If the family knows its “why,” it can endure any “how’s. Sadly, more than two-thirds of wealthy patriarchs in Asia fail to plan for business succession. I have seen many cases where the death of its founder, patriarch, or clan leader results in the destruction of the business. I want to cite one example of a family where the patriarch suddenly died of a heart attack at 66 years of age. He had no succession plan for his wealth or his business. Only two of his children had been involved, and no non-family managers were trained to fill his shoes. “His death practically disrupted everything and everybody!” exclaimed one creditor. A close relative also shook his head in disbelief, “Richard’s sudden demise created so much chaos, and no one knew how to lead. Now that he is gone, everyone wants to take control.”
While Richard was a visionary, a dedicated husband and father, and a pillar of his community, he had one fault: he was a procrastinator. When I raised the topic of succession and commenced work on his estate, he assured me that he had already started. He even promised me that he would share his plan but kept putting it off. I was convinced that he didn’t have a plan. Within four months of his death, his business, which had about 750 employees, faced its worst crisis ever, and for the first time in its almost 40 years of existence, it began to run on empty due to an impaired cash flow. It was an organization that was spiraling out of control. With the pandemic raging, some creditors were now demanding concrete plans on how the business could service its debt.
A Tharawat Magazine article entitled “The Secrets of Hundred Year Old Family Businesses” highlighted a very good point, “Running a family-owned corporate entity is a double-edged sword – equal parts blessing and curse. On the one hand, many family-owned businesses have very tight-knit management structures, and those at the top feel even more invested in its success. In a family-owned business, it’s not just the bottom line but also the family name at stake.” It added, “On the other hand, because many family-owned business CEOs want to keep the business in the family, it sometimes can be handed over to those who may not be the best qualified to run it. Historically, there have been a number of cases where successful companies have faltered after being handed over to the second and third generation.”
Every business in the world has at least one thing in common: it needs someone in charge to succeed. With the founder gone, what will happen? It’s a grim thing to think about, but it has to be addressed at some point. The quicker you get your succession planning in order as a business owner, the better. Hence my advice to founders is to go for early succession planning. Three years is tight, five years in advance is good, but ten years is much better. And it is best to build a gradual detachment strategy that will allow your children to slide effortlessly into positions of leadership slowly. The point is, the longer you spend time on family business succession planning, the smoother the transition process is likely to be.
Another well-meaning piece of advice to leaders comes from 4th generation successor Richard Eu, chairman of the 142-year-old Singapore-based Eu Yan Sang Group, the world’s leader in Traditional Chinese Medicine (TCM), “Bite the bullet. Think of it as an experiment. Can the business survive without you being there every day? What if you take a month off? Try to do something that you have longed wanted to do!”
Finally, avoid worrying about how your children would fail the family business. Instead, be excited for their learning and growth. Before you challenge and empower them, you must first express your aspirations. I cannot emphasize enough the importance of communicating the family’s shared purpose and the very reason why family members are in business together.