bloody thing. And, so I remember my Year Seven marks were not very good, but that wasn't what my parents were focused on. They were focused on the comments. "David's not interested, David's got to work harder. David's not trying", typified by my carpentry report, which said, "Term one, David's work is not up to standard. Term two, David's work is still not up to standard. Term three, David will never be a carpenter."

Now that didn't really phase me, but what really upset my parents, my dad in particular, was my inability to do my very best. And, I still remember sitting in the den, mom and dad facing me, and it was my first face-to-face memorable meeting. And I suppose I was threatened in a way, influenced in another way, that if I didn't pull my socks up, if I didn't start working and applying myself to get the best out of myself, then I might've ended up like my dad did at the age of 14 or 15, in the abattoirs with no future.

And so, after that, I remembered that one of the things my dad told me, "if you aim for the moon, you might hit the top of the cow shed." Now, that wasn't bad for a butcher, but I've always, I've always tried in my life to aim high, and not settle for second best or third best. So, I aim for the moon. You might hit the top of the cow shed-

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MH: Do you remember what it was about Year Seven, the reasons why you lost interest? You'd obviously been doing okay until then.

DS: I don't think I had an interest in the beginning. I think that's partly of coming maybe from already a family that was being successful.

And, it wasn't any by any means wealthy, but we were successful. I knew my dad, and his brother, and my uncles, and all the rest of them worked very hard. And, we'd had a couple of abattoirs, were in other businesses. And so, the first signs of success were there. And maybe, I was just on a joy ride thinking, because I've got the same surname, it's all going to fall for me. And-

MH: Life was good.

DS: Yes, life is good, and you don't understand until you have those personal experiences. And so, that was my first memorable discussion conversation that I can recall. And, it really helped me change my attitude towards life.

MH: I think I had a few of those conversations in the library around year seven, but thankfully we didn't own an abattoir.

DS: Yes, well you and a few other things Matt, so that was okay. And so, after school, in a very naive way, I wanted to create my own success. And although during my teenage years, I always worked in the family business during the school holidays and whatever. And, you understood the value of how hard it is to earn a dollar, and how easy it is to spend a dollar. In a naive way, I wanted to do my own thing.

And so, I went to Monash and I spent five years doing a Law course there. And, during that time I got married, and I had three sons in pretty quick succession. Although I... Unusually, I never failed one subject during the five years, which is quite interesting when I reflect back on it. All my mates did, but somehow I didn't.

But I then practised Law for about nine months in the city, and I hated every day. I really did not like getting out of bed in the morning to go and come to work in the city as a lawyer. And my younger brother Rodney's engagement party, our chairman of our family company, Victor Smorgon, who was a real dynamo, and made-it-happen sort of guy.

He got me in a corner and said, "What are you wasting your time being a lawyer? I heard you're not enjoying it, and how could you be feeding your three boys? Why don't you come out to West Footscray and get a real job?" I said, "Who told you that?" He said, "Don't bullshit me. I know you're not enjoying yourself. Come and get a real job. See me on Monday morning." So, I went out to Footscray, West Footscray and [inaudible 00:08:42] road where abattoir was, and he said, "When do you want to start?" I said, "Tell me what the job is." He said, "The job, it's down to the gut house. That's where we all start. That's where you'll start."

I said, "Hang on, I've been a lawyer, five years of education." "Not worth a pinch of shit over here, your down in the gut house." And so, then you go and have a make a big decision to transition from being the lawyer in a beautiful office in the city, but you're not enjoying yourself, out to West Footscray and in the gut house.

And, the next three years or so, were probably some of the toughest years I've ever had, but you learn so much about life. You learn about leadership, you learn about motivation, you learn about communication, you learn about respecting differences, because the people in the gut house where people that probably like my family did in 1927. This was their first job in Australia, and they were there. Why were they there? They were trying to build a better lifestyle for themselves and their children. And they do whatever they wanted to do.

MH: Did you find at the time, no doubt there was a lot of Smorgons working in the business. Was it difficult being a Smorgon down in the gut house?

DS: You got tested, Matt. You got tested between the foreman and the supervisors that were seeing, whether you're a good bloke like your dad, or so and so, maybe some other members of the family. You got tested by the union. So yes, you were to that extent, a meat in the sandwich, but you also learned that it's about you.

MH: Mm-hmm (affirmative).

DS: It's not about your surname, it's not about who your dad is, it's not about who your brother is. And in fact, one of the other stories I'd like to relate to you, to highlight what you just asked me, is after about a few months, I got promoted. And so, I went home very excited one day, and I said to my late wife, Roslyn, "Oh, I'm so excited, got promoted."

