In Unity There is Strength!

By Prof. Enrique Soriano

 

The lack of trust and open communication are responsible for 80% of family business failures in Asia. In my experience helping families heal years of tumultuous relationships, I can conclusively say that the lack of a sense of meaning, shared purpose and belief that family unity is paramount are the major reasons why family owned businesses do not last two or three generations. There is an Italian saying, “Dalle stalle alle stelle alle stalle,” which means, “From the stables to the stars and back to the stables.” It is an indication that the challenges facing family businesses are universal.

 

Time is a variable for any kind of business. The test of endurance and viability of an enterprise depends on generational leadership plus a lot of patient capital and creativity.  Business survival or leaving a legacy from generation to generation requires hard work and commitment reinforced by the acquiescence of the founder or the key business leader to share power and plan the transition journey. For successors, it means embracing and living the vision of the founder, that they must have the determination and the audacity to move forward despite the emotional roller coaster experience found in family enterprises. Creating a family business legacy is a challenge for owners of family businesses.  Whatever you are doing now will decide the fate of the family enterprise’ future existence or demise.The late best-selling author Stephen Covey once said, “There are only two lasting bequests we can give our children. One is roots, the other wings.”

 

Whatever a family business’s purpose is, open communication is critical. This is something family advisors must do… encourage family members to speak out and be truthful. There is the need for families to talk about difficult issues no matter how painful and uncomfortable the issues are.  Individual family members need to share their personal aspirations as a starting point for any family conversation about values, vision and purpose and when family members violate certain codes of behavior and do something that runs counter to the family’s priorities, there needs to be a governance process ( pre agreed family rules like a Constitution) for addressing it.

 

As 4th Generation successor Jon Ramon Aboitiz, former chair of Philippine based Aboitiz Group (a family conglomerate that was established in the 1880’s)  said in one of his interviews, “I think that succession is very important in a family business. First of all, the most important in a family corporation is that you have to build up rules and regulations for the family and the business. We have, for example, built a constitution. We have a family council. We have rules of engagement, who can join the family business because not every family member is entitled to work for the company. He has to try; he has to go through different processes, This helps, as people leaving the business happen many times. If you have the constitution, if you have the understanding of the rules of engagement, then it makes things easier because it is very clear to everyone what are the dos and don’ts.”

 

Investing on a powerful governance structure with clear rules of engagement and where family members are encouraged to collectively deliberate on difficult decisions while maintaining unity is one of the major steps in harmonizing relationships. Having this platform for meaningful discussions related to the purpose of a family business can be difficult at first but it is one powerful lever that will pave the way for family members to acknowledge their inherent responsibility to pursue the founders dream of a 100 year old business.

 

Why don’t family-owned businesses endure? Deloitte’s William Chou writes that it’s not internal squabbling or lack of interested successors — it’s the lack of a commonly understood purpose. Defining purpose may seem easy but maintaining it from generation to generation can be harder than most people think especially when there are multiple generations involved who have different life experiences and perspectives.