opinion

Marrying Money: The In-Law Dilemma

November 4, 2019

I was once asked in a TV interview anchored by Michelle Ong of ANC (ABSCBN) what my thoughts were in recommending in-laws to work in the family business and my quick response was straightforward, “If family owning businesses can afford professionals, there is absolutely no need to hire in-laws!”      In my years of doing consulting work for my firm, Wong + Bernstein Family Advisory, one significant variable in family enterprises is the effect that in-laws have on family owning businesses. They can either be a positive contributor or can be a huge burden to the family and the business. And I have encountered dozens of family businesses threatened and impaired by the actions of in-laws.      Business owners must realize that they will never know who their children will choose as partners.  Not even the most controlling family business owner can determine his children’s final choices. So no matter how you look at in-laws, they will always play a huge role in the way your children will manage the business and the family especially when you are no longer around.      But while you are still at the helm, owners must recognize that unity, governance, wealth transition and legacy building efforts should always be in place before proceeding with your plan in bringing in-laws to the business.      In Asia, hiring in-laws is correlated to culture and necessity. For start-up businesses where resources are limited, in-laws are usually relied upon to help in the business and fill the void. Their engagement is significant as they not only play a pivotal role in the growth of the business but they end up becoming a natural extension of the founder’s trust. In a latter’s circle of trusted people in the organization, in-laws are classified as part of the “cheap labor” pool of relatives and friends.      However, problems generally surface when the business transitions from a mom and pop venture to a bigger and complex organization. Despite the transition, the owners often disregard the importance of establishing rules and policies related to in-law entry.      For Dr. Steven Berglas, management consultant, faculty of Harvard Medical School and author of “The Success Syndrome”, he asserted that “hiring in-laws into the family business can be a “kiss of death”. The reason?  They become too familiar to the point that they believe the business is their own.   They then proceed to prove their value to the company by changing the way it’s run.”      To help the family weigh in on the pros and cons of hiring in laws, I am enumerating issues and concerns that every owner must consider as he or she navigates the perilous journey of balancing family and business with in-laws:      1.    Should the in law be subjected to the same treatment as family members or should they be treated differently?      2.    How do you compensate In-laws working in the family business?      3.    Will they have the same benefits as any ordinary non family professional? Or have perks similar to that of the children?      4.    Will they be made to sign an employment contract and be subjected to the same performance metrics?      5.    What are the consequences for an underperforming in-law? Can he or she be suspended or terminated?      I have warned dozens of owners about the potential risk that exists when they carelessly and hastily employ in-laws minus entry rules and policies. It is not only unfair to the in law but a selfish act committed by the business owner which if left unmanaged can cause serious implications.      esoriano@wongadvisory.com

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'Where he's coming from'

November 4, 2019

A popular consideration that many people nowadays make when they try to understand someone who has a different view from theirs is to try to figure out “where that person is coming from.” I hear that expression very often these days. It’s a laudable gesture that is meant to keep a meaningful dialog with others.      Of course, the expression, “where he’s coming from,” is a reminder of the basic principle that a person sees, understands and reacts to things according to the way he is. An old Latin adage already expresses this phenomenon. “Operare sequitur esse.” Action follows being. One behaves the way he is.      If that person is male or female, rich or poor, a socialite or a farm worker, a liberal or a conservative, a racist or a feminist, etc., these conditions are somehow reflected in his views and his over-all actuations. In other words, we all have our biases and preferences. Some can be valid and legitimate. But others may not. It is the latter that we have to be most careful about.      To see where one is coming from is, of course, a very logical consideration to make. But then again, we do not work by logic alone, since we can also be very logical in our error.      Logic does not go the distance. We need to go metaphysical, considering things way beyond the many conditionings that describe person. We have to go to the original and the ultimate objective truth about ourselves and about where we come from before the conditionings add their trappings on it.      And this original and ultimate truth about where we come from is that we all come from God. All creatures, of course, come from God, but in our case, we come from him in a very intimate way since we are created in his image and likeness, meant to share the very life of God.      We just did not come from our parents. We are not merely biological creatures. We are not simply products of our social and historico-cultural environment. We also are spiritual creatures who are very intimately linked to our Creator God. We are not merely the image and likeness of our parents. We, first of all, are the image and likeness of God.      While it’s true and correct to consider the personal, social, cultural background, etc. of a person to know where he is coming from when he expresses his views, we should not neglect the most basic consideration of the truth that we all come from God.      We are supposed to be God’s image and likeness, reflecting in ourselves as much as possible God’s goodness, love, mercy, wisdom, etc. In our dealings with others, in our discussions and exchanges, we should not forget that we all are children of God, we all are brothers and sisters, meant to love one another as Christ has loved us. (cfr. Jn 13,34)      As a consequence, we have to learn how to see the image and likeness of God in everyone, no matter how unlovable a person is to us. And also, we have to remind ourselves, that in spite of our personal idiosyncracies and peculiarities, we are also the image and likeness of God who are meant to see, understand and react to things the way God sees, understands and reacts to them.      For this, we have to look closely at the teaching and example of Christ who is the fullness of the revelation of God. He is “the way, the truth and the life” for us. We are patterned after him and we have to follow him to be what we ought to be.      And Christ makes himself alive in us through his word and the sacraments. Thus we cannot overemphasize the need to study the gospel, the catechism, etc., and to have recourse to the sacraments, especially the Holy Eucharist, to figure out where everyone is coming from.