She said, "How much extra money do you get?" I said, "No, no, I haven't got extra money." She says, "Well, what do you get for being promoted?" I said, "I go from khaki overalls to grey overalls." And, she looked at me and said, "Grey overalls, well, that doesn't do anything for me." And I said, "You don't understand. This is about me. This is understanding that success is a personal thing, regardless of your surname, regardless of your debt, regardless of your uncle, regardless of your brothers. Sometimes, you've got to work your butt off to achieve things yourself." And so, if my nine grandchildren have any story to remember, that's the story I'd like to make sure they understand. Because success is a personal issue, not reflected of who you are or what you're doing.

MH: That's a great message. And, so was it that you had to work twice as hard? Did you find back in those days?

DS: No, I don't think I had to work as twice as hard.

I had to pull my weight. I had to be a part of a team. And you realise, Matt, when a couple of blokes didn't turn up because they're on the grog the night before, like you were indicating earlier, you're letting the team down, you're letting the company down. And no one got the bonuses, et cetera. So, you learn about teamwork and being part of a team. So I don't think I worked any harder, but you had to apply yourself, and you started thinking how could we improve it?

So, you saw different sorts of leadership. You saw the so-called supervisor. The leader would come in, kick ass, criticise you, walk out of there and everyone would say, "Stuff him." As compared to the other supervisor might come in, "How can I make it better for you? Can I turn the lights up? Could I turn the air conditioning on? Do you need some safety too?" Or, whatever the case may be. And you just say, "Gee, look at the difference."

Everyone's now ready to roll up their sleeves and get stuck into it, as compared to the other guy where you said, "Stuff him". And, you don't really feel like working. So, there's all those sorts of things you remember back, and reflect on the difference between successful leadership and poor leadership.

MH: So no doubt, an incredibly challenging and difficult three years, but with some fantastic lessons. Did you have a big celebration the day you moved out of the gut house?

DS: No. No, because that's just part of a transition in life and unfortunately, fortunately I've always transitioned from one thing to another and yes, I think you celebrate success. You celebrate life in so many ways, but I don't think you necessarily celebrated because you get a promotion, or you move to another dirty part of the meat works.

MH: And, from the abattoir, the Smorgon enterprise obviously merged into a whole range of different businesses.

DS: Yes.

MH: What was driving that at the time? Was that Victor having a vision for each of those sectors, or had he actually-

DS: Well, Victor was our leader. He was our chairman, but remember we had a very complex family. There was seven family groups as shareholders of Smorgon, consolidated industry, and we had the right of veto. Any shareholder had the right of veto, but of course someone has to lead it.

Victor was a very dynamic and successful leader, but Victor was the optimist. And, my uncle Sam, who's still alive, he's 96, he was the pessimist. And, there's a nice balance between optimism and pessimism. And then, it's surrounded by other family members and senior non-family executives that make up the team.

So, we used to talk about the proverbial us and we, not I. And that made a big difference to the success of our family. And from the meat business, we expanded into cartons, paperboard. We expanded into the glass business, plastics business, the steel business, property business.

We had egg carton plants, we had moulding plants, egg moulding plants I should say. And we were very diversified manufacturing group. So, the expansion came because we were successful, because we were entrepreneurial. And, we're very proud to employ, I think at one stage, about twelve and a half thousand Australians all around the country.

And, that was our way of contributing and putting in. And, alongside that, philanthropy was an important aspect of the family, whether it be to the Arts, the hospitals, the health areas, schools. And, you learn to give. And, that's something that I'm sure all of us to this day are very proud.

MH: So, groups like Wesfarmers obviously continue to be quite successful, and build very diversified businesses under the one group. It's becoming increasingly challenging in this environment. Did you find that diversification was actually a good thing back then, or was it just sort of how this happened?

DS: It was difficult because we were a private family business and we had a different structure. We had a different culture to most of the public companies that we took over. So, in the glass business, in the cardboard box business, in the glass business, we took over public companies and they had a different modus operandi than what we did, and it took some time for us to adjust. Or sorry, I should say the other way for those organisations to adjust the way we wanted to do it. And sometimes, there was a clash between formality and informality, between bureaucracy and just getting on and doing it.

But I'd say in the main, we successfully integrated all of those businesses into ours, even though there were some rough patches from time to time, as would be expected because some people didn't understand that we were the new owners and the old way is the old way, and we want to do a new way, and a different way. But I think, in the end, we proved that we were able very successful, to integrate those companies.

MH: So, integration is a big challenge for a lot of our firms. A lot of our firms are getting close to retirement, and they're selling into sort of bigger businesses and vice versa. Where bigger businesses is buying a range of small businesses. Do you remember some of the things that you did as a group to help with the integration, and to make sure that the culture is, whilst probably very different at the start, came together.

DS: I think the most important thing in that regard is people have to understand three things about you. Who are you, what do you stand for, and where do we want to head?

