Keys to successful family legacy business
Where does an entrepreneur start in making sure that his family business will transcend the test of time and the oft-repeated third-generation curse?
The third-generation curse is a business succession idea where the first generation entrepreneur builds and creates the business from scratch. This is then passed on to the second generation who maintains it and keeps the momentum growing, before the third one takes over and wastes it away.
It has been said that the two enemies in sustaining family legacies are: an overly controlling patriarch and the next generation’s dominating sense of entitlement. However, according to professor and family business expert Eric Soriano, there are ways in making sure that the two won’t be a problem later on.
Let’s take a look at some of ideas he shared: • Good parenting and shared val
ues Family has always been the core of society and this is the springboard of character of the kids. Integrity, hard work, and fairness usually start when parents espouse the same values that helped them in building the business from the ground up.
• Clear agreement In any kind of relationship, there should always be clarity. When one member of the family enters the business, there should be a proper delineation of duties and expectations.
For a successful business, Soriano noted how important it is that “parents stop behaving like a father or mother on business-related matters involving the children.” It is crucial, according to him, to “never ever reward bad behavior.”
• Employment contract The constant overlapping of family, business, and ownership can be a dangerous thing and here’s where an employment contract comes in handy.
Soriano highlighted the importance of “compensation being commensurate to credentials and being based on what the child can contribute to the business.” The worst mistake any parent can commit when it comes to grooming their children to take over the family business, according to him, is telling the kids things like ‘someday, you’ll own this.’
• Stewardship Only when a business owner appoints the most capable and competent leader could an excellent stewardship be assured. In this regard, the successor should be able to see that he is only taking care of the business for the next generation. • Preparing succession early Suc- cession is not something that should be taken lightly. Successful power transitions always come with thorough preparation and early efficient child rearing where the next generation of leaders from the family learn the value of hard work and not entitlement.
As the family business grows, there will be more and more insights that a business owner, his family, and employees should learn.
These are just some of the ideas that will be discussed soon as Eric Soriano hosts Alliance Global Group Inc. chief executive officer Kevin Tan in a talk about family, business, and ownership governance systems at the Manila Marriott Hotel in Resorts World Manila, Newport City on Aug. 25. Call (02) 655 2686 or 0922 860 3186 or email events@wongadvisory.com. for reservation.