I am sounding the alarm bell to all visionaries and business owners. The warning is directed to family enterprises that have accumulated significant wealth in the first and second generation. Should you fail to initiate governance, you have a 75% to 80% certainty of throwing away the business you built with your life.
Losing a business can mean conflict among siblings/branches resulting to a decimated ownership and/or a sellout where ownership falls into the hands of a few members. Evidently, any family breakdown primarily points to a long standing sibling rivalry ending with a power grab.
All these culminating events can strike a death knell to the enterprise immediately right after the demise of the leader. The Italians have a fancy term for it, “dale stalle alle stele alle stalle” (from stalls to stars to stalls).
On a positive note, I highlighted in the past successful family owning businesses that overcame hardship, conflict and triumphantly extended the founders legacy to more than a 100 years.
One company that made a dramatic turnaround is the Eu Yan Sang (EYS) Group. Founded in 1879, EYS is Asia’s leading brand in the healthcare industry, with a core focus on traditional Chinese medicine (TCM). They market quality Chinese herbs, medicines and supplements. Their story is one for the books as it is accompanied with greed, betrayal and a riveting story of murder, sellout, repurchase and growth all these happening during its 138 years of existence. Presently under the watchful eye of 4th generation members headed by Richard Tiu, EYS has become the gold standard for family governance in Asia.
Together with another inspiring family business that has breached a century, I will share both cases in a major event on August 25, entitled “On Becoming a 100-Year- old Family Enterprise” at the Manila Marriott Hotel. To reinforce my talk with real life governance, I have invited a second generation successor, Kevin Tan, the newly appointed CEO of Alliance Global Inc. (AGI), as my co-resource speaker during the event. He will share his experience as an entry level employee who rose from the ranks after close to 20 years of constantly proving himself to family members and peers.
AGI is one of the Philippines largest conglomerates founded by Kevin’s visionary father and AGI Chairman, Dr. Andrew Tan. The market cap of AGI with 6 listed companies under its portfolio is anywhere from US$12B to US$14B.
Back to EYS, it is a tale of fourth generation resiliency and resolve to regain control of the business lost to outside investors. As Rachel Cheung of the South China Post remarked, “despite years of family strife, the murder of the founder’s wife by her brothers-in-law and a takeover by a Singapore investment group, TCM maker EYS has survived and flourished as a Hong Kong icon.”
Visionaries and business leaders need not necessarily go through rough periods of adversity because most of the problems besetting family owned businesses are predictable. The real challenge is preserving the wealth and maintaining family harmony and all that family members must collective agree on is to initiate family governance and succession immediately.
So what are the distinct characteristics of successful 100-year-old family businesses? I enjoin leaders to embrace each virtue:
· Shared Vision Mission Values
· Commitment on Family and Shareholder Agreements
· Investment on People: Family and Non Family Talent
· The Right Business/Family Balance
· Compelling Business Model Innovation
· Institutionalizing Communication and Transparency Protocols
· Ownership Policy on Sibling/Branch Partnership
· Next Generation Leadership to the most deserving
· Engaging members via the Family Council/Forum