Tag Archives: Ayala Group

Ensuring 100 Years of Unity and Growth Part 2

The secret sauce for the survival of a family business from generation to generation has three main ingredients: Growth, Talent and Unity and it should be every founder/business leaders’ mantra especially for those pursuing multigenerational success.

Family unity has been documented as an important characteristic of successful and enduring family businesses.  Family pride, personal sacrifice, loyalty and reputation are valuable factors which influence business operations, especially their continuity during periods of hardship (Donnelly, 1964).

As 8th Generation successor Jaime Augusto Zobel de Ayala (JAZA) of the formidable 184 year-old Ayala group when asked what he felt about family unity, remarked,

“Family unity is critical for business continuity. At the heart of this is careful and constant nurturing by inculcating the right values in the upbringing of children and maintaining bonds among siblings. We strengthen relationships between siblings and cousins by getting together on many different occasions. These gatherings build friendship and trust and also provide opportunities for educating the younger members about the family’s values and philosophy.”

Is the family keeping the business together or, is it the business that is keeping the family together? Family feuds that result in ownership splits weaken a family and greatly reduce its value. Therefore, you need a plan to bring together the family behind the business, to strengthen trusting bonds and build family commitment to the enterprise. Fundamental disagreements can be managed in a respectful and careful way, ultimately with a commitment to preserve family unity.

Successful families are those who remain steadfastly united, keeping supportive members loyal to one another and to the family’s mission. Over time, as families become more diverse, it is likely that only a few relatives per generation will directly work in the business.

Inactive members can still support family philanthropic efforts or social activities, and sometimes that level of involvement is enough to maintain family unity. But investing on the next generation of family enterprise leaders can also keep talented members contributing to the broader family’s wealth and mission. All these initiatives to promote family harmony and longevity constitute a family plan.

I was once asked what a long term family plan means. This plan involves making a conscious decision to unite as a larger family. It involves identifying the larger family’s goals, understanding risks to accomplishing those goals and planning for the time when the family members become complex as they increase in number.

There are always challenges when a company is on the door step of transitioning from one generation to another and it is natural that each family member in any generation will have their own perspective on how the business should run moving forward.  Developing a plan will lead to increased profitability which provides more options for the family and the company to work through any leadership or ownership transfer issues.

We can safely conclude that the real secret to a family fortune is permanence and permanence begins at home. The oldest businesses in the world are family businesses that have been successful mainly due to the resilience and united stand of the family members even in the face of seemingly insurmountable obstacles brought about by modernization and globalization.  Indeed unity and commitment are every family’s competitive advantage.

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Ensuring 100 Years of Unity and Growth Part 1

What comprises natural conflict?

I’ll start with the most pressing issues that are regularly amplified in my governance engagements in Asia.

Generational transition and the ensuing conflict between generations can cause irreversible damage to relationships. All too often the senior-generation leaders believe they have done a great deal in generating wealth for the next generation only to falter in the end game because the “passing of the torch” was never planned well. There is no success without succession!

Family members between generations have different values and varying degrees of personal and business goals.When these goals are not articulated in a proper forum or is not aligned with the overarching values of the family, this can transform into unnecessary stress and open the flood gates for more conflict situations.

Personalities are totally different. When ignored, set aside or worse, a bad behavior is rewarded by the business leader; this can naturally lead to intense rivalries. The result can cause severe harm not just to the business but in relationships all the way to the succeeding generations.

Family member expectations related to employment, entitlement, perks, promotions, ownership vary. These expectations must be addressed immediately. If the business leader continues to set this aside, it will negatively impact family and business harmony and challenge the long-term survival of the business.

No employment entry and exit rules. Expect regular fireworks when any family member crosses over from the family to the business without clarity. Who gets to work? Who gets what position? Promotion? Titles? Perks? In-law employment? Treatment of family member, as an employee or as an owner? When the business leader ignores these issues and does not initiate a formal employment process, your natural tendency to employ family members by virtue of bloodline can turn into a nightmare.

These are natural conflicts in family owning businesses. Every family business comprises a mixture of individuals who are more likely to hold different opinions on a particular matter. For some families, disagreements can either be strategic or tactical which is acceptable in the ordinary course of preparing your plans for the future.

But in really difficult cases, some of the conflicts I have resolved come from deep-seated resentment and anger dating back from years of indifference and neglect.

When these issues continue to be ignored or not managed, expect tension to build up causing many business failures and untold misery.

On the bright side, I have identified Asia’s oldest family-owned businesses that have breached 100 years. What are the “secrets” to their longevity? What made them overcome crisis after crisis? What made them accomplished so much?

In the Philippines, I can only count a handful of family owned businesses that are still operating today.  The most enduring of them all is the family behind the 184 year old Ayala Group of Companies. The group was founded in 1834 and is presently under the care of the 8th generation stewards, Jaime and Fernando Zobel de Ayala.

Out of a family of seven, they were both handpicked to co-lead the conglomerate. With a target EBITDA of more than US$1B this year, they must be doing something worth emulating.

Presently, three 9th generation family members are occupying positions in different industries to prepare them for future leadership. But just like ordinary employees, these young descendants have to go through the rigors of occupying entry level positions to gain the experience and think like professionals with accountability so they can earn the respect of their non-family co-employees.

To be continued…