The Key to Thriving Family Business Across Generations

[MUSIC PLAYING] You are listening to the Insert Family Business Podcast. We are talking to family business leaders, professional executives, and the next generation to help inspire the leaders of tomorrow. Today's episode will focus on how to keep a family business successful across generations. My guest is Timothy Kusulic. He's a 16-generation of the Family Enterprise Kusulic Group which was founded in Italy in 1857. For generations, the company has been a major player in many industries and sectors. Today, the activities span more than 15 business units, 133 companies, and they are employing around 3,000 people worldwide. Timothy also holds an MBA from Insert Business School, like myself. Timothy, welcome to the podcast. Thank you, pleasure to meet you here, Martin. I've been looking forward very much to this conversation because Kusulic Group has such a rich and fascinating history and legacy, and it has succeeded very well over many generations. Maybe we could just kick off the podcast with a brief background and timeline of Kusulic Group since its founding. Of course, it would be a pleasure. So the group was founded in 1857. As you mentioned, it's a family business. It's still 100% family owned by our family. We started as a sheep owner back in 1857, but being sold, that also means that we went through history and different events that occurred over the last 168 years, including world wars, of course. And so during World War I, the fleet was destroyed. So we had to rebuild the fleet during World War II. The fleet was nationalized. So we had to rebuild the fleet again. At that time, we also had a shipyard. The shipyard in Mofa Kona near Tiesta, which is now one of the main shipyards in Europe dedicated to shipbuilding for the cruise sector, that was also nationalized. So we have a history of having to restart, let's say, which I think pushed our entrepreneurial spirit over the years. And probably we were already entrepreneurs at heart, but we would become even more entrepreneurs. So then we started to diversify beyond a ship owning into ship agency, into ship management, into logistics, into marine energy, and to the steel industry, which is now the only non-ship business that we have within the group. And so we have now a rather diversified group with a number of business units and present across the globe, with about 3,000 people, and turn over about $2 billion. Wow, that's very inspiring. You actually worked outside the family company before you joined. How did your corporate career influence the leader that you have become today? It's a good question, and it's something that I'm very grateful for, and grateful, first and foremost, because of the learning that I was able to receive and to go through during those years. I spent 10 years outside of the group. 10 years is also the requirements that we as a group have for family members who want to join the group. They need to have their own career outside of the group for approximately 10 years. That is one of the requirements that we have. So I was very fortunate to spend time with the people who were very good and who were very generous with their time and their willingness to teach. I spent first about six years at PWC, as a strategy consultant. After PWC, I went to ESAADs, I got my MBA, and then after ESAAD, I joined Merck in the Netherlands, where I worked as a general manager for about three years. And both at PWC and at Merck, I had fantastic bosses, fantastic colleagues, and I was able to learn a lot. Another big upside for me was also the structure that I got from those two experiences, from those 10 years. Probably I'm already a relatively structured person myself. But I think the years I spent at PWC and Merck made me even a little bit more structured. Some people say maybe too structured, but I love planning and I love organizing, let's say. It's also the experience outside of the company, is also maybe we'll go a little bit deeper on that later on. But it's also very important for your self confidence. Because obviously, if you join your family business, I think it is quite human for people around you. You assume that you're there just because it's your family business. Whether it's right or wrong, it's beyond the point. I think it's just something that happens. And you as a family member need to do with it. And I think that having the self confidence coming from a career developed outside of the company helps a lot with that. And then finally, there's also the idea of the message that you signed to the organization by having a family member who had his or her own career outside of the group and who has demonstrated a level of self-reliance and who then joins the group, as opposed to someone who joins the group straight from university not being able to really contribute that much to the success of the company. So was it always a given that you should join back in the family firm or what made you decide after such a long career outside? Were there any pressure or expectation from the family, from senior generation for you to join back in Italy? No, definitely, it was not a given. And definitely, I didn't feel any pressure to join. If anything, it was a little bit the opposite. We, for right or for wrong, I don't know. But we almost try to discourage family members from joining the business because we feel that we only want the truly committed ones. And those who are really interested in the business as opposed to attracting those who see the family business as the easy option, the easy way out in a way. So at that time, I definitely didn't feel any pressure. I remember conversations with my dad, but my dad was asking me what were my main drivers and highlighting the fact that if money was my main driver, then this would probably not be the best place for me to work. Because we have a comfortable living, of course, but none of us has a private auto or Ferrari or anything like that. We work quite hard, and that is the driver, the opportunity to develop something rather than how much money we can make and all that. So definitely no pressure. What brought me here was, I think, an alignment in terms of the entrepreneurial spirit that I had and that the company has, an alignment on values, which I think is related to what you could call legacy. So there's that mix of tradition and values