Traditional Group Ltd. (“the Group”) has been in business for the last eight decades. The Group is…

Traditional Group Ltd. (“the Group”) has been in business for the last eight decades.
The Group is proud of its longevity and of its growth and comparative financial stability over that time.
It began as a small manufacturing company, producing and distributing a range of engineering products throughout Ireland.
Growth has been financed mainly by the reinvestment of profits and by borrowings to a lesser extent.
For the most part, this growth has taken the form of expansion of existing business units and the establishment of new units from start-up.
The Group has never accepted equity investment from outside the O’Sullivan family (who founded the Group and has owned it ever since) and has only rarely bought equity stakes in other companies.
You met recently with the Chief Executive Officer (CEO), Mr Peter.
“Our managerial and business style means that we like to think of our Group as traditional and tightly managed, but not conservative in any prejudicial sense. For example, most of our business units are engaged in manufacturing and/or distributing physical products through traditional distribution channels. We don’t do much selling over the Internet and only one of our business units is involved in the services sector. It’s not that we have made any deliberate decision to lock ourselves out of Internet selling or services sectors, it’s just that we have made different choices as to what sectors we want to be in”.
Mr Peter is confident that the fact that the business is 100% family-owned has not been detrimental to the calibre of management.
Approximately 10% of business unit managers are family members and Peter believes that they have all been appointed on merit and are subject to the same performance management assessment controls as the other 90%.
“Business unit managers have a fair degree of ongoing autonomy, but they know that they are assessed on a periodic and regular basis”, says Peter. “Everyone has an annual profit target or an annual Return on Investment (ROI) target for his or her business unit, and they know that if they achieve that target then they are ‘safe’ – the Christmas bonus, the additional job security, and the pat on the back from me will all be forthcoming.
Sometimes, a manager will want to pursue a business opportunity with a longer timeframe – for example, take a strategic initiative which will adversely affect profits in the current year but will pay off handsomely in the long term. That’s fine by me; it’s a form of ‘outsidethe-box’ thinking. But it’s ‘part of the deal’ in that type of situation that I need to be shown what the long-term game plan is and when it’s going to pay off – in other words, that someone isn’t just trying to conceal bad outcomes and decisions in the current year”.
Mr Peter believes that it is ultimately better for the Group if he respects business unit managers’ autonomy as much as possible.
He recognises that there may be conflicts both within and/or between