Monthly Archives: May 2015

When generations collide: Securing your legacy (part 2)

8. Compliance on business governance.

It is essential that family members define and set boundaries. It must also draw clear management lines as mixing business, family and ownership issues every day can eventually produce a volatile brew. Divide roles and responsibilities to avoid hard feelings or miscommunication. Discretion follows conflict. Put in writing rules for participation in the business, qualifications, duties and accountabilities of the family member.

Mr. John Gokongwei, the founder of the JG Summit Group, created his famous 10 Family Business Commandments purposely meant for the next generation of family business leaders. He emphatically highlighted three of the most important cardinal rules: No In-Laws, No Moonlighting and Being a Gokongwei does not give you any guarantee of employment.

9. Require outside work experience.

Children should get at least three to five years business experience elsewhere first, preferably in a related industry. This will give them valuable perspective on how the business world works outside of a family setting. Here the child appreciates the value of discipline, competition and control.

10. Seek outside advice.

The decision-making process for growing a family business can sometimes be too closed. Fresh ideas and creative thinking can get lost in the tangled web of family relationships. By having a non-family member/outside advisor, objective solutions minus the emotions are effectively laid out. The advisor’s entry can also be a good way to give the business a reality check.

11. Develop a succession plan.

A family business without a formal succession plan are asking for trouble. The plan should spell out the details of how and when the torch will be passed to a younger generation. It needs to be a financially sound plan for the business, as well as a way for retiring family members to enjoy the quality years ahead.

The phrase, “There is only one boss” is so appropriate when a successor is in place. Having a single leader does tend to be less complicated from the point of view of corporate decision-making.

The country’s biggest and most diversified family-owned businesses like Henry Sy’s SM Prime and Andrew Gotianun’s Filinvest Group have already anointed female leaders, Tessie Sy Coson and Josephine Yap, to lead their billion-dollar conglomerates. With their succession plan firmly in place, mandates are established and the next generation leaders selected and identified to continue their stewardship role to the next generational phase.

12. Empower the next generation of family members.

Allowing the next generation of leaders to make contributions and introduce change is a major step in the right direction. Establish guidelines for competency, leadership and accountabilities for the next in line family business leaders.

Applying these 12 initiatives in the course of growing the business plan is like the smooth, graceful exchange of a baton between runners in a relay race. The new runner has maximum energy; the concluding runner is slowing down as he has already spent his energy by running at maximum speed early on. The athletes never come to a stop to exchange the baton; instead, the handoff takes place on the move.

The race becomes a skillful blend of the talents of all team members–an exchange of leadership that is so smooth and powerful that the business never falters, but accelerates, fueled by a new source of energy at each leg of the race.

Grooming the successor can begin at an early age, simply by involving children in the family business and observing which ones have the greatest ability and interest in the company.

Good succession planning does not merely involve designating a family member and training him or her for the takeover. In fact, grooming the successor is the founder’s greatest teaching and development responsibility because it involves a long-term, continuing effort to balance competing interests and pressures that are integral in a family business.

Another key feature of many successful planning processes is the third party advisor or consultant to guide the family through the many intricacies of management succession. He/she would be able to help identify the relevant issues while avoiding interference that emerges from emotional factors.

The independent judgment of the advisor can serve as a means to resolve conflicts and overcome opposition by bridging generational gaps with his experience and expertise.

In my many years of family business consulting, training second and third-generation heirs and doing coaching work in Asia, I have personally met many family business leaders who believe that they are taking considerable risks in transferring a successful business into the next generation. However, once they made a concerted effort to plan for succession, they were able to reduce these daunting odds.

(Prof. Soriano is an Asean Family Business advisor and chair of the Marketing Cluster of the Ateneo Graduate School of Business. He is a National Agora Awardee and book author of Kite Runner, a book on Family Business Governance and Succession.)