Founder inaction can cause a business to fail

Allow me to share the story of a family business run by Mr. C. Like most entrepreneurs, Mr. C migrated from Southern China, started a trading business and through the years expanded to several businesses like manufacturing, food and retail. The business was founded 44 years ago and at its peak, had a total employee count of more than 15,000.

Early this year, I conducted an organizational audit and found out that the employee headcount sharply dropped to just below 5,000. The decline started right after the founder took a back seat due to a life threatening condition.

Family C’s case is unique. It is a live case full of twists and turns and ever unfolding. Live case also means that it is a “work in progress” (WIP). This is also one of the reasons I spend more time in Asia than in the Philippines.

Our sessions have been quite challenging and gratifying at the same time. My core team was able to diffuse a family “ticking time bomb” that started more than a decade ago involving two warring sides of the family--three younger siblings pitted against two older siblings.

The problem started with the employment of the first two children, who were untrained and ill-equipped to handle the rigors of managing an enterprise belonging to different industries.

Straight from college and without any formal entry policy, they were asked by their father to help out in the business. Confident that the children were ready to assume bigger roles and the companies’ consistently better performance year after year, the father decided to slowly detach from the day-to-day chores.

Through time, they married, produced children and the family grew faster than the business. With their new found power, the older children started to apportion for themselves the departments and business units that they were already managing.

This was also the time the three younger siblings joined the business. With five children in the business, each vying for control, the departments were like a separate kingdom without any semblance of a collective plan moving in one direction.

With the children at the helm, heated discussions among them became more frequent and their incompetence manifesting by way of lapses in major decisions. It was obvious that apart from the breakdown of governance, the lack of vision, poor judgement, conflict of interest, high attrition rate for employees, no planning and a certain level of entitlement contributed to the decline.

Primary causes of the sharp decline

With the same surname as the founder, any family member can freely join the business.

Some were plain lazy, while some did not have to work as hard and still got the same pay as those who were fully engaged.

Distrust and self-dealing among family members were becoming apparent.

Relatives or friends can be a supplier without the necessary accreditation.

In-laws got infected with the “entitlement bug.” There were no rules of entry and exit including accountability for family members. Employees started to take sides out of survival. There were frequent clashes due to personality differences.

There was constant friction as to where the business should be heading.

There was no expansion as family members spent much of their energy fighting one another over money and power.

Family members never exerted effort nor time to cooperate.

To be continued.