My urgent advice to family business owners

THE late great Peter Drucker immortalized this statement: “The final test of greatness in a founder is how well he chooses a successor and whether he can step aside and let his successor run the company.”

I have used this quote many times and I will continue to resonate this line to stress the importance of codifying governance and succession in family businesses.

My passion to coach family businesses all over the world

It has been an incredible week of flying with several time zone changes that started in Japan last week then Dubai and Madrid.

As this article sees print, I am on a plane heading to Los Angeles to do a series of exciting talks related to the expansion of the highly coveted brand Organique Acai Group owned by the well loved enterprising Cebuano couple Elton and Cathy Salimbangon. But this is another topic that I will readily share in the near future.

So why am I passionate despite my incredible calendar this November? The answer is simple and requires no scientific explanation. I love my work because family members experience visible results when governance is embraced by everyone.

My coaching work revolves around the most fundamental but often neglected elements:

1. Establishing rules and code of conduct

2. Making sure each family member complies and is made accountable

3. Providing oversight and, when necessary, do intervention to mitigate conflict among siblings/branches

4. Helping source the right talent through our executive search network

5. Singular thrust toward growth and expansion

Coaching work can also be frustrating

Frustration can come in many sizes and shapes. One of the most common drawbacks is the patriarchal shadow continuing to loom large over the next generation members, thus preventing or clipping their desire to perform to the detriment of the family enterprise.

Family business leaders, particularly the entrepreneurial founders, often neglect the issue of succession because they are so protective of the business they started.

Although they want their ventures to survive them and to pass the torch of leadership on to their children, they seldom support their intentions by a plan to accomplish that goal. They just dream of continuing the business long after they’re gone but take no steps to make that dream a reality.

It is also a very common sight when succession planning begins in response to an external event such as illness, accident, death, marriage or hostile separation.

Planning should not be undertaken only as a reaction to a major health emergency of the family business leader/founder. For then, everything might just be too late.

Succession is a precarious event

One of the worst mistakes entrepreneurs can make is to postpone naming a successor until just before they are ready to step down. Sometimes founders avoid naming successors because they don’t want to hurt the family members who are not chosen to succeed them. Yet, both the business and the family will be better off if, after observing the candidates as they work in the business, the founder picks the successor based on that person’s skills and abilities, early enough.

The best way to avoid deadly turf battles and conflicts is to develop a governance and succession plan. Without it, family businesses face an increased risk of faltering or failing in the next generation. Succession planning reduces the tension by gradually “changing the guard.”

I have identified several time-tested tips to ensure growth and sustainability of the family business:

1. Decide if the enterprise will follow a family business or Business family model.

While many businesses that are owned and managed by families recognized the importance of ownership and management, few know where and how to start in developing a governance and succession plan.

The key is determining what model or template to follow. Family managers must make a very important choice…should you prioritize family over the business or vice versa?

The Gokongweis, the Aboitizes and Ayala families decided generations ago to pursue a business family model and no one can question their dramatic growth, not just in the Philippines, but all over Asia.

To be continued.

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