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Are you really committed to succession?

October 7, 2019

Prof. Josep Tàpies of IESE Business School in Spain is absolutely right when he remarked, “No one assumes that the son of a great violinist will also be a virtuoso on that instrument”.      So when do we consider a succession successful? First, it is when the company’s founder hands over the business seamlessly to the children, along with their spouses without any fanfare nor disturbances in any of the three critical pillars: Family, business and ownership systems.      Second, it includes the transfer of power to the most qualified and deserving next generation leader, who will navigate the enterprise together with his or her siblings. The transition to a chosen successor is a critical decision made unanimously by all the siblings, the BOD and the senior executive team.      The third element in the succession journey is that every strategic move is guided by a family agreement or a charter where governance issues are raised to the family council for approval using pre-agreed barometers. It is also essential for every member of the family council to be involved in a consensual decision-making process under a culture of transparency and respect.      In my family governance work at W+B Advisory, it can take up to 10 to 12 sessions or close to a year to create a family agreement. Why that long? There is no short cut to creating a real and authentic governance process. Just to initiate a transition from an informal set of rules to documenting formal agreements can be daunting for family members who are not used to corporate best practices.      During sessions, family members are made aware of their inherent responsibilities. They are guided on every item covering a slew of code of conduct policies where they simulate a formal meeting and collectively negotiate an acceptable governance solution to predictable problems that will likely happen in the future.      The fourth element is the creation of a Family Business Training Institute meant to inculcate good parenting programs, values formation training, business skills enhancement, shareholders education, a rigid successor program, Board level governance and institutionalizing a culture of stewardship to all family members.      And finally the last element in the succession journey is the creation of a Single Family office (SFO) that seeks to manage and preserve the family’s wealth. An SFO is a private company that manages investments and trusts for a single family.      Other services include family governance, financial and investment education, philanthropy, estate planning and tax mitigating services. For ultra-high net worth (UHNW) families ably assisted by my firm, we assist family businesses in pursuing diversification strategies using private equity and liquidity investments.      Tàpies concludes, “All companies are subject to risks committed by governments and managers, but family companies, because of their very nature, can more easily succumb to a series of mistakes. The succession process is a key issue that the family company must confront. It is a long process that requires planning and collaboration with outside advisors. A well-prepared succession requires the intensive training of one or several different successors. It also requires you to establish conditions that will regulate relationships between shareholders, managers and corporate personnel in the future.”      In closing, succession is a new beginning, a process, an ever evolving phenomenon. Most of all, it is a journey. Hence, adequate preparation is key and this includes:      ·         An agreement or willingness of the successors to go on the trip      ·         A common destination with shared values      ·         Milestones for monitoring progress      ·         Fuel to sustain the journey      ·         Fundamental skills for dealing with road obstacles

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Active-contemplative synergy

