Defying the third generation curse: The Japanese way

Based on research, there are 5,000 companies in the world that are more than 200 years old, and, out of this figure, more than 3,000 are in Japan.

It is the middle of 2019 and I am writing this article while on a plane en route to Toronto from Istanbul. Time really flies and every opportunity to unite families from long standing conflict is significant, as it provides a chance for hope, harmony and most importantly, forgiveness for family members that are mired in conflict.

In my years coaching family businesses in Asia and North America, the acrimonious and unnecessary parting between parents and siblings, siblings against siblings, in- laws against family members, and cousins against cousins has made the task of reconciliation more difficult than ever. With so much emotion consumed by all sides, nobody really wins.

Historically, the average lifespan of corporations has been between 40 and 50 years—a figure that has gradually been on the decline due to a challenging marketing environment. However, for family-owned businesses, it is a totally different story. Predictably, it almost always ends in tragedy when the founder or business leader dies without articulating his or her leadership and ownership plan to the next generation.

In Europe, it is even more alarming.

A study that analyzed thousands of European firms yielded a corporate life expectancy figure of a mere 12.5 years. Companies are dying younger and family enterprises without any form of governance in their veins are most vulnerable and are prone to collapse at any given time.

Defying the odds: The Japanese way

Why is Japan home to so many enduring family-owned businesses? Based on research, there are 5,000 companies in the world that are more than 200 years old, and, out of this figure, more than 3,000 are in Japan.

That’s more than 50 percent of the world’s oldest family-owned businesses concentrated in one country. The next closest country competitor is Germany, but it houses a mere 19 percent of the world’s oldest businesses, most of which are breweries. After that, no other country boasts more than five percent, and these are European countries heavily involved in producing wine.

So why is Japan different? Why do some of these family-owned companies go on for centuries while the rest of Asia die early? What is their secret to a long corporate life? Does culture play a huge influence?

The Bank of Korea undertook a study years ago related to the country’s enduring generational success. The primary objective of that study was for Korean family-owned businesses to learn valuable lessons from their next door neighbor, as Korea has only three family-owned businesses older than 100 years. Even South Korea’s so-called chaebol (chae means wealth and bol means clan), a large industrial family-owned business conglomerate that is run and controlled by an owner, are not spared from many scandalous succession and ownership issues throughout their existence, and there has been a long-simmering public anger against next generation successors that have taken over the businesses. They are perceived to be arrogant and entitled, a far cry from the widely respected older generation.

When these visionaries neglect family governance, the process in handing power to the next generation can always produce lots of drama and conflict. Therefore, is the Japanese longevity model all about their values, ideas and religious beliefs that have developed over the course of its history? What can their unique approach teach us about longevity?

To be continued...