The lack of trust and open communication are responsible for 80% of family business failures in Asia. In my experience helping families heal damaged relationships from years of acrimony, I can conclusively say that the lack of a sense of meaning, shared purpose and belief that family unity is paramount are the major reasons why family owned businesses do not last two or three generations. There is an Italian saying, “Dalle stalle alle stelle alle stalle,” which means, “From the stables to the stars and back to the stables.” It is an indication that the challenges facing family businesses are universal.
Time is a variable for any kind of business. The test of endurance and viability of an enterprise depends on generational leadership, patient capital and creativity. Business survival or leaving a legacy from generation to generation requires hard work and commitment reinforced by the acquiescence of the founder of the key founder or the key business leader to share power ans the transitionBusiness survival or leaving a legacy from generation to generation requires hard work and commitment reinforced by the acquiescence of the founder or the key business leader to share power and plan the transition journey. For successors, it means embracing and living the vision of the founder, that they must have the determination and the audacity to move forward despite the emotional roller coaster experience found in family enterprises. Curating a family business legacy is a challenge for owners of family businesses. Whatever you are doing now will decide the fate of the family enterprise’ future existence or demise.The late best-selling author Stephen Covey once said, “There are only two lasting bequests we can give our children. One is roots, the other wings.”
Whatever a family business’s purpose is, open communication is critical. This is something family advisors must do… encourage family members to speak out and be truthful. There is the need for families to talk about difficult issues no matter how painful and uncomfortable the issues are. Individual family members need to share their personal aspirations as a starting point for any family conversation about values, vision and purpose and when family members violate certain codes of behavior and do something that runs counter to the family’s priorities, there needs to be a governance process ( pre agreed family rules like a Constitution) for addressing it.
As 4th Generation successor Jon Ramon Aboitiz, former chair of Philippine based Aboitiz Group (a family conglomerate that was established in the 1880’s) said in one of his interviews, “I think that succession is very important in a family business. First of all, the most important in a family corporation is that you have to build up rules and regulations for the family and the business. We have, for example, built a constitution. We have a family council. We have rules of engagement, who can join the family business because not every family member is entitled to work for the company. He has to try; he has to go through different processes, This helps, as people leaving the business happen many times. If you have the constitution, if you have the understanding of the rules of engagement, then it makes things easier because it is very clear to everyone what are the dos and don’ts.”
Investing on a powerful governance structure with clear rules of engagement and where family members are encouraged to collectively deliberate on difficult decisions while maintaining unity is one of the major steps in harmonizing relationships. Having this platform for meaningful discussions related to the purpose of a family business can be difficult at first but it is one powerful lever that will pave the way for family members to acknowledge their inherent responsibility to pursue the founders dream of a 100 year old business.
Why don’t family-owned businesses endure? Deloitte’s William Chou writes that it’s not internal squabbling or lack of interested successors — it’s the lack of a commonly understood purpose. Defining purpose may seem easy but maintaining it from generation to generation can be harder than most people think especially when there are multiple generations involved who have different life experiences and perspectives.
ARTICLE
Avoiding Family Dramas
Enrique M. Soriano
Senior Advisor
Wong Advisory Group
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When Blood Becomes a Birthright
For the new year, it is appropriate and timely to reinforce to one and all that raising non-entitled children (and grandchildren)
January 04, 2023
Preventing Entitlement Starts With Good Parenting
There are many ways to prevent children from becoming entitled. The most effective approach is through role modeling and communication.
January 10, 2023
Baa, Baa, Black Sheep
Tagged "black sheep" family members are indeed quite a character.
January 24, 2023
The Consequences of being an Absentee Father (Mother)
As an exasperated parent-founder once said, "It is easier to run a conglomerate with thousands of executives, but it is far more difficult managing an offspring." But why do 'black sheep' family members really exist?
January 31, 2023
Is It Fair to Divide Your Wealth Equally?
The question that begs to be answered is: “Is giving equal ownership really fair, or is fairness in the context of wealth transfer never equal?”
February 07, 2023
Giving Your Children Equal Compensation Is Wrong
Conflict is normal in family businesses, but the unresolved ones classified as excessive can ultimately create damage and instability that, when not constructively dealt with, can open a prolific source of deep-seated problems like a pandora's box.
February 15, 2023
Poorly Crafted Family Compensation Policy is Divisive
Without understanding the concept of compensation, the children may end up disillusioned, confused, frustrated, and constantly asking why their salaries are equal.
February 21, 2023
A Tale of Two Siblings Fighting a Lost Cause
Conflicts in life are unpleasant. It destroys relationships and zaps the energy of individuals and their families, so many families try to avoid conflict at all costs, which is a big mistake.
March 01, 2023
50/50 Estate Split is a Double-Edged Sword: A Parent’s Dilemma
With the businesses going full throttle, the couple became worried that if they gave the business to son B, which seemed fair to do, they would not have any means to treat son A equally, which seemed unfair to him.
