My personal advice to business owners (last part)

SURABAYA- As this article sees print, I will be in Indonesia’s second biggest and most populated city with a population of three million and an extended metropolitan area with more than nine million inhabitants covering several cities.

Surabaya is a port city and was once the largest city in the Dutch East Indies and virtually the center of trading in Southeast Asia, competing with the likes of Singapore and Hong Kong. It is pretty much like Cebu and Iloilo as the local economy has a thriving Chinatown district.

Together with neighboring Singapore, which is a short two-hour flight, Surabaya and Jakarta form part of my regular coaching itinerary due to my numerous engagements with some of the country’s biggest family owned conglomerates.

Compliance after implementation

Allow me to complete the last part of the time tested formula that I strongly encourage every family member to embrace:

8. Compliance on business governance. It is essential that family members define and set boundaries, including drawing clear management lines in running the business. Mixing business, family and ownership issues every day can strain relationships, transforming the same into unnecessary conflict and disagreements.

Discretion follows conflict, so the best way to understand each other is to put in writing rules for participation in the business, qualifications, duties and accountabilities of each family member.

For senior generation leaders, there is no other time than now to initiate and document protocols and define roles and responsibilities to avoid hard feelings or miscommunication.

9. Require outside work experience. Children of owners desirous to join the family business should be required to get at least three to five years’ business experience elsewhere first, preferably in a related industry.

This will give them valuable perspectives on how the business world works outside of a family setting. Here, the child appreciates the value of discipline, competition and control. It is also in the outside world where he is humbled and challenged to perform by his peers and superiors.

10. Seek outside advice. The decision-making process for growing a family business can sometimes be too closed. Fresh ideas and creative thinking can get lost in the tangled web of family relationships. By having a non-family advisor, objective solutions minus the emotions are effectively laid out. The advisor’s entry can also be a good way to give the business a reality check.

11. Develop a succession plan. A family business without a formal succession plan is asking for trouble. The plan should spell out the details of how and when the torch will be passed to the younger generation. It needs to be a financially sound plan for the business, as well as a way for retiring family members to enjoy the quality years ahead. The phrase, “There is only one boss” is so appropriate when a successor is in place. Having a single leader does tend to be less complicated from the point of view of corporate decision-making.

The country’s biggest and most diversified family owned businesses like JG Summit Group and the Filinvest Group have already anointed next generation lead- ers to lead their billion-dollar conglomerates. With their succession plan firmly in place, mandates are established and the next generation leaders identified early so they can continue their stewardship role to the next generational phase.

12. Empower the next generation family members. Allowing the next generation of leaders to make contributions and introduce change is a major step in the right direction. Establish guidelines for competency, leadership and accountabilities for the next in line family business leaders.

The time to start the process is now

Applying these success formulas in the course of growing the business plan is like experiencing the seamless, graceful exchange of a stick between runners in a relay race. The new runner is fresh and has maximum energy; the concluding runner is decelerating as he has already spent his energy by running at maximum speed early on. The athletes never come to a stop to exchange the baton; instead, the handoff takes place on the move, almost effortlessly.

Good succession planning does not merely involve designating a family member and training him or her for the takeover. In fact, grooming the successor is the founder’s greatest teaching and development responsibility because it involves a long-term, continuing effort to balance competing interests and pressures that are integral in a family business.

Prof. Soriano is an ASEAN family business advisor and former chair of the marketing cluster of the Ateneo Graduate School of Business. He is a National Agora Awardee and book author of two bestselling books related to family business governance and succession.

For information on how to get a copy of his book “Ensuring The Family Business Legacy”, please call W+B Group 09228603186 and look for Jen.