And, you've got to bring them along that journey. And, who are you, and what you stand for, and even what where you want to head, may be very different from the incumbents of the companies you took over. And, so often, there was a clash in terms of values. Now I believe we all do business with people we fundamentally like. It's very difficult to do business with an ogre if you see that person as an ogre. Doesn't matter what technology they've got, or what other basis they've got. And so, one of the most important things was to explain to the newcomers, or the ones we've taken over, who are we, what do we stand for, what are the values, what are the principles? So, we adopted a thing called the Smorgon way, which on a one-page document, said this is the way we like to do business.

Whether that be you as a staff person, whether you'd be a customer or a supplier, this is the way and the principles that we like to do business. And if you didn't line with those principles, well you're not going to really survive, or succeed working under our umbrella. So, that was the most critical thing. And then, you've got to have some flexibility, because some people won't be quick to adjust as others. And so, therefore you've got to be flexible. But the fundamental thing is they've got to understand what are we aiming for, what is our prime objection, objective rather in this [inaudible 00:17:02].

MH: And, the Smorgon way, presumably, was quite a hard document to come up with, given you actually had seven families?

DS: No, it wasn't-

MH: Or, was that already installed?

DS: No. Well the principals were basically instilled over many, many years. It took a weekend, and then some fine tuning, and then some discussion and debate about particular wordsmithing of it. But the essence of it was there, and I don't think anyone had a real problem with it. And today I see the way is now used in a lot of other businesses, which is, which is good. I don't say that we were the first to have it, but this Smorgon way it was, it was publicised and when OneSteel took over the Smorgon steel, it became part of OneSteel's way. And so, that tradition has continued.

MH: And, it's pretty fundamental now, to pretty much every business book you read. It's sort of the Simon Sinek, the who, the what, the why.

DS: Exactly. It becomes fundamental. But, we did this 25 years ago. So, before Simon Sinek was heard of. So.

MH: We'll get onto family in a moment, but as you know, we're sort of related through marriage somewhere along the way. And I was lucky enough to visit the Victor Smorgon, a new office. And I noticed that they still have the, the lunch table where everyone gets together over lunch.

DS: The round table.

MH: The round table. Do you just want to talk a bit about that and how Victor and, and the group stayed together and continue to work together?

DS: Well, we did that for about 70 years, and then it all imploded. So the round table was a precedent that came from, from the Ukraine. It must've been a very small round type. I don't think they could have afforded much more than that. But, the round table was something that we, we all grew up with. It had a lazy Susan in the middle of it and the round table was there because everyone was supposed to be equal, except we knew that some were more equal than others, which was always a bit of a joke in the family. But the most important thing, I think there were two key aspects. We all met for lunch. So, at 12:30 it was down tools, no matter where you were working. And you were there at 12:30 for lunch. We used to get spoiled. We used to have to try all the meat, the filtered steak or the porterhouse steak.

The worst thing was when we had to try a canned corn beef, which was not as tasty or delicious as some of the other offerings on the menu. And so, the regularity of getting together as a family. So it was young, a young person to sit and listen to the academics. And we weren't talking about football, or horses, or races or, it was all about business.

So, it was a great way to learn. And the other aspect that has been very, very memorable is we used to have some VIPs come once or twice a week, from all walks of life. They could be business, politicians, counsellors, competitors, suppliers. And, the most daunting person I remember ever meeting was Kerry Packer. A larger than life, the figure a larger than life character. And I still remember shaking hands with him. He was like a giant, and I don't think he shut up for one minute. And, I think Victor gave him the opportunity to tell us a little bit about yourself, and for the next hour I think we're all totally absorbed in Kerry's story.

I hope you gave him the good porterhouse, not the canned beef.

MH: I think he got the VIP treatment. Yes.

DS: Do you remember what he was talking about at the time?

MH: No.

DS: No.

MH: It was a long time ago.

DS: I was only a young boy at the time. No, I don't remember. But, I remember, I don't think he took breath, apart from having a few cigarettes, which wasn't allowed, but he got away with it.

He did. So, I love this concept of the round table. And, if you look at a lot of businesses, the biggest complaint is communication. And, what a fantastic way to actually get people talking every day, about what they're doing in their different businesses.

MH: Yes. And one of the things that I do today, which we'll get onto Matt, is it's so important to create a safe environment, a safe environment where people have a voice. And, even in our family, when I look back on it, there could have been a lot more encouragement for young people to speak up. Because when you've got older people around, and they dominate and, because they are much more experienced and much more mature, and they've been around the block a few times, it takes some courage to speak up, particularly if you've got a contrary view. And when I look back on it, it was good to be sitting there, but I would like to have been a bit more encouraged to, what do you think, David? What do you think, Matt? Have a voice. So, but creating that safe environment is so important, even in today's world.

DS: How many people were sitting around the table at its peak? Well, there were up to 23 or 24 of us family members-

MH: Yes.

DS: In there, and there used to be three or four senior executives that were treated as family members that joined us for lunch. So, there could have been up to 30 people at any one time.

