Monthly Archives: March 2015

Most powerful women leaders running family businesses

“STUDIES have shown that women-owned firms outperformed the male-owned firms on many levels, including return on investment.”

All over the world and predominantly in Asia, family-owned enterprises have been dominated by men. We refer to this right of primogeniture as the exclusive right of inheritance belonging to the eldest son.

Wikipedia defines primogeniture as a right, by law or custom, of the first-born male child, in preference to siblings. In the absence of children, inheritance passed to collateral relatives, usually males, in order of seniority of their lines of descent.

Time and market complexities favoring women leaders

In one of Prof. Alderson’s articles about the role of women in family businesses, the percentage of women taking over management and ownership of their family business has increased significantly in recent years. Alderson adds, “In the past, it was common practice for the business to be passed on to the oldest son upon retirement or death of the founder. Women, until the last 20 years, were not usually considered to LEAD the family business. This is especially true in countries that have male-dominated cultures. Only if there were no male successors were women considered.”

The most influential 2nd generation women leaders: An inspiration

In the Philippines, there has been a noticeable change in the role of women leaders in family-owned businesses. Highlighting this change is the entry of next generation women successors managing the country’s biggest conglomerates.

I have listed three of the most powerful women successors with the objective of inspiring and challenging women in family-owned businesses to continuously raise the bar as they move up into positions of leadership and influence. These second generation women leaders whose accomplishments landed them in the Forbes Asia’s Top 50 Women Business leaders were cited for exemplifying a different kind of leadership in a male dominated business environment. These women wield significant power in making a difference in their respective family businesses.

SM’s Tessie Sy-Coson LEADS the pack

Teresita Sy-Coson of the SM Group. At 63, she is the eldest and undeniably the most influential among the six children of Henry and Felicidad Sy. The family business is the largest family-owned conglomerate in the Philippines with interests in banking, real estate, hotels, retail, convention centers and power.

Under her leadership, SMIC (SM Investment Corp.) became the largest listed company on the Philippine Stock Exchange by market capitalization. Tessie has been consistently in the list of the Forbes Asia Top Women Leaders. The estimated market capitalization of the SM consolidated businesses is at P1.5 trillion.

Josephine Gotianun-Yap, of the Filinvest Group, is not the eldest but considered the most qualified and highly educated amongst the Gotianun siblings. Joji is Jesuit-educated and a third in a brood of four and the only daughter. She is the president and CEO of Filinvest Development Corp. and flagship business Filinvest Land, Inc.

The family’s business interest is so diverse, covering real estate, banking, power generation and sugar mills. In 2013, Joji landed on Forbes Asia Magazine’s 2013 list of “Asia’s Top 50 Women Leaders.” She was cited as belonging to a roster of women who LEAD profitable companies and whose accomplishments stand out.

Her father, founder and visionary Andrew Gotinanun is in the Forbes list of the Top 50 Richest Filipinos with an estimated net worth of $1.4 Billion.

Vivian Que-Azcona is the president of privately-held company, Mercury Drug Corp., the country’s biggest drugstore chain. The company started in 1945, shortly after World War II. The founder, Mariano Que began selling bottles of medicine from a pushcart on the street. Today, Mercury Drug employs more than 12,000 employees operating close to a thousand STORES nationwide and an estimated market share of more 65 percent. Mercury Drug is reportedly looking at a backdoor listing in the near future.

In 2014, Forbes ranked Vivian as the richest Filipina and 18th overall with a net worth of close to $1 billion. She has been consistently listed as the country’s highest taxpayer. The conglomerate counts among its interests in real estate, logistics, food, supermarket, bakeshops, pharmaceutical.

Women managers are awesome

Women business leaders have been making their mark. They have particular qualities that can be vital to the survival and success of a family business. As Prof. Alderson accurately pointed out, daughters are now considered to be among the most underutilized resources in family businesses.

To encourage the next generation of women to be valuable members of the business, potential female successors should be nurtured by assimilation into the family firm, mentoring, sharing of important tacit knowledge and having positive role models within the business.

A handful of family-owned enterprises in the Philippines are slowly realizing the significant contribution of women leaders in terms of growth and stability. It is time for our male-dominated culture to reboot and involve women in our quest for game-changing strategies to continue the legacy.

Women are awesome… And we cannot deny that!

(I will be in Cebu on April 24, a Friday, and Makati on April 30, a Thursday, to facilitate one of my bestselling one-day workshops entitled “Securing the future of your family business.” The venue in Cebu will be at Choi City in Banilad and in Makati at the AIM Conference Center. For more inquiries, please contact the organizer, Octopus Branding c/o John 0947-5070869 (Makati) and Prof. Danny Wong at +639178900063 (Cebu) for details. Slots are limited.)

Advertisements

Shared values + common vision = family constitution

“The family constitution, a comprehensive articulation of philosophy, principles, and policies for the future that balances and synthesizes the welfare of family, owners, and the business, is among the most important steps a business-owning family can take to secure and strengthen its business and, most preciously, its family.”

– Prof. John Ward

According to Prof. Ward, the two most effective practices implemented to protect and preserve the family business are a.) to create an independent board to strengthen the business and b.) to draft a family agreement to strengthen the family. This column is the last of a three-part series related to the latter.

In some countries, a family constitution is referred to as a family agreement. For some, it is a family creed or a charter. But regardless of the name, there is absolutely no doubt that a family agreement, when done correctly, can be the most important document that will perpetuate the family business for generations to come.

What I meant when I said “when done correctly” refers to the need to customize and tailor-fit rules and protocols based on the uniqueness of each family and business. Just as each family business is unique, so each family constitution will need to reflect the unique characteristics of both the business and the family to which it relates.

