BUS604: Innovation and Sustainability

Shareholders

"In a family-owned business it is crucial that you keep your family shareholders committed. If a large part of the shareholders want to sell their shares, you have a problem. So you pay them a fair dividend and you keep them involved. That is why we invite our family to ship launches, encourage them to visit projects in execution, and continuously tell them about the history of the company. Keeping the history alive creates a feeling that one is part of something that is bigger than oneself.

The Next Generation 

Koos continues: "Another objective is developing the next generation. It is important that they are aware of the family's roots, internalize the family values and learn to become responsible shareholders. This is why we have set up the extensive Next Generation Development Programme for family members from the age of 13 to 30. It is divided into age groups. The programme is a combination of getting to know each other, personal development, and having fun together. We engage them in a number of practical subjects like finance for those who are not experts to prepare young family members for their future roles based on the family values of stewardship, entrepreneurship, and long-term perspective. The Van Oord company has set its core values in the spirit of the family values.

Succession Planning 

"Last but not least, we want to encourage family members with leadership potential to have a career in the company. And that is the most difficult task. Why? Because they understand that it is not easy to work as a Van Oord member in such a big company. In the first half of their career in the company they feel the burden that they have to perform better than non-family members. Once that period is over, they grasp the benefits of being a family member. It goes without saying that they must be willing to travel frequently. They also might be asked to live and work overseas.

"Living abroad requires family members to be willing and able to adapt to a new environment - being flexible and mobile is essential. All in all, it is an adventurous but demanding existence that in time can be very rewarding. In the first 15 years of my career my family and I moved about 10 times. It is not easy, but we enjoyed it intensively". Currently seven family members hold leadership positions in different ranks in the company.

Leadership 

"Leadership plays a key role in any business, but particularly in a family-run business. In our family there are a number of leaders, each with their own field of responsibility. My cousin Pieter, who is the CEO of Van Oord, represents the fourth Van Oord generation. Another cousin is CEO of another family business. I am the chairman of the family holding company, MerweOord, which looks after the family's shareholding [about 78 percent of the company stock].

"Another family member chairs the family association. There are many more family members involved in committee work. This system of involvement, besides giving opportunities for learning and development, also creates a culture of checks and balances which we consider to be crucial.

"Managing a family-owned business requires a variety of skills. Decisions have to be taken, but there should also be room among the family shareholders for debate and different opinions. The most important element of my role is to keep the family united and connected with the business".

The Three-circle Model 

"Our governance structure is based on the so called 'three-circle model' which is a family-owned business concept that originated in the US:

FIGURE 5: THE THREE-CIRCLE MODEL

"The figure shows three circles of influence: the business, the shareholders, and the family. In the first generation all circles overlap; there is just one circle. As the business matures and it is passed on to the next generation, these three circles grow apart. This creates potential areas of tension. Traditionally family businesses are well-organized in the business circle, but they tend to forget the family circle. To avoid this, we have a Family Association with its own board, budget, activities, sub-committees, and so on. Its primary role is to keep the family interested in the business - as the business is the cement of the family - and to educate the next generation to become responsible shareholders.

The Importance of Stakeholder Management  

"Marine contractors are viewed as disturbers of nature. We arrive at a project location, build a port or an offshore wind park, or make an artificial island. That means interaction with the existing environment. We do our utmost to avoid a negative impact on the environment. However, this is not always possible".

Van Oord is conscious of the impact of its work on ecosystems, human health and safety, local communities, and human rights, but is also limited in what it can do. The need to strike the right balance between people, planet, and profit is beyond dispute. Sustainability is embedded in the decision-making process and in business operations.

The Van Oord Sustainability Agenda 2020 subscribes to four of the United Nations' Sustainability Goals. "This is our ambition", admits Koos, "but it is not easy to achieve. As a company we have a Sustainability Board with external experts to advise and assist us in preparing for this increasing trend of accountability.

"In the past, when the environment was not yet a hot topic, we could rely on the data provided by clients and engineering companies. They were responsible for the design of the projects, for the environmental impact studies, and the compensation of the locals who were affected. Today, stakeholders demand a much larger responsibility from contractors. For example, together with a research institute, we have done extensive research on the effect on fish stocks of removing sand from the bottom of the North Sea".

Stewardship

Both the Van Oord family and company give to charity. "Spending wisely on charity is even more difficult than earning money. It is not difficult to give money away," says Koos van Oord with a smile. "Water development projects in the third world are the main focus of the family, while the company sponsors a wide range of social activities in countries where it is present. We try to find projects which have an impact".

Seasoned Advice

What advice would Koos van Oord give to the next generation of family members who will be involved with the company in the coming decades? "To our family members I would say: follow your passion. They should be happy in what they do. If they are not interested in working for the company or if their studies don't fit the requirements of the company, no problem - let them find their own destiny. We will help them where we can. Second: be a responsible shareholder. And third: do not consider your shareholding as your property but as something which was given to you to take care of and hand over to the next generation in a better state than you received it. Don't forget your heritage, be compassionate to others and have fun".