MH: And, with lots of cross-conversations going? Or, was it always one person speaking?

DS: It wasn't formalised. No, it wasn't formalised. If there was a big issue, if there was a deal to be done, or something talked about, obviously then we'd focus on that. But otherwise, it was just interaction and communication, and getting on with each other.

MH: Yes. And, you mentioned that worked for 70 years.

DS: Yes, it worked for 70 years, and I think it's fair to say that our family had the reputation of having the right recipe and the right formula for sticking together.

Remember, we were a complex family, seven family groups. Up to 23, 24 people together in three generations, from 85 to 25. So, some people worry about just a father and son working together in a business Matt. So, you can imagine what it's like with 23! And then, I suppose in the late 1980s to early 1990s, a few tangents started to crop up. And that's usual and expected. Family feuds, family differences are predictable. They're not necessarily inevitable.

MH: Was that the next generation?

DS: Well, I wouldn't say the next generation. They were a part of it. There was many reasons and people would have different views on this. I think we had an inability to deal with succession. We had an inability to talk about some difficult topics, particularly on personal stuff and individual stuff. I think there was some attitude towards the fourth generation, that was causing concerns.

There was a complexity just having 24 people working in the business. There was pressure from those that weren't in the business, for dividends and distributions. Although that was a relatively minor issue, I would have said. And so, put all those together, you have some issues.

And what we found, unfortunately, we couldn't find the right organisational-right people to help us through those troubled times. It was... Family business in Australia is a very much an ignored sector, as compared to in the USA or Europe, where you've got generations of families that have been in the sixth seventh, eighth, ninth generation, and it's a science there.

Every university has a chair of family business, but in Australia we, we, we struggled finding someone that could help us through. I'm not sure even if we had the right expert, it would have made such a difference. But we struggled to find someone that could help us relieve some of those tensions or prevent them, I should say, from getting into differences of opinion within. You have a split in the family between four on one side, and three on another.

MH: And that's clearly shaped a lot of your thinking work that you're doing today.

DS: Well, it fuelled a passion in me to say, what went wrong after all those years of working together? I had dreams that my three sons could be given the same opportunities my dad gave my two brothers and I, and likewise with other family members. And so, I was really disappointed and I know everyone's got different views of this. Some people are very happy that has been done. I think time will continue to tell whether that was the right or, or wrong decision. And it's not right or wrong. We've all moved on life. Life goes on and the watch doesn't stop ticking because you might be upset or disappointed with the decision. Life is very much a transition. And so, I've learned to move on to other things, and apply myself with the same zest and enthusiasm as I've tried to do with whatever endeavour I participate in.

MH: So, before we get onto, I guess some of your key learnings from that time and some of the things that you're talking to families about now, the work that you're doing with families, your time as a leader at the Western Bulldogs. Again, that would've been a fascinating era, because I think at the time, they weren't performing particularly well. And they've obviously since gone on for greatness. Working in a club where culture is so key, and leadership is critical, what were some of the things that you took to the club that was able to sort of help turn it around?

DS: Yes. Well, I've followed Footscray Football Club, the Bulldogs since I was six years old.

MH: Given where the factory was, I'm guessing so did the whole family?

DS: No.

MH: No.

DS: No, it was only my dad.

MH: Right.

DS: Everyone else was Carlton, because they used to all live in Carlton. And dad didn't like Carlton, thank goodness. And so, dad was the renegade, and he followed the Bulldogs, and I followed the Bulldogs. And so I, like millions of others, love my sport. And I suppose a day wouldn't go by where I didn't read or hear something about my favourite footy club. But, I never dreamed, or had any aspirations to be officially involved in the club. Although I was on the board for about six months in 1982, before I went to Sydney to run a glass and plastics business. And in 1996, at the end of that season, the Bulldogs had finished last, or second last of Fitzroy in Fitzroy got merged with, with Brisbane.

And as someone said, we had no players, no money and no hope. So why would you get involved? Well, that to me it was almost like, hang on. That's the reason to get involved, because it was a huge challenge. And, together with a group of other dedicated Bulldog guys, we said, "Okay, let's have a look at this. We'll do some homework." And we spent three months from probably August 96 to October, November, and when we had a strategy session and these were day-by-day events, we had 9,500 members and we said, we've got to get to 20,000. And, I remember him saying, "How could we get to 20,000 and for every bulldog person you're going to go and find somebody else, it's going to be bloody difficult."

Then we started drawing a map of Victoria, and we started to put where we were in Footscray. And then you started to see, hang on, look at the growth in the Western region, look what's happening down at Werribee down to Geelong and okay, Geelong's Geelong, so we're not going to go there.

MH: I'm a Cats supporter, so easy.

