Family before fortune

OPINION
By PROF. ENRIQUE SORIANO
September 18, 2019

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On behalf of the W+B Family Advisory Group, the event organizer ICON Executive Search and education partner, ExCED Institute, I want to personally thank all the participants who graced the 2nd W+B Family Business Conference titled, CAN FAMILY-RUN BUSINESSES LAST FOREVER: A Talk About Building 100 Year Old Enterprises, last August 31 at the Manila Marriot Hotel, Resorts World Manila. Thank you to Panay News for the media support!
    
I hope that everyone found the conference informative and worthwhile. The primary goal of the forum was to bring together Governance leaders (Institute of Corporate Directors), Wealth Preservation and Risk experts (Deloitte and Bank of Singapore) under one roof to discuss multi-generational issues currently confronting 92% of family owned and managed businesses in the Philippines. Our objective was to share powerful strategies related to Family and Corporate Governance practices and inspire everyone by inviting a pragmatic Enterprise-founder/CEO and thought leader (Mr. William Tiu Lim) who willingly and generously shared his vision and legacy initiatives geared towards transforming the business he founded, Mega Global, to Centennial status (100-Year old).
    
Your presence helped to make this event a huge success, making it the biggest gathering of family business leaders in years!

Rags to Riches to Ruin
    
Few family corporations have survived way beyond three generations -- a curse that summarizes the life cycle of a business from rags to riches and then ruin. In the three-generation effect, a family corporation usually starts with the patriarch establishing the company to provide for the family. The second generation inherits the business and grows it, then comes the third generation to squander it. Studies show that seven out of ten affluent families will lose the family fortune by the end of the second generation. By the end of the third generation, nine out of ten of all affluent families have blown through the family wealth, and many have suffered terrible family strife.
    
Research indicates that family business failures can essentially be traced to several factors:
    
* Forbidden Issues. Lack of trust and misunderstandings in the family leads to conflict avoidance, lying, hiding things from each other.
    
* Lack of meritocracy. The inability of next generation offspring to cultivate the requisite skills that match those needed by the current and future business environment.
    
* Lack of clarity. The lack of planning and governance at the business, family and ownership levels.
    
* Weak or misaligned values. Lack of common understanding of what values the company and the family lives by, and wants to preserve.
    
* An unfortunate lack of succession planning. Founders and owners are notoriously poor at planning for the future of their businesses. For one, death is not an easy subject to talk about; not is retirement, especially for rugged individualist and entrepreneurs or their families.
    
A family business without a formal succession plan is asking for trouble. We often hear this statement from business leaders, "No doubt, my children are being groomed to lead the business eventually but they are too young and inexperienced to make critical decisions." Family business leaders, particularly the founders, often neglect the issue of succession because they are so protective of the business they started.
    
Although they want their ventures to survive them and to pass the torch of leadership on to their children, they seldom support their intentions by a plan to accomplish that goal. They just dream of continuing the business long after they're gone but take no steps to make that dream a reality.

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