A constitution is a living document

A family constitution is a living document. It specifies the relationship between the business and the family. It sets out the roles, compositions and powers of the key governance bodies of the company. These bodies are family members, the shareholders, the management and the board of directors.

The constitution also contains regulatory protocols and formal policies that effectively curtail privileges or entitlements of family members and in laws for the greater good.

In my constitution building sessions with second-generation family businesses in Singapore and Vietnam last month, we touched on several sensitive questions related to governance, ownership, control and succession. Below are some questions that were solicited from the next generation members:

a.) How do the senior generation leaders in the family make decisions?

b.) When will our parents empower us to make decisions? We have been in the business for more than 10 years!

c.) What are the rules for next-generation family members to work in the business?

d.) Can we seek your help in pushing for our vision and values? We really do not know where this company is heading.

e.) Can we review the current compensation policy? The next generation family members have growing needs and we do not know if they are aware.

f.) What if a family member wants to sell his/her shares? We actually have no written agreement. How do we proceed?

g.) Is there a mechanism to gauge the performance of siblings? I sometimes feel it is unfair. I work more than my other siblings and yet we receive the same pay.

h.) Can we regulate the entry of in-laws?

i.) If and when I decide to pursue my MBA, will the family business pay for my tuition? Will it be the entire amount?

j.) Our dad was diagnosed with mild dementia last year and our MD has warned us it will continue to deteriorate. The problem with our father is he keeps on delaying the appointment of his successor. There are four of us. What should we do?

Clearly, these are troubling questions bordering on the uncertainty of their respective family businesses and a family constitution addresses these questions and many more.

It’s the journey that matters

The important thing in formulating a family constitution is the journey and it goes through many phases. A significant number of Constitutions that failed were attributed to several areas:

a.) The initiation, formulation and approval phases were all done in haste

b.) There was no proper orientation or buy in of family members from the different generations

c.) The contents were not real contributions from family members but extracted from a handful of senior generation leaders

d.) The information in the Constitution were open ended and created more questions and confusion than solutions

e.) The formulation process was limited to a few days and upon signing, the family members were left on their own to implement the rules

f.) The contents were limited to the present generation

g.) After the signing, the family members started violating what was agreed upon in the constitution and there was no proper monitoring

To conclude, a well-crafted family constitution that goes beyond two to three generations towards the future can perpetuate a family business for a long time. It is therefore my wish that family business members should start the process now in order to ensure the legacy of the founders and the everlasting prosperity of the family and its businesses.

When should you adopt a family constitution?

“The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese proverb

The family business owner should view the tree as an investment for the future. That investment is the family constitution. If you missed investing on a family constitution 20 years ago, the second best time to start investing in one is now.

In my last article, I highlighted the importance of having a family constitution. In today’s column, I am enjoining family business leaders to start the process.

The family constitution: A wonderful gift to your children

So when is the best time? The short answer is as soon as possible. In my experience, a family constitution is most likely to be adopted or revised at the time of generational change within the business. It can often also be considered when the business is about to be passed on from the founder to his or her children.

Common scenario

All too sudden, the patriarch (or matriarch) is diagnosed with a debilitating condition and siblings representing two or more branches of the family find themselves in charge of the business, unsure of where to go next. The situation is compounded if the abrupt change happens from the second to the third generation where the number of owners, the complexities of decision-making and the changing lifestyles of the cousins including the diversity of their ambitions for the business rears its ugly head.

Generational change can be unplanned, typically as the result of the unexpected death or disablement of the existing business owner. This possibility strongly suggests that the constitution should be drafted and agreed well ahead of the expected transition.

A family constitution helps the family deal with the generational changes constructively. It requires the family to think about important decisions before they have to be made and find agreement on important family business goals.

The crucial and possibly two of the most important component of the family constitution is the articulation of the importance of shared values and the vision of the family business. Family business authority Professor Ward likens successful family partnerships to the bunch of sticks in Aesop’s fable. “If you take a bunch of sticks together, you can’t break them. But, if you take the sticks one at a time, they snap.” Shared values and a compelling vision bind the business owners and sharpen the business focus.

Formulating a family constitution will take time to develop and may require a series of family meetings. Even if there isn’t agreement on all issues, it will form a good basis for family to work from when issues arise. Before drafting the constitution itself, the family needs to agree on some general guiding principles.

Important examples as guideposts

Family members must decide whether the vision of the founder is still relevant. In some cases, I would challenge family members to think about the future, to look into market trends, competition and to brace them for the Asean integration. I would share success stories of family businesses overcoming conflict and ownership issues.

For some family owners, a decision must be taken into account to retain and manage the business so that it can provide jobs and financial support for future generations of the family. There are many other issues that will require a serious and deliberate effort such as succession planning, letting go, governance, training of the next generation business leaders and even defining the role of in-law participation.

Other examples generally focused on the availability of financing. Can the business’ future capital requirements be satisfied under continuing family ownership? Will the continuing ownership of the business likely to create tensions and divisions within?

Having answered these questions, the family can begin to articulate more specific principles and policies regarding the business, including the creation of a working framework that focuses on the appropriate structure and ownership including the family’s role in the day-to-day management of the family business.

The information solicited from the family managers will now become the basis in formulating business objectives geared towards the growth and sustainability of the family business.

Not too late to start

Reflecting on the Chinese proverb, the message that you should get out of this is that it’s never too late to accomplish the things you want to accomplish.

In everyday life we all have things we want to do. And if family business leaders want to perpetuate their legacy, then your most important investment is having a family constitution. I encourage the readers to make this your personal goal.

You may have been contemplating about this for a long time and have thought about doing this sooner, which may have been a better time since your children were still young, but you can still accomplish it today — and now. The quote reminds and inspires family businesses owners to get out there and start the process of constitution building.

We all have trees we want to plant. We shouldn’t give up hope, since we can still plant our tree today.