Tag Archives: family legacy

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…

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The Lee Kum Kee Family Secret

Hong Kong sauce giant Lee KumKee Group is one of a handful of Chinese family owned enterprises in the world that has not only managed to survived for more than a century but has thrived after 129 years of steadfastly holding on to some unique and time tested values reinforced with a powerful succession plan model.

Established in 1888, the Lee KumKee group has a remarkable history built over five generations. Yet, despite its market leadership and being a world-renowned brand offering an assortment of Chinese sauces, the group has not been spared of her share of family conflict as a result of business disagreements and buyouts.

Major Shocks

In 1972, the third generation heir, Lee Man-tat and grandson of the founder suggested to its shareholders the importance of creating additional product lines for its oyster sauce business to reach a bigger market. But the idea did not sit well with his uncles, so the following year and with the backing from his father, Lee Man-tat ended up buying all the shares of the company.

Another setback happened in 1986 when Lee Man-tat proposed the idea of expanding the factory but ended up being rebuffed by his younger sibling who at that time owned 40 percent of the business. Due to differences in management style, Lee Man-tat offered to buy his brother’s shares.

After going through these two major corporate hiccups, Lee Man-tat ended up gaining control of the business. His five children then joined the company one after another.

The two shocks made the Lee family realized the vulnerability of the enterprise to internal conflicts, so in 2002, the family agreed to set up a family council and draft a family constitution.

Family First, Business Second

The core value of Lee KumKee is “family first, business second,” there other values according to writer Alan Lee Ka-Fai that are worth emulating by family business owners and these are the following:

a. Entrepreneurship is Key: The family requires the successors to stay as entrepreneurs as “it does not believe one would succeed in keeping the business without instant innovation and thinking out of the box.” The family business will not be able to stay on long unless it always maintains the mindset of entrepreneurs.

b. Governance System must be in Place: Apart from family values, the family constitution and family council are two key elements of family governance. These elements would help build trust among family members and cement family ties.

c. The family motto also underlines achieving a win-win situation

Additionally, I have included some of the powerful values I mentioned in my article last week namely:

d. Put Other’s First, before yourself

e. Pragmatism

f. Integrity and

g. Benefiting the community

According to Dr. Amen Lee, President of Legacy Academy, developing a long-term vision is a key element. He goes on to espouse the five dimensions that includes the practice of family values, continuation of family relationship, passing on of family knowledge, management of family wealth and succession of family business.

Inevitably, for family enterprises aspiring to become legacy bearers, the key is to pass on the values of the first-generation entrepreneurs, including their core concepts and life wisdom.

For writer Allan Lee Ka-fai, he concluded that “Family businesses which have lasted more than 100 years usually have a very unique understanding of family, business and relationships, and pass it on to the next generation as the family legacy.”

(esoriano@wongadvisory.com)