Three generations of the Babich family: Brothers (L to R) Peter & Joe and Peter's son David
Babich Wines is a living testament that family-owned companies can build longevity into its DNA provided it has the right philosophy.
Since Croatian migrant the late Josip Babich sold his first bottle and casket of wine in 1916 under the Babich Brothers brand, the company has grown into an award-winning international company, exporting to 40 countries around the world.
Central to its success is a strong commitment to developing leadership qualities and professional expertise among the people running the company. Family members who want to work in the business must first learn how to.
This year, Babich Wines is planning a series of events that will lead up to its centenary in 2016. Idealog asked Joe Babich, son of Josip, some questions about building a long-lasting business, and what makes inter-generational business work.
Q: NZ companies, according to a recent global survey which included NZ companies, are slow in planning for succession. What has Babich’s experience been in handing over the reins of the business to the younger generation?
A: As the second generation coming in we had no difficulties with our father who virtually gave us free rein to run the business, which was quite small at that time. Moving from the second to third generation has been different as the business is so much larger and more complex but similar freedoms to install new systems of management etc. still exist.
Q: How was the transition from old to young made?
In our day, we came in with a higher level of education than our parents and grew into the role over time. The same applies today where David (3rd generation), who is my brother Peter’s son, came into the business with a higher level of education – two degrees and seven years commercial experience – and has been allowed to grow into the role.
Q: What were some of the important lessons you learnt, in transitioning from a family-run business to a modern company run with a global vision in mind?
A: We had traditionally been a production focussed company and it took some time to adjust to become a market focussed business. Also understanding the importance of price points in the market and tailoring our costs to suit rather than having a cost plus mentality.
Q: Can you cite some examples of what has been the most difficult part in selecting who gets to run what (among family members?), or was it a natural process?
A: In the first instance we all did everything that had to be done. As the business grew and became departmentalised Peter (my brother) concentrated on viticulture and the financial performance of the business and I on the wine making and production. In each case we brothers were fortunate to be working in the field which most interested us. In David’s case he started in the winery but quickly realised his interests were in the administration side of the business – re-educated himself and is now doing what he likes.
Q: US research shows that companies seldom last over one generation. Is the wine industry an exception considering you have been around for 100 years? The company already has 3 generations involved in the business.
A: The wine industry is different in that it is capital intensive, is affected by the weather and a long term view is crucial. Families are generally more accepting of highs and lows than the stock exchange.
Q: How do you manage inter-generational conflict within Babich?
A: Up to this point we haven’t had any.
Q: What is the best aspect of a family business in terms of providing competitive qualities?
A: The best aspect is being nimble and decisive.
Q: How do you plan for future succession?
A: Future family members must be highly educated but also have genuine leadership qualities otherwise outside managers will need to be employed. A strong capable board is vital.
Q: There are professional managers helping run the family business. Can you elaborate on why this is so important?
A: It is important to employ skills that are not available in the family but as the business grows it is unlikely that family members could fill all the roles anyway.
Q: How are management lines drawn between owners/family and professional managers?
A: Each area is answerable to its manager who in turn is answerable to the general manager who is a family member/owner.
Q: Do you have an exit strategy in place?
A: The exit strategy is to have the next generation take over the business management and receive dividends from a well-run business.