October 7, 2019

Given the increasingly pressing conditions of the world today and the permanent, ultimate and most precious goal of ours, we really need to be more serious and more skillful in synergizing both the active and contemplative modes of our life.      We have to be immersed and involved in all our worldly affairs, attending to their requirements as promptly and actively as possible. But we also have to see to it that we do not lose sight of what is most important in our life—to be with God and to aim at heaven. “What does it profit a man,” Christ said, “if he gains the whole world but loses his own soul?” (Mk 8,36)      We need to be both with God and with the world. These two modes of our life need not be in conflict. They can and should be put together to enable us to live a life proper to us as persons and children of God. We have to learn to find the connection between the material and spiritual, the temporal and eternal, and the mundane and sacred aspects of our life.      The active and contemplative modes of our life may each have their own ways, but we have to develop a strategy of how those distinctive ways can be put together. It wouldn’t be good for us if we would just be active but fail to be contemplative, or just contemplative but not active. We have to be both.      The secret, I believe, is to begin everything we think, desire, speak, and do with God, the creator of everything, the author of what is true, good and beautiful in the world. With him, we get to see the unity that binds together all the different aspects of our life. He is the source, pattern, and end of unity.      Thus, a period of prayer, meditation, and contemplation should have priority over our work and other forms of activity. Prayer in its many forms, together with the recourse of the sacraments and making sacrifices, should help us have a deep, strong supernatural outlook such that we can somehow feel God’s presence everywhere and see and abide by his will.      We have to devise some means to keep our presence of God all day even in the middle of the most mundane activity we have. In this regard, we have to be most inventive, creative, flexible, and versatile. It helps that to be truly motivated by our love of God and for others, we be sportive and game in our lifestyle, since every day is actually like a game with endlessly varying possibilities.      To be contemplative is usually associated with being isolated, withdrawn from things, reflective, silent, recollected, and far-looking, but it has to blend with our need to be with others, immersed in things, constantly reactive to whatever immediate stimuli may come our way.      If we have a true contemplative spirit, the things of the world would not be a hindrance in our relationship with God. In fact, the things of the world would become the means, instrument, occasion, and reason to be with God. It is in them that we can and should develop and show our love for him and for others.      In other words, our active life of work and other worldly concerns is also where we can contemplate God. It is in them that we can and should meet God. There is no event in our life where we cannot meet God.      Even when in our earthly affairs we suffer some misfortune or commit mistakes or even fall into sin, we should not forget that we can and should still be with God. Yes, even in our worst condition, God would be most solicitous of us, as illustrated in the parable of the lost sheep, the lost coin, and the prodigal son.

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A very precious gift from Emirates Red Crescent

October 7, 2019

As the nation prepared to celebrate National Teachers Month,  the teachers and students of Itaas Elementary School in Muntinlupa City received late last month  a generous donation from Emirates Red Crescent (ERC).       The gift, dubbed  as “Dubai School”,  consists of a 4-storey 8-classroom school building, complete with arm chairs for pupils, teachers’ tables and chairs and 9 comfort rooms.      500 students also received school bags.       Emirates Red Crescent is a  volunteer humanitarian organization based in Dubai, United Arab Emirates. It is a member of the International Federation of Red Cross and Red Crescent Societies since 1986.        ERC is focused on 1) educating people in international humanitarian law 2) spreading health awareness and education  3) establishing projects for the good of those in need: orphans, widows, elderly, and special needs 4)  rescuing people from the effects of disasters and  5) attracting talents for volunteer work.      In the Philippines, most of its projects are related to education.  To date, ERC has constructed or repaired 21 school-buildings enough to accommodate 10,000 students. Other facilities donated  by ERC include 15 multi-purpose covered courts, 12 theaters, service and health facilities and computer laboratories.       The Dubai School construction commenced in  October 2018 immediately following the signing of a memorandum of agreement between  DepEd Muntinlupa represented by Schools Division Superintendent, Dr.  Mauro C.  de Gulan; Raul T. Felix, the school principal and H.E. Hamad Zaed Alzaabi, UAE ambassador to the Philippines.      Funds for the project were donated to ERC by Mr. Ahmed Al Abdullah Al Ansari.        Several dignitaries from the UAE attended the turnover last September 25. They  included  H.E. Hamoud Abudllah Alawi Mohammed Aljneibi, General Secretary of  Marketing and Donation (M&D)  of the Emirates Red Crescent; UAE Ambassador,  H.E. Hamad Zaed Alzaabi;  and Obaid Rahmat Al Baloushi, ERC Director of  Projects.       The visitors  were received by Muntinlupa City officials led by Mayor jaime R. Fresnedi, Vice Mayor Artemio Simundac, city councilors Raul R. Corro and Paty Katy Boncayao.  The DepEd family was represented by  Dr. Mauro C. De Gulan Schools,  Division Superintendent;  principals of different Muntinlupa elementary schools, Public Schools District supervisors, parents , and students. The office of DepEd Regional Director was represented by Mrs. Victoria Mayo.  Speech Laboratory Project      Earlier this year, Itaas Elementary School (which happens to be my Alma Mater) received an additional 15-seater speech laboratory, courtesy of SM Foundation.   The additional facilities complement an earlier donation by alumni and friends of Itaas, led by Class 1956.       Note: Please feel free to share the foregoing article via Facebook, Twitter and/or Linked-In.