DS: Oh, okay, I'll go easy. So we went, looked at Werribee and then you look, East of Werribee, and then today it's Williams Landing, and then it's Melton and Sunbury and then okay, [inaudible 00:27:05] on that side. But between [inaudible 00:27:06] and on one side and Geelong long way down the high way on one the other, there's the whole Western region. That's going to be the future, not only for Victoria, it's the future for the Footscray Football Club. So that's how we got to change the name from Footscray to the Western Bulldogs and today, and it probably took 10 years longer than we thought.

But today, the kids that have been born in any of those areas, they don't know Footscray Football Club. They know Western Bulldogs. And of course, added to the premiership in 2016, no wonder our membership base is increasing. And I can't quite pinch myself when it says they're aiming this year to get 50,000 members.

MH: Amazing.

DS: Well that was, that was just unheard of way back in 1996/97.

MH: That was a huge insight to have back then. How unpopular was the name change with adjusting members?

DS: Oh, that was one of my most daunting things. I was threatened with Supreme court action. I still see the back page here of the Herald Sun. There were a couple of old fogeys at the club that said, "You can't, you can't take the name. You've got no right to steal our hundred heritage." While I wasn't interested in the hundred-year heritage as a much for the next 10, 20, 30 years of the Bulldogs. Because at that time Matt, the AFL commission were desperate to move a couple of clubs out of Melbourne, and we were riding the gun, and we weren't getting much support initially from the AFL.

So, the brief of my board was to keep the doors open to being lobbying and talking to the AFL behind the scenes, and the commissioners, give us a chance to get our act together because we were second rate, we were treated as second rate citizens.

We never got Anzac day, we never got Queen's birthday. We never got any blockbuster games. We never got Friday night television because, and it was self perpetuating, and that's why we continue to struggle. Give us a chance to show us what we can do. And I think the history is now on the school board.

MH: Yes, totally risky. You might actually lose a few supporters but had the view that you are going-

DS: Well, I'm not aware.

MH: And, they're probably still there.

DS: And, if you lose some, leadership is not about trying to please everyone. I mean we realised at the time, yes, there were going to be some older people that were entrenched with Footscray. Nothing would change them. You're got to move on. So I'm very pleased we did, and I think the history has proved that it was a really, a brave decision, but the right decision.

MH: Have you had anyone come up to and say thank you?

DS: Yes. You say that. Your receptionist is a Bulldog girl.

MH: There you go.

DS: Yes.

MH: In fact, the other gentleman sitting just at the desk, about three metres from here, is too. So.

DS: Well anyway, you've got, you've got a higher percentage than normal. We've pulled a lot of people in the office. But, a lot of people say thank you. Even to this day, there were some people that think I'm still the president, which is ridiculous, given that's seven years since I stepped down.

MH: Were you there for the flag?

DS: No.

MH: No.

DS: I was there for the flag, but it wasn't as president.

MH: Wasn't as president.

DS: No, but it just showed you the type of values that the club has. That Peter Gordon, my predecessor, and my successor, he promised me that if we got to a grand final and we win the grand final, he was going to give me the wristband to get on the MCG. When the final siren rang, he was true to his word. And that's interesting, because a lot of other mates of mine that follow other clubs said that wouldn't have happened at their club. In other words, it's all about me and not you. I've done it my way and you were yesteryear. So, Peter shared the glory and it's one of the highlights of my life, to be running on that MCG. It's still a fog. But what a day!

How to transition a family-owned business

Hear more from David Smorgon, as he guides you through the process of transitioning a family-owned business through generations.

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MH:
It would have been incredibly special. Now, you mentioned a word before. Values again. So, did you implement the Bulldog way, in the same way that you did the Smorgon way?

DS: Yes, we had it. I think it's been altered and amended, which is in order to be, because everything needs to be reviewed every year or two or three.

MH: Yes.

DS: But look, I think it's fair to say that we, we brought a different way of looking at it. If you follow football in 96 I said, we finished second last, but we appointed Terry Wallace, and we gave him the licence to go and make a difference. We don't want to be hanging around. We don't want to be third last or the fourth last. And we got to the preliminary final in 1997. We were 32 points up against Adelaide, and they kicked six skulls in the last quarter to win. I talked about some of the best days of a life, it was one of the worst days of my life, because I remember during the third quarter I said to a fellow director, a guy called Ray Baxter who played for the club, "Ray, can you believe it? We're going to be in the grand final. This is their first year. How good is this?" He said, "Hang on, small guy. There's a quarter to go." I said, "Don't be silly, they can't get six goals!" Well, they bloody well did and we lost them, and they went on to win the grand final.

MH: Just on that though, there was a great video that went around with Nathan Buckley the other day. He was trying to give the guys a pep talk after they lost their game. How do you re-motivate a team when they get that close after so many years?

DS: Well, I can tell you I can. Well, again, one of my most memorable moments was being in the rooms when we lost that game. So, preliminary final, we lost the last kick of the day. By two points we lost. And I'm sitting in the rooms with all the players coming in, and they're tearing up. They're crying, some of them uncontrollable. The coach is not much better, and obviously, no one says a word.

No one's even looking at each other, because you've lost the unloseable game. Knock on the door, "Coach, the press idea are out here, they want a comment. "I'm not making a comment." The assistant coach says, "I'm not making a comment." And then, I'm looking around the room and you realise, Oh, hello, I'm the president of the footie club. The coach, the captain have-

MH: Bailed.

DS: All said, "No." Now's your moment. And I thought for a bit, must've been two minutes or more. Could've been longer because I bang on the door, and I opened the door and it was like Hollywood. Every camera, every light was on your, every microphone was in your face.

"How could you lose that game?" So, I just settled everyone down. And I can't remember specifically what I said, but it was enough to satisfy the press at the time, and enough that I've got a lot of complementary emails and text messages. And even in those days to say [inaudible 00:32:50] well because what I did, I said, it's a game and we lost, and we'll learn from this, and we'll move on, and we won't forget about it and next year we'll come back stronger. Whatever the case may be. You have to keep hope alive with your 40 fans. It's the same in a business. We all go through tough times in business. Business is difficult. It's not going to happen simply because it happened yesterday for you. Right? And so you've got to apply yourself, and you've got to take the best. You've got to learn from failure.

I understand that failure is a detour and not a defeat. And I see so many people around that just think if they fail, it's the end of the world. It's not. It's a learning exercise. Learn from it, move on to bigger and better things, which is the attitude we had to take.

MH: And I think that's an incredibly powerful statement. Our industry or financial services is going through change-

DS: Yes, tough times.

MH: And it's incredibly tough for a lot of people out there. And remaining core to your values, remembering the work that you do, and the work that you're doing for your clients is critical. And then, actually getting your staff back around that.

DS: And that's where leadership plays a key role to make sure that you're bringing everyone on the same path and some people are drag being dragged along with it. But you've got to be on that same path, and you have to have belief in each other and trust in each other. And how do you get trust? You communicate. So we were always strong at being good communicators. Now it doesn't mean we ticked every box every time, because that's not the real world either. But as hard as we tried, we tried to communicate openly and honestly about issues, because that means people have got a better chance of coming along with you on the ride.

MH: And presumably, that's no different to the lessons that you're trying to convey to the families that you're working with. Can you just talk about some of the work that you're now doing through Point Made, and why or how you think you can impact the outcomes.

DS: The work I do at PointMade is a family advisory company. I set up about 10 years ago, and then in about 2013, PwC acquired PointMade, and I became executive chairman of the family advisory division of PwC. But that, that deal finished the end of last year.

So, I'm back now in PointMade, doing what I love doing. I'm passionate about family businesses, and tragically family businesses all around Australia are imploding for the wrong reason. They're imploding because of a breakdown in family relationships, and not because the business is no good. And we talked about communication Matt. Communication in families is pretty poor. We say we communicate, we think we communicate, but we don't do it effectively enough. And we have a real problem in having difficult conversations on difficult topics with our children and family. And therefore, we build up a culture of not talking. And so what Australia as a nation is going through at the moment is baby boomers, men and women in their seventies and eighties, born post 1946, and in let's say in business, and it may not be in business, it might be with their investment portfolio. They're having to face up to some hard calls.

How are we going to talk to our kids? Or, should we talk to our kids about our state plans? Who gets what to be crude about it? How are we going to deal with it? And if you've grown up in a home or a family that is not used to having these discussions, you'll keep it in your suitcase, you'll keep it in your bag. And it won't come out there until under crisis. Okay. Because it's very difficult to have those sorts of conversations if they're not part of your DNA. And so, part of the Point Made process is to help people understand each other by facilitating what we call family meetings, by making sure everyone has a voice in a safe environment. And so from the youngest to the oldest, from the smartest of the ones that are not maybe so smart, we give everyone a voice. Because you can't make decisions for your family, unless you truly understand the needs and wants of all of your children, grandchildren, as the case may be.

So, we've been very successful in making people realise what they need to do because most of the people we deal with in business, you can't tell them a thing because 99% of their time is focused on business and their names are up in lights. They're successful. They know what, who to talk to. If they've got an issue, they know which lawyer or accountant.

God forbid, if there's issues going on with their children or grandchildren or their brother or sisters, or the case may be, when it comes to family relationship issues, they don't know where to turn to. An account frankly is not going to help them. Okay? They're not good with that. They're good with numbers, great with statistics and data, but they're not going to help them in terms of, tell me man, how are you really feeling? What's really keeping you awake at night? What is really concerning you?

And the lawyers in most cases are not good either in that sort of thing. You've got to show a little bit of empathy, you have to care about people and I'm not being trying to be disrespectful, but it's those sort of intangible discussions on soft issues or what I call the quality of issues. That's where there's a failure of people go and talk about it. So, that's the whole Point Made is covering, and we're thrilled and privileged to work with so many really wonderful families and helping them to achieve the aims. And most of it Matt, is about closer family harmony, and unity, and continuity.

MH: I think it said it's a fascinating topic, and could probably spend the next couple of hours talking about it. Do you happen to know how many small business or family run businesses there are in Australia?

DS: One and a half million.

MH: One and a half million. How many-

DS: Australia has about 2.2, 2.1, 2.2 businesses which estimated about 65, 70% are family businesses. Now, that includes the Milk Bar, Mum and Dad, 7-eleven franchise obviously, but we contribute small business and family business. Private business, I should say, contributes about 60% of Australia's GDP. It's huge, and yet it's not a topic that many people talk about. If you take away the top layer, the multi-billionaire families that are so well known, the Packers, the Lowys, the Reynards, the Pratts, there's a whole thousands and thousands of others, that are spread around Australia, that are making a major contribution to our economy. They've got similar sort of issues and they need to be dealt with, and they're not getting much publicity.

MH: The numbers are staggering. I don't know if my numbers right. It's something like 500,000 of those are actually looking at exiting the business in the next five to ten years. Is that something-

DS: Well I don't know about that particular statistic, but I know that succession planning is generally the, any data, any research that you see, less than 50% of people have a succession plan because you're going to talk about my mortality. Give me a break. I'm fine. I'm 72. I'm healthy. Come back in 10 years and talk to me. You're asking me to make a decision between which such child might may take over for me. I can't do that. I love them all equally. You asked me to plan. I don't plan. I just live day to day. All these things come into play, and that's the reason why no more than 50% as I said, would have a succession plan. And yet the lack of succession planning is the biggest issue facing family relationships today.

MH: You've mentioned communication numerous times now, so communications is what's lacking the most. How do you put that into a family business or a family environment? Is it through formal dedicated sessions? Is it about actually having a mechanism to discuss things more openly throughout the day, and putting a divide between work and home? What are some of the things that you-

DS: There's many ways to do it, but the most effective way in my experience, is to put family meeting time in your diary.

That in some cases, depending on the complexity of the family, it might need to be monthly. In other cases, it might be quarterly. These are family meetings, not business meetings. So, we don't want a family meeting that's going to be driven by the father or the mother, and spoken to for 90% of the time, and the last thing is, well Matt, hey, how's everything going on with you? We can't have superficial discussions.

The communication has got to be meaningful. In my view. You can't have a meaningful relationship, unless you've got a meaningful connection. Okay? You've got to have a meaningful connection. That means I've really got to understand you, and you've got to spend the time and the allocation to allow that to happen with all of your family members. And that can come about on a regular basis when you sit down with an independent chair. As a parent, you can't share your own family meetings because I've got three wonderful sons. I love them all, but we've all got them in little boxes, and we've got to be careful of, of being objective, and so you need someone that's there for the protection and growth of all the family members to treat everyone fairly and equally when it comes to a voice around the table.

MH: And, this is not about discussing the profit and loss or-

DS: No. Don't want to know about it.

MH: This is about family matters.

DS: Now, let's look at ourselves.

MH: It'll come up.

DS: The businesses drive the financial situation of the family, and so, therefore, it's appropriate. There might be an overview, there might be a general summary, but it's not detailing what the strategy's going to be. You have to use your common sense. So there's going to be something in the press about your business activity. Well, of course the best thing is to tell your family before they read in the press. Or, your photo is going to be in a magazine. You need to tell them, because it's all those little things that going to upset and disrupt the family. Why's Matt in, and not Michael? Or vice versa, whatever the case may be. It's all those little things that add up. So all that stuff in our suitcase did, if you don't have those family meetings, you're not unpacking. And, it stays in that suitcase until it builds up and up with all this stuff, and then it explodes, because you've seen us something that dad might've done that really upset you.

MH: So, you often hear stories about the black sheep of the family that just doesn't want to engage, doesn't want to get involved. Do you need to drag people to those style of meetings or do they just-

DS: I would help you don't have to drag the man. I would hope we would encourage them to participate. They may not be interested in the business-

MH: Yes.

DS: But they should be interested in family.

MH: Yes, and that's a good point because business, you've always got different levels of understanding, interest-

DS: Not everyone wants to be a businessperson, but hopefully whatever your child wants to do, encourage them to follow their passions and their interests. And if something different from what the mother or father do, well, so be it. But doesn't main they shouldn't be joining in a family meeting, because that's where they belong.

MH: So, you're one person, and there's a lot of families out there that need help. How does that get solved in Australia? Does the government-

DS: Well PointMade, I've got now four people working with me.

MH: Okay.

DS: And there's others that do it.

MH: Yes.

