Preparing for the Third Wave!
When my firm, W+B Family Advisory Group, sent a family governance survey a couple of years ago to successful Asian family business leaders, we asked them what critical initiatives they made during the difficult transition from a mom and pop business to a high performing enterprise. Their collective answer was

By Prof. Enrique Soriano
By Prof. Enrique Soriano
When my firm, W+B Family Advisory Group, sent a family governance survey a couple of years ago to successful Asian family business leaders, we asked them what critical initiatives they made during the difficult transition from a mom and pop business to a high performing enterprise. Their collective answer was family governance. They believed that governance helped them create a structure that aligned the family to the business under an atmosphere of competence, trust, accountability, family unity and sense of purpose, avoiding potential conflicts not only over financial issues, but also over personal relationships. When we asked another major initiative they took and they were thankful they did, they ranked the engagement of external influences (advisors, independent and managers) as the second highest after family governance. By being outward-looking and willing to take advantage of external skills, family enterprises are better able to grow and respond successfully. In short, for family owned businesses to survive and thrive, governance should be first in the list and the hiring of top outside talent next.
Innovation is Key
Global consulting leader, Mckinsey & Company wrote a very timely article about innovation as a launchpad out of COVID -19 and it clearly highlighted a strong message, “to innovate your way out of this downturn, you need to change behaviors and mindsets—starting at the very top. Crises are adrenaline for innovation. You must make decisions quickly under extremely uncertain conditions, and you never have enough time or information to fully weigh difficult choices that may affect both employee livelihoods and the survival of the business. Yet these very constraints can unleash waves of creativity. Necessity and urgency spur ideas and dissipate inertia. Leading innovators seize such conditions to reshape mindsets and behaviors, embracing the opportunity to uncover fresh solutions and make bold bets that can reignite growth.”
Which leads me to emphatically call on family business owners to stop agonizing and start organizing. After one year of waiting, it is now time to pick up the pieces and focus on getting the right professionals, one essential outsider at a time. We are facing an unprecedented crisis never before experienced in our lifetime. There is no go-to-playbook to apply in dealing with the complex interrelated problems confronting businesses. The truth is that the pandemic has turned our world upside down in ways that we never anticipated. After decades of resisting the increasing pace of change and the many innovations disrupting many industries, we are now encountering a situation that makes it impossible not to adapt. Every business, large and small, has been threatened, and every leader is facing deep challenges. For 2021, there is no room for complacency nor impulsive, short-sighted decisions.
Build and they will come
As family firms become larger and more complex, the foundations have to be laid for a more structured, less centralized organization. The task is more difficult for family than for non-family enterprises because there is a strong temptation in many family firms to depend on internal experience and judgements. This natural tendency to rely on blood can be countered by the effective use of outside talent, advisors or managers. And the decision to appoint outsiders may be a difficult and challenging one. There will be never ending opposition from all sides as this marks a major cultural shift. But the reality is this: it is an important step in making the family enterprise embrace external influence and when done right, can help secure its future. As Dhanin Chearavanont, senior chairman of the Thailand based conglomerate, Charoen Pokphand Group (CP Group) with an annual revenue turnover of US$63 B (San Miguel Corp annual revenue is only US$20.6 B) explained in an interview by Nikkei Asia, “rather than continue to do everything ourselves, we decided to bring in outside experts to manage the company. Novices can only run a business for so long before its operations become too large and complex for them to handle.” This is one of the reasons why the CP Group, which started out as a tiny store with only a handful of employees, quickly joined the ranks of international businesses with more than 360,000 employees dispersed to more than 30 countries across five continents. It is the world’s largest animal feed producer and also one of the largest poultry, swine and shrimp producers.
On Sun, Apr 11, 2021 at 10:50 PM Enrique Soriano <esoriano@wbadvisoryasia.com> wrote:
The Impact of the Next Wave
Nikkei Asia reported that “Asian economists have revