Tag Archives: business continuity

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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Are Business Owners Doing It Right? (Part 2)

  • Do you think your children are dedicated in pursuing business continuity?
  • Are your children qualified to assume leadership roles?
  • Do you have rules for in-law participation?
  • Have you already identified a successor?
  • Do you have a succession plan in place?
  • Do you honestly believe your eldest child is the most qualified? 
  • Are your children entitled? Were there rules when they joined the business?
  • Did you require them to work outside the family business before joining?
  • Are you compensating your children commensurate to their skills and annual performance?
  • Does an HR policies cover family members? Does your HR Manager have the power to discipline family members?
  • Have you established criteria for family members owning shares? For selling shares? Assigning shares? Encumbering shares? Selling to siblings or other branches?

If you answered “NO” to just a handful of the questions above, sadly your family and the business may be headed to a bruising conflict.

If you sense the undercurrents and tensions building amongst family members now, it is wise not to disregard them. As their leader, do your family a big favor, fix the problem. If you cannot fix it, find someone who has the competence, experience and objectivity to help.

Let me take this opportunity to say that this extremely sensitive subject will be highlighted and discussed in my one day workshop in Cebu on Saturday, May 20 at City Sports Club.

The simmering tensions are telltale signs of a “baby elephant in the room”. Ignore these issues and the family and business will suffer. You might think that these issues will heal over time. It will not. As a matter of fact, the conflict will manifest in many forms and through time, implodes as you start losing your grip of the business due to advancing age or when you are no longer around to make important decisions.

It is obviously clear that these problems surfaced many years ago and you brushed them aside. These problems relate to entitlement, sibling rivalry, generational conflict, conflicting interest, in law and cousin participation.

When you procrastinate, the problems are magnified, emotions takes center stage, entropy pervades and battle lines are drawn.

Emotion and entitlement

At this juncture, legal intervention assumes a more active role and my capacity and influence as a family business coach diminishes. As family business advisor, our governance intervention is more effective if lawyers are kept out of the conflict.

Immediately right after helplessly watching his children bitterly fought for ownership and control of the business he started 50 years ago, a client confided to me:

“Prof, I failed as a parent. How I wished I were poor again. I never expected that the wealth I created has cause so much pain and misery amongst my children…we used to live simple lives but things have changed, all because of greed and pride!”.

If I hasten to add, emotion and entitlement remained as aggravating circumstances to any conflict.

With no policies in place, it will be overwhelmingly tough for the family to move forward in one direction.

I can go on and on with more nagging questions but inarguably, it will still reflect on the most fundamental question for family business owners…

“Are you doing it right? If you think you are not doing enough to ensure your legacy, do you plan to urgently do something to create harmony amongst family members?”

It is not too late though. There is still time to do something right but you must start the process now!

(esoriano@wongadvisory.com)

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Prof Soriano is slated to deliver a talk to family business owners in Cebu on May 20, 2017. The talk this month is part of W+B Cebu’s advocacy campaign related to Family and Business Governance. Seats are limited. Those interested to reserve a slot may call Octopus Events at 09159108686 and look for Ms. Cherryl.