that I definitely felt aligned with, and but also a sense of responsibility and accountability. There's something I love, which is leading by example, so really being an example every minute of my life, and that is something that I can do here. Fantastic. What is your current role then? So my direct responsibility right now, so technically I'm the CEO for marine energy, meaning that I'm responsible for the marine energy business units at the global level, and marine energy being right now the business unit represents the highest share of turnover profits, risk, and investments within the group. I am also in charge of HR at the global level. At the same time, we have gradually started a succession process with my father, who's now the group CEO and at some point, let's say I'll take over from him. There's absolutely no rush. He's absolutely active, sharp, and on the ball. So it's not something that will happen soon, but it's precisely because of that, precisely because it's sharp on the ball and active, that is when you should start the process. And it really helps that we have a fantastic relationship. So it's really collaborative effort. Let's look a little closer at your group from a kind of internal and external structure level. Maybe governance first, right? What governance mechanisms and structures you have in play to manage the family, but also the business side of things, I mean, family assembly, family council, committees, and so forth. How have you structured yourself? To answer the first part of the question, so governance on the family side is quite quick, because there's very little. A lot of them proud of that, but we have a family constitution, which we work very hard to write and to agree on. So it's not just a document that we have on a shelf. It is something that we are all aware of and something that we live by, something that we comply with and that we care about. So we have that, but that's pretty much it. We don't have a family council, we don't have a family assembly. We don't even have kind of a family reunion, if you will. Historically, there's a little bit of a separation between the family and the business. We've always been a family business, but somehow we've always kept the business quite separate from the family. I remember very few conversations, probably no conversations were at the dinner table or a Christmas where you would talk about business. There was very little communication from the business to the family on what the business is about and so on. You know, I remember this story, my dad sometimes told me that until a certain age, my dad thought that my grandfather, his father was working at the train station because he always had some tickets, trade tickets with him. So he had no idea what his job was. So this is how little communication there was from the business to the family. If we look at the business on the other side, we are definitely improving on the governance sides. Obviously we have a board of directors, but we have a year and a half ago, we've introduced an executive board members. So we have now two external board members on the board. - Which is a bit of an event after so many years. This is the first time you have non-family directors. It must have been a bit of an event. - Huge. It took me a good six years to convince everyone, particularly my father. - An interesting thing is somehow the board was, at least this is how I perceived it, was seen almost as a sacred place where we share the deepest secrets and things that you cannot tell outside. When in reality, in my years here on the board, I thought this was just meetings. (laughs) Not once, I heard stuff that really could not be revealed outside. So I think it was more of a legacy again from the past and I think that everybody now really sees the added value of having an external board member, someone who is aligned in terms of values, but who brings a different perspective, a different set of skills as well. Because obviously we don't have all the skills within our board. And so it's good to have that. Also, it brings a lot of discipline because what used to happen quite often is that we would agree on something and I would commit to do XYZ, but then come the next board meeting since you and I are cousins, you would not really put me on the spot, say, "Hey, did you do XYZ?" As you said, you would do. Whereas now we have that. We have that level of discipline. We have the level of preparation that you need before a board meeting, in terms of documents that you prepare, the level of the documents, the level of the data that you need to share. So it's getting better and better and I'm very happy with that. How many family members are there in your family? In the group, we have at the moment five on the board, plus another three not on the board. So there's a total of eight family members in the group of which five sit on the board. And we have three different generations. We have the 56th and 7th generation represented. An important issue in family business is also ownership and the mandates around ownership. It can come with aspects around fairness, motivation, privilege, governance and so forth. How do you manage ownership in a cosolition? What are some of your rules? How have you structured ownership? - This is a more related to the previous question and it is definitely one of the challenges. How do we keep the family engaged? How do we attract talents going back to my point earlier about discouraging young family members from joining because you only want the interest of the one. At the same time on the flip sides, you also want to make sure that you attract talents and we know that today markets is sometimes more of an employee market than an employer market. So the challenge is how do you attract and retain talents? Whether it's family or non-family, right? So that is one of the challenges that we have. Also consider historically being very little communication and there still is little communication from the business to the family. Historically we've never distributed dividends, which is something quite extreme. We can go a little bit deeper into that if you want but it's something that is quite particular for our business until last year. We've always invested 100% of our profits into the business. Last year we sat a rule that we would distribute 2.5% of our profits which still very close to