March 08, 2023
50/50 Estate Split is a Double-Edged Sword Part 2
Splitting assets and shares of the family business between your children can be tricky as it puts to the test the parent owners’ fairness to everybody
March 15, 2023
50/50 Estate Split is a Double-Edged Sword Part 2
Splitting assets and shares of the family business between your children can be tricky
March 15, 2023
You Can Never Manage Your Business From The Grave
The stakes are high, the consequences of a wrong decision are devastating
March 21, 2023
Rights of the Next Generation's Spouses
As a family business grows and is passed on to the children, concerns arise regarding the rights of the next-generation family members and their spouses to own and control the company.
March 29, 2023
When Shares Are Carelessly Passed On To In-Laws
Having in-laws owning shares in a family business has challenges
April 12, 2023
How to Effectively Manage In-Laws Last Part
If you really believe that in-laws deserve to be future shareholders, it is absolutely necessary that clear policies and procedures must be in place for in-law employment, share ownership
May 17, 2023
Advantages and Disadvantages of Family Members Working in the Family Business
In my experience mentoring next-generation successors, their biggest handicap is that they were never exposed to work in the real world.
May 23, 2023
The Advantages of Family Members Working in the Family Business
All businesses face challenges and family-owned businesses are not immune to these, but by the very nature of a family business structure, there are also unique sets of opportunities that family businesses can take advantage of.
May 31, 2023
Did You Hire Your Children Based on Talent or Birthright?
As a founder, did you consider talent or base your decision solely on birthright when you appointed family members? Was the last name of your son or daughter the sole reason? Was it purely trust? Would you have done it any other way?
June 06, 2023
Rules for Eliminating Nepotism in the Family Business
When employing people who are related to the founder, either by blood or marriage, it should always be based on the following non-negotiable metrics: outside experience, credentials, exceptional work in the past, and merit.
June 14, 2023
The Real Dangers of Nepotism in Family-Run Businesses
Why has nepotism gained more attention? The number of family businesses today is growing, and so is the awareness of the negative effects of nepotism prevalent in the context of a family business
June 21, 2023
If You Can't Avoid Nepotism, Set the Rules of Engagement
Family members in leadership positions should lead by example, demonstrating professionalism, competence, and a commitment to the success of the business
June 28, 2023
Family Business Covenants Against Nepotism
Regardless of blood relations, employment should never be guaranteed
July 04, 2023
Wealth Will Not Last Two Generations Part 1
"Transferring wealth to your children can be dangerous if not done thoughtfully and responsibly." - Prof. Enrique Soriano
July 18, 2023
Is Inherited Wealth Evil?
Oftentimes, children of affluent parents have not had time to establish their own identities separate from the wealth and status of the business.
July 19, 2023
A Founder's Adversity Quotient
Armed with nothing but grit, founders experience firsthand the struggles and setbacks that come with creating something from nothing, which hones them into extraordinary entrepreneurs with unmatched AQ.
July 24, 2023
Wealth Will Not Last Two Generations: The Consequences of a Low AQ
It is a fact that many next-generation family members have a Low Adversity Quotient (AQ). Consequently, when next-generation successors have low AQ, there is a significant risk that the business they inherit will suffer.
August 01, 2023
The Significance of Strategic Planning in Family-Owned Businesses
In a recent strategic planning session for a family-owned business, powerful questions emerged: 'Why are we in Business Together?' and 'Where do we want the business to be in 3 years and 5 years?'
August 09, 2023
The Dangerous Mindset of Many Next-Generation Leaders
What will it take for the next generation to break the cycle of adopting detrimental behavioral patterns and mindsets?
August 16, 2023
A Fail-Proof Succession Starts with Your Successors AQ
Often overshadowed by the larger, publicly traded corporations, family businesses operated quietly, keeping their successes and struggles within the family circle, but the landscape is changing rapidly.
August 23, 2023
From Comfort Zone to Resilience: A Next-Gen Transformative Journey
In my extensive experience helping families in Asia, the concept of Adversity Quotient (AQ) has emerged as a pivotal metric for assessing an individual's capacity to adapt and thrive in the face of adversity.
August 30, 2023
Succession Planning: The Cornerstone of Family Business Legacy and Prosperity
In family enterprises, a sobering truth prevails: With each generational transition, the odds of a company's survival diminish.
September 06, 2023
Unraveling the Pervasive Father-Son Conflict in Family Businesses: A Complex and Compelling Tale
September 26, 2023
Resolving the Father-Son Conflict in a Family Business: A Path to Harmony and Success
October 03, 2023
Fair Should Not Be Equal in a Family-Owned Business
Enforcing strict equality within a family-owned business can pose significant challenges, especially because family members often bring varying levels of expertise, experience, and commitment to the table.
October 12, 2023
From Family-First Leadership to Meritocracy: It's Time to Shift Part 2
His father's passing thrusts him into the role of President, a position that always seemed destined for him, but as he embarks on critical operational decisions, questions that echo through family business corridors are raised.
October 24, 2023
The Aimee and Allan Sibling Conflict, Solved! Last Part
Even siblings with harmonious childhoods can face rivalry in the professional realm due to the unique challenges a family business presents.
November 29, 2023
Founders Must Lead The Way! Part 1
In an evolving and growing family business, the key to sustained success is for the founder to recognize that the business is now a team sport, where cohesion and collaboration are paramount to winning games.
February 06, 2024
Entitled Family Members Can Undermine Business Success (Part 1)
Stewardship is the key to ensuring the long-term sustainability and success of family-owned businesses. In contrast, entitled family members can pose a significant threat to business stability.
February 20, 2024
A Hidden Crisis: 90% of Directors Are Unaware of Their Fiduciary Duties!
The intricate dynamics of familial relationships can complicate decision-making processes as they may pose a threat to the family members' commitment to their fiduciary obligations.
March 20, 2024
Upholding Non-Negotiable Values: Humility, Discipline, and Respect
As founders and mentors, we observe with deep concern the gradual erosion of humility, discipline, and respect among the next generation of leaders—a trend that threatens the very essence of our businesses.
April 03, 2024
Why Many Chinese Family Businesses Fade by the Third Generation
This shift in societal norms and values has led to changes in family dynamics, as younger generations may have different priorities, lifestyles, and career aspirations compared to their predecessors.
May 06, 2024
Why Many Chinese Family Businesses Fade by the Third Generation? Part 2
While it may be tempting to blame the founder for these disputes, the reality is often more complex.
May 13, 2024
Why Family-Owned Businesses Struggle?
Leadership Transition: Passing the baton to the next generation is a complex process.
May 20, 2024
Taming Family Business Drama: Enforce the Rules
We must recognize that there are different types of family members involved in the business.
May 28, 2024
The Crucial Role of a Family Code of Conduct
The B family’s experience illustrates the crucial role of a family code of conduct in managing family-owned businesses.
June 04, 2024
The Powerful Role of Your Family Code of Conduct: The B Family Case Study
A Family Code of Conduct is simply a set of 5 R's that institutionalizes rules and regulates family behavior in and outside the enterprise.
June 11, 2024
The Powerful Role of Your Family Code of Conduct
The transition from the first to the second and then to the third generation can further increase both the number of owners and the diversity of their ambitions for the business.
June 20, 2024
Effective Ways of Dealing with Cousin/Shareholders in Family Businesses
As family businesses transition to the 3rd and 4th generations, they face a unique set of challenges. More family members—cousins, nephews, nieces—join the business, bringing diverse expectations, dispersed ownership, and a need for fair processes.
June 25, 2024
Effective Ways of Dealing with Cousin/Shareholders in Family Businesses Part 2
Establishing formal governance structures early on was one of the critical steps the family took. They created a family constitution, a family council, and a shareholder agreement.
July 03, 2024
Effective Ways of Dealing with Cousin/Shareholders in Family Businesses: Last Part
Moreover, balancing the drive to make money with the need for sound governance is critical. While financial success is important, it should not overshadow the importance of family harmony and long-term sustainability.
July 09, 2024
Is Accumulating Wealth More Important than Creating Lasting Memories?
"When a business owner dies or becomes permanently disabled, the business itself may die or be permanently disabled—not because something wrong was done, but because nothing was done!"
July 17, 2024
True Legacy Starts With Being a Good Parent
Many founders have worked tirelessly to build their businesses from the ground up, often sacrificing family time for financial success. However, in a century, the homes and possessions we fight so hard to acquire will belong to strangers.
July 22, 2024
Balancing Parenthood and Entrepreneurship. The Journey of Founder M
The stories of entrepreneurs like M demonstrate that it is possible to find a balance between building a successful business and being a good parent.
July 29, 2024
Family Wealth Preservation Will Ensure a Lasting Legacy
Family wealth preservation is not just about financial security; it's about creating a lasting legacy that upholds the family's core values and principles.
August 06, 2024
Part 1: The Japanese Model of Family Business Succession: A Tradition of Longevity
The concept of long-term, generational succession is deeply rooted in Japanese society, and this practice has allowed many Japanese companies to thrive across centuries.
August 20, 2024
Part 2 "Better to Have Daughters than Sons, for then I can choose my Sons"
In the second installment of our series on family business succession, we explore the Mukoyoshi practice—a uniquely Japanese approach with universal lessons.
August 27, 2024
Will the Mukoyoshi Model Work in China and Asia?
In Chinese culture, the succession of leadership within family businesses is deeply rooted in the principle of passing the mantle to the eldest son or a close male family member.
September 03, 2024
Beyond Japan: Global Implications of Strategic Succession
While Mukoyoshi is uniquely Japanese, its core principles—meritocracy, long-term vision, and flexibility in succession planning—are universally applicable.
September 10, 2024