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Nothing is certain in life and in business

September 28, 2019

Geoffrey Gaberino, the 1984 Olympic Gold Medalist once remarked, “The real contest is always between what you’ve done and what you’re capable of doing.  You measure yourself against yourself and nobody else.”      If family businesses around the world strive for future prosperity and family survival in an increasingly volatile, uncertain, complex and ambiguous (VUCA) world, how did the next generation business leaders of dominant conglomerates like the 184-year old Ayala and 130-year old LKK managed to keep pace with an ever-changing VUCA world?       Even with a great idea, leadership and many hours of hard work, one rule still applies:  Nothing is certain in life and in business.  No one can unfailingly know if an enterprise will fail or reach a century or whether a startup will survive past the one-year mark.  So, how can one increase the odds?      To dream and aspire in becoming a 100-year old enterprise, the business must be relentless in staying relevant. But how?      Firstly, the business leader must create a clear vision of where he or she wants to take the business in 10 to 20 years. Next is future proofing a succession plan. It is important that this shared vision must be well-defined, replete with measureable objectives and supported with very clear lines of communication and accountability, especially with the natural entry of next generation siblings and cousins.      I was in Boston last week for strategic coaching work and in between engagements, pursued collaborative studies at Harvard on how to create a resilient and dynamic organization of the future. Expectedly, VUCA is here to stay and family businesses must evolve to overcome these dramatic changes!      So beyond the perks, entitlement and glamour of being an SOB (Sons and daughters of Business owner), successors must fully embrace the commitment, the hard work, the long hours and the pursuit of a strategic “big idea” that goes with the succession plan. This is what strategic planning is all about.      Jane Hilbert-Davis, a Boston based consultant, defined strategic planning as “simply creating a plan of action. Originally from the Greek roots, ‘STER’ which means to spread out, usually in a military sense, and AG to drive or to lead, the word ‘strategy’ conjures up images of preparing for battle, or competition.  It's different from 'vision' which is a future imagined, a hope of how things can be in the ‘farther into the future’ horizon, 10-20 years from now. “      A strategic plan describes how you can get there. It's about making decisions in the present for the future and usually involves a 3-5-year time frame. It is both written and lived. It cannot be pieces of paper stuck in a drawer and forgotten, but must be thought through carefully.  It should reflect a flexibility and readiness to whatever the future may bring.      So I pose this challenge to business owners: What is your vision, your shared values—and your mission? What strategies should you follow to reach your goals before passing the baton? What structures and people do you need for the business to succeed? What is your succession plan? What are your contingency plans in handling a business crisis? How about a death in the family? Sibling rivalry? Questions related to ownership, management of shares, who are qualified to own, inheritance, entry of in-laws, extended family members?      Many business owners recognize the importance of ownership and management transition, but few know where and how to start in developing collaborative leaders that will take the business to the future.      To be continued…

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