zero. It's just that when in the process of writing our family constitutions, we felt that we should include a provision for dividends. And so we sat that to 2.5% still quite low. Is ownership distributed among families or how have you set up your own structure? The way it works now is we have a holding company, which in Italian it's called Sochita's Implature. I can see it as a normal limited company. You have shareholders, but shareholders are divided in categories and so the categories basically reflect the family branches. So right now there are four categories. To give an example, my dad's category represent 49%. And the other three categories represent the remaining 51%. And the reason why we have categories is that shareholders belong into the same category. They have to vote jointly. They cannot vote this title. That is rule number one. Rule number two, which is quite important. Not all shareholders can vote. Only the shareholders who sit on the board of the operating company. And so one example would be that in the 49%, working for my dad's family branch, only my father and I vote. And we have to vote together. So the mechanism is designed so that only the people involved in the business and who supposedly understand the need of the business can express their vote. And this mechanism also addresses the issue of fragmentation with the share holding because it doesn't really matter if you own 40% or 1%. What matters is what branch you belong to and whether you sit on the board of the operating company. This is what matters. So we've always tried to find ways to have only the people who truly understand the needs of the business to take decisions for the business. So with different shareholder groups and voting rights, and you also said that there's a simple family governance structure that seemed to have been working well for you, it also relates to how do you keep on up harmony, coherent unity, which is so important, not only in this generation, but you have to do it across generation. It also relates to a bit to what you told about values in the beginning, not always easy round. How do you manage and balance these issues of harmony, coherent unity, and keeping up the values while having this, I would say, unique structure in governance and ownership? I think there's not just one single thing. There's a number of things that we do. To start with, as I mentioned earlier, none of us family members working in the business has particularly luxurious or lavish lifestyle. So as I said, all of us have a comfortable life, but nothing crazy. And we work very hard, all of us. And that is quite important because the family members not working in the business, they see that. They see that we're not taking advantage of the position we have. They just see people who work really hard and they get decent remuneration out of it. That no dividends, because the no dividends apply to everyone. So we get the salary, we get the bonus at the end of the year, but that's pretty much it. So that is the first thing. If you go to our company in the parking lot, you will see very normal cars. I use evolve over here, a fiat there. It's quite low-key. So you're not motivated by money? Definitely not, definitely not. I mean, money is a tool that you need to satisfy needs. Sometimes they say that happiness is the difference between what you need or what you think you need and what you have. But to increase happiness, you don't necessarily have to increase what you have. You can also decrease what you think you need. And so I think we are definitely on that side of the spectrum where we're quite low maintenance. And I'm definitely a lot more motivated by independence, by responsibility, by the possibility to give something or to grow something. Going back to your question, another thing we do is we truly do our best to keep the family currents and future generations engaged and giving them the possibility to join the business if they deserve it. So one example would be that, of course, you will have a certain generation that for a certain branch of the family maybe is not represented. But then my responsibility as someone in the business is to make sure that the next generation in that family branch is taken into consideration and is given the opportunity to join the business, assuming they have the right skill set, the right attitude, and all that. So they don't have a branch of the family that gets forgotten. That is one thing. The other thing is, again, to try and be present in our community, locally, be an example. For us, the company for "Tally Cosr" which is our last name. So it's quite visible. So it's also about making sure that people from the family, they are proud of what we do. Whether they get something out of it or not, but that they are proud to be associated with the name. So there's a few things, and by no means we think they are perfect. But it is definitely one of the areas where we focus on is how do we keep the family engaged. How do you educate and motivate the next generation and how do you bring them in and how do you make sure the legacy lives on? Do you have any specific activities or rules or programs to make sure you always engage the tomorrow's generation? Yeah, so the only rules we have is one is the one I mentioned earlier, the 10 years approximately work experience outside of the group. Obviously there's an attitude aspect. We want to make sure that the person is the right fit. Again, so aligned with our values, low key humble team player with a very strong learning mindset, all these kind of things. One thing that I started a few years back that is working quite OK is a program for young family members. So starting their university or more even looking for the first job. And it's basically a mentorship program where I offer myself as a mentor, whatever that is worth. And mentorship deal includes advice, brainstorming, conversations and all of that. It also includes connections. So if you are a young family member, you're looking for a job in London in a certain industry. I will do my best through my contacts and my connections to help you find an internship or a job outside of the group. So this is my end of the deal. Their end of the deal is they agree to periodic and regular chat conversations so that I get the opportunity to know them, number one, to evaluate how they think, how they decide, what they say, what drives them, and all of that, with no commitment from my side to offer them a job at the end, and no commitment from their side to come and join the group. But over a number of years, at least I have the opportunity to assess them and see if they could be a good fit for the group, as opposed to taking a decision based on a 45-minute interview, which can be obviously quite misleading sometimes. Succession can be quite complex and sometimes emotionally challenging as well. What advice would you give to the next generation, maybe finding themselves at the vantage point of joining or maybe even being in the family business because you had tried that journey yourself and now you're in the family firm, what advice would you give to next generations? Mostly, I would say, being clear about what drives you and being clear about what your values are, your personal values. And then do whatever you can to stay true to those values. Joining a family business is a long-term decision. The way I pictured it in my mind was taking my CV and repeating it apart. This is how I saw it because I really saw it as my last job. Obviously, you can't leave your family business, but it is a little bit like a divorce. So it comes with consequences, mostly emotional consequences. So when I was asked to join a family business, I really took the time to think whether it was what I wanted for the long term. And I spent quite a bit of time on that. And I came to the conclusion that, yes, it was what I wanted. So one advice would be to really think about that in terms of your personal values, whether they are aligned with the family business and whether you're comfortable with the idea of joining your family business as a very long-term decision. Do you think that the current global next tense, I don't know, we are generalizing here, are the different in their views, aspirations, demands compared to the previous generations, even to your generation? Do you see any differences or have next tense always been different at any given generation? I do think that every next generation has been somehow different from the previous one. And so the new generation is, in my view, no exception. Obviously, there's always, they are different in different ways. So what I see is that the new generations and now here I'm generalizing, right? So it's not necessarily correct. But I think they look at their careers in a different way. The concept, for example, of lifelong employment seems to be gone. I don't see it there, whereas it was definitely very present in the generation before mine. And certainly it was present also in my generation to a certain extent. The level of patience has also decreased. So the idea of doing the same job for four to five years somehow seems unthinkable now. And we have in our group, people have been doing the same job for 35 years. And they keep on enjoying it. They keep on learning new things. At the same time, they have some young graduates who do something for three years, consider themselves the worldwide expert of whatever that is. And they are ready to move on to something different. And again, I'm generalizing here. But it is a pattern that sometimes we see. What I think is that the challenge for organizations now is how do we adapt to this generation? How do we address the needs without compromising on our values and on what we believe is the important thing? I want to turn into longevity because you have this long legacy and heritage in Kosolec. How do you balance that strong legacy and heritage, which I'm sure you want to preserve? How do you balance that with renewal and innovation? Because you're still going to be market fit. You're still going to be relevant. What is critical to observe between legacy and heritage and renewal and innovation? How do you find that balance? Yeah. Well, like many family businesses, legacy sometimes can hold you back. Personally, I have started a bit of a personal battle, I guess, we've always worked this way, type of approach, which is a standard answer that I would see a number of times during my time here. And I do see a shift, but it takes time. It takes time is not something that happens overnight. It is, in my view, it is very correlated also to your approach to failure. It spends quite some time with colleagues on a regular basis to clarify the difference between let's call it a mistake and a failure, where failure-- and obviously, this is just semantics. You can also swap the two terms, but let's say one type of failure is you're trying to do something new and you get it wrong. You use all the information that you have available, and you get it wrong. And that for me is OK. Absolutely. I welcome it. Obviously, I don't want fatal failures. I don't want something that kills the company, but I'm absolutely fine with that. Mistakes are basically errors that you make because you don't use the information you have, because you don't build on your experience or things that you have done in the past. And so despite having the information, despite having tools, you still made a mistake. And that is not OK. So I think what we're trying to do here is really building an environment where the first type of failure is between tolerated and encouraged. And obviously, nobody likes to get things wrong. Probably at heart, we're still more European than Americans. And that is probably part of the explanation. But in general, we are really working on making that type of culture stick within an organization. There is also, I think, an element of, you know, often you hear people saying, I want my people to come with solutions, not with problems. I understand where that comes from, but at the same time, I think that if you take that to an extreme, then people will be afraid to share problems with you. So I want to hear the bad news. And I want people to feel free to share the bad news. And then we discuss together. Obviously, I'm also expecting people to make suggestions, to propose plans. But I don't want people to not communicate because they have to come with a solution. The other point is also how you model your attitudes when it comes to disagreements. One of the requests that I made to some of my direct reports, for example, because amongst my direct reports, obviously there are some more introverts, some extroverts. There's a variety of nationalities. So also there's a cultural