Fiat's John Elkann shares family business views
John Elkann, Chairman, Fiatl
John Elkann followed his grandfather Gianni Agnelli on to the board of Fiat at the age of 21. In 2010 he became chairman at the age of 34. He presented some of his key views about business-owning families at the Family Business Network International Summit in October 2010.
John explained that the family business was formed in Italy in 1899 by his great-great- grandfather, who often visited America and knew Henry Ford. The business struggled during the mid-1940s but grew strongly after the end of the war. The 1980s stood out as an excellent decade for Fiat with growth across its divisions, which include the manufacture of cars, trucks and agricultural machinery. But during the 1990s the business results were not as positive.
Also at this time there was an issue of family leadership as Gianni Agnelli neared the end of his life. The expected heir, who was the fourth generation since the founder, died of a rare form of cancer at the age of 33.
American-born John was a member of the fifth generation and he came to live in Italy when he started his university studies. Gianni Agnelli spent time with him and appointed him to Fiat’s board. Then, while John was still in his 20s, Gianni Agnelli died. He had been one of Europe’s leading business people and thousands of people came to his funeral to pay their respects.
The family then found itself in a relatively weak position with no clear leader, large bank borrowings, and no stability among the highest level of management at Fiat. John recalled that there was a “sensation of agony everywhere”.
Decisions had to be taken. The family raised the capital of Fiat by re-allocating money from other ventures. John Elkann became vice chairman of Fiat in 2004. A new CEO was appointed, Sergio Marchionne, who returned the automobile division to profitability. The overall situation improved rapidly and 2008 was Fiat’s best financial year in its whole history.
But then the global financial crisis hit hard. Again, some big decisions had to be taken. John says: “We knew we had to partner with someone. We would be happy to dilute our family holding if it meant being part of a bigger and healthier organisation.” In 2009 Fiat announced an alliance with US car-maker Chrysler.
There can be a sense of guilt about being wealthy.
Reflecting on his experience over the last decade, John said that it “has been extremely intensive in facing internal and external problems. And when I think about these crises, and when I think about the future, it’s clear that many more will come. The reality is that you cannot really prevent them so the important thing is to face them and react to them.”
What issues are top of mind for John as he leads his family forward? His thoughts are very much with the next generation. He said: “It’s important for us that they build their lives on their own merit.” He is aware of some behaviours that can sometimes be found in wealthy families: “a sense of guilt to be wealthy, a sense of entitlement, or complacency.”
One way of trying to avoid these behaviours is through nurturing a sense of responsibility among the next generation. John believes he was fortunate to be given responsibility when he was young, and to be made accountable for it. He said that the process of giving responsibility can start at a young age and that people can grow in their roles.
John commented that “if you feel you’re doing the right thing, it makes you feel good”. One of the biggest lessons that he’s learned in the last few years is the importance of ultimately not being afraid while facing up to present and future challenges.
A second concern facing the Agnelli family is maintaining unity. John values good relationships with his siblings, five half-siblings and cousins. To help remove a potential source of tension, the family interests are concentrated in a holding company called Exor (BIT: EXO). Being listed, the shares of this company can provide liquidity: so, at any time and for any reason, the family shareholders can convert shareholdings into cash.
A third concern is being able to respond effectively to the business challenges of the coming years. John said: “As an entrepreneur you have responsibilities in trying to operate well in what you have to do. There is a positive effect if you end up doing that. That’s where I try to spend most of my efforts.”
John is very aware that business-owning families have to evolve over time. He described the process as ‘very Darwinian’. He quoted the example of South Korea’s Lee family who started as traders in food items but then extended their line of work and went on to create the many divisions of Samsung.
As well as adapting the nature of their businesses, some families also need to change their geographies in response to evolving circumstances. For example the Murdoch family began in Australia, moved to the UK, and now operates in the USA and worldwide.
John recognizes that families and businesses are, by nature, very different. Families are about equality and helping each other whereas businesses are about hierarchy and performance. The challenge is to be aware that the two systems function differently and to find ways that they can communicate and operate one with another.
John said: “The lesson I have learnt is that when a family and a business function, they function together. You have to have a family that works and a business that works and the two will end up working well alongside.”
It’s clear that John has learned much from the overlap of family and business. His grandfather taught him useful lessons during the time they had together. One of these was not to be ashamed of not knowing, and to have the humility to “be ready to ask others”. Another lesson was that “business is done by people so you have to understand people”.
John has also absorbed the family’s philanthropic commitment to education. Talking about philanthropy, he says: “What we believe in is applied to the family foundation that is working on education. The only way to have better people is ultimately to educate and so that’s where we spend most of our energies.”
Towards the end of John’s presentation he was asked by an FBN member what he would like to have achieved in 20 years time. His answer was: “What I’d like to have achieved is that the next generation grow up well and they are happy in their lives and solid individuals, and that the business which I’m involved in is doing well or at least we can face the challenges it has. And being happy with this.”
All information concerning the 21st Family Business Network International Summit is now available at www.fbn-i.org.