DS: We do it a little bit differently, we would suggest. But that's okay. Everyone's there to do something they're passionate about. And, it's a serious worry. I mean, I'm frankly too busy than what I should be, but I love the challenge when someone comes in, particularly if I know of them, or I've read about them. And, they've got all the money in the world, and they're telling me I can't get my kids together for Father's day, or can you help me get them all around the Christmas table because one out of three of them are coming. And you say, why? Well, the others are talking to each other. That really upsets you. And you realise, what's going on in our society?

What's going on in our community? And today with our technology, with on the phones and the iPads, we're losing the ability to look each other in the eye and call a spade a spade. Or to have a difficult conversation. And these issues about wealth, about estate planning, about who gets what, they're not easy conversations and they're very difficult. But it doesn't mean you keep them in your suitcase, because it's only going to get worse.

MH: I heard a great saying once. That was a particular family and they had a CEO. And the CEO is actually the chief emotional officer, as opposed to the traditional CEO, and that actually rings true I think for so many groups.

DS: Well we talk about the quantitative and the qualitative. And a lot of business people follow and are only focused on the quantitative side of life.

What are the numbers, what are the finances, what's my balance sheet look like? What are the returns, what are the margins, and all that. Which is obviously from a business perspective, one can argue with it. But, if you're in a family situation, whether it be in with investments and or business, I say it's the quality side of life that's just as important. Not to the exclusion of the other, obviously, because the business won't survive. But you've got to allocate much more time, than currently what's been done. And the other thing Matt, to recognise, is your best assets in my view, is not your balance sheet. Your best assets in a family is each and every family member that sits around your table. And if you treat them with respect, if you give them a voice, you'd be amazed at what you can get from them.

Particularly from younger women today, who in my experience are treated like a second and third rate citizens. And then we would create the safe environment for them to come along to a family meeting, when we've encouraged them and influenced them to ask some questions. My God, I can see the mothers looking at the father, huh? Where did this come from? We didn't know she had, they've never given her a chance. And I say that because it's so common with the families we are dealing with that the men, the boys, are treated differently than the girls. And today that is just unacceptable.

MH: How about wives and partners? Do they come to these meetings, or is that not generally the way they are run?

DS: There's a difference if it's bloodline. So, if it's the mother, she definitely needs to be there. Okay. A more contingent issue is what do you do with the in-laws, or the out-laws, as some people call them? Everyone's got a different view on this. My view is that once you get your act together from the bloodline perspective, once you've broken out and what, who you are, what you stand for, what the principles, what the vision for the family is, you then should encourage the spouse of the in-laws to come along and participate in them. 'Cause how can you have a close knit family, if you go home and you say to your Mrs, "Sorry, we had a great family meeting, but can't talk about it. It's all confidential, and you're not included." It doesn't go to help your marriage.

MH: It doesn't seal the mood, no.

DS: And so, there are some unfortunately old fashioned values, that we've got to put up with. But remarkably, we've got a few men in particular, changed their attitude, and now they realise, wow, it's actually added another dimension to our family by having our in-laws there.

MH: It's interesting. Many of the things you've talked about, in many ways, would be considered un-Australian. To talk about emotions, and to talk about real issues.

DS: If you're a White Anglo-Saxon, you come from a background, and we're generalising, obviously. You come from a background where we don't talk about these things. I've heard repeated, "My grandfather taught my father, grandfather, never to say a bloody word about money or wealth." And, "My grandfather taught my father, and my father's taught me. So, how do you expect me to change David?" Well, what's important to you? And hopefully, it's well, family, unity, family continuity, family harmony. So the guy, your children know where you live. They've got a rough idea of your spending. But in my experience, if you're not on the front foot, if you're not talking about your wealth with your kids, the kids will not be asking you about the wealth. And we know that wealth alone does not give your children a sense of purpose or direction in life. Wealth is never the glue that binds a family. Wealth alone will never buy happiness, and that's why wealth is sometimes a burden more than a benefit and that to me is tragic.

MH: David, you gave us some incredible insights, some fantastic lessons. I think our listeners are going to absolutely love what you've spoken about today. Unfortunately, we are getting close to the end of our time, but what's next for you?

DS: What's next for me? I'm just loving-

MH: It doesn't sound like you are slowing down.

DS: No, why should you slow down? I'm only 72. I'm enjoying what I'm doing. My purpose in life Matt, has changed dramatically from being involved in a family business, to then going for sixteen years as the chairman of the Bulldogs, which was a different sense of purpose. Together with my time at Family Business of Australia. And my purpose today is simple. To share my experiences with others, to assist them. And, as long as I continue to make a difference to families, as long as I'm in good health and I'm challenged by what I do, I'll continue what I'm doing.

MH: You've certainly still got the passion. Thank you so much for all of your insights again. It's been great chatting, and look forward to, to hearing more and learning more about what you're doing over the years.

DS: My pleasure, Matt. Thank you.

 

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