element there. There's some of them I'm very close to, some of them I'm less close to. I've asked the more extroverts and the ones I'm more close to to openly and publicly disagree with me. Obviously, I have not asked them to make up disagreements out of nothing. But I've asked them whenever they disagree with something I say, I really need them to make that point openly. To openly disagree with me so that we can together give an example to everyone that it's OK to disagree with me and to contradict it. So there's an element of all modern in there. And then finally, there's also an element of something I'm truly passionate about, which is learning and study. So the idea of always being a student and having this learning mindset where there's always something that you can learn, there's always something more that you can know about something. There is always something you can learn from the person in front of you, no matter who that person is. And the famous epithetus quoted, you cannot learn something that you think you already know. So I think that if you put all these things together, then even as a family business, you can really balance the legacy elements with the innovation. So how do you keep your entrepreneurial spirit burning so well? Do you have existence for so many years? And I'm guessing you're lifetime. You're also going to leave the asset behind in a even better shape. What's your secret source to the entrepreneurship and the entrepreneurial spirit? There's, for sure, there's an element of curiosity. I'm a very curious person. I love new ideas. I read a lot. I like to learn. There's a big element of listening as well. I do my best to listen as much as I can. I think we have two years and only one mouth for a reason. Sometimes we forget about it. And I also like to support my colleagues' ideas. And I do my best to let them feel the ownership on those ideas. Because that is really, I think, part of the essence of the entrepreneurial spirit is not about you being the mastermind behind everything or the source of the genius. The idea is really to create that environment, that ecosystem where ideas can come up. So I want my colleagues to come up with ideas. I want them to feel ownership over the ideas. And so that we see it as a team effort. It seems to me you're also bringing a bit of a cultural change in Kosolec. You seem to be very adaptant to your leadership and getting your colleagues to come forward, not to be intimidated by you being a family member, but really getting diverse views and participation. I think this, what it just mentions, takes me back to Fratelli Kosović as a very long-term employment project for myself. I need to be comfortable here with the way we work, the way the company works. And so this is the way of working that I feel comfortable with. And so I have the privilege to be able to shape the company in a way that I feel comfortable with, that aligns with my values. I'm also privileged that I'm not really revolutionizing anything. I'm developing certain aspects of the business more than others. I didn't have to do a turn around of the company. The company was already doing quite well. Timothy, where do you get your inspiration from? I mean, who inspires you? Well, my dad, for sure, is an inspiration. He's always been an inspiration and continuous to being with his passion and his energy. And his love for what he does for the people around him that is certain inspiration. As I mentioned, I read a lot. So I find a lot of inspiration from the stories. I read the books I read from past people, current, and so on. I'm very passionate about sports. I'm a passionate triathlete. So I also get a lot of inspiration from athletes and their stories. Collaborate with a number of athletes and some parolidic athletes. I find them particularly inspiring because of the stories and the challenges they go through. So there's also some inspiration. I find inspiration from my kids, the things they say. Also, it's not a direct inspiration, but sometimes, in business, you find yourself having to take a decision that has some ethical/moral element. And maybe it's a gray area. And for me, the guideline, let's say, is always going back to my kids and thinking whether, if I had to explain my decision to my kids, the decision I'm about to take. Whether I would feel proud or ashamed. And that, for me, has always worked very well. Because if I don't feel proud about explaining my decisions to my kids, chances are that it's not a good decision. Timothy, as we are getting to the end of this postcard episode, which has been truly inspiring, when you get to your end of your own journey with Kosulich one fine day and you're going to look back at what you did at Kosulich and with your life for that matter, what's the legacy that you want to leave behind? I think it's about the lives of the people you touch. Whether it's colleagues, I think, in my case, it's probably mostly colleagues, clients, suppliers, institutions. It doesn't matter, but I think it's really about the lives of the colleagues you're able to impart. And if I can have a positive impact on their lives, whether it's on a personal level, on a professional level, if I can teach something to them, if I can help them with their career, if I can help them getting fulfilment, or simply part of a big part of their responsibility. A fee is also, as I mentioned, we have 3,000 employees in our group that also means 3,000 families who depend on the decisions we take. So making sure that at the end of each month, all these 3,000 families receive the check. The paycheck is a big part of our responsibility and something that I consider quite important. Timothy, it was very inspiring to listen to your story and to learn from you. Thanks very much for sharing and for joining us. You might try your marketing and thank you again for inviting me here. We'd love to have you back soon. Sure. Thank you for listening to the Insert Family Business podcast. We hope you enjoyed learning from the stories shared by family business leaders, professional executives, and the next generation. Remember that success is a journey, not a destination. Please subscribe to the podcast and post a review. Your comments will help others to find us. You're welcome to subscribe to our newsletter and follow us on social media. We look forward to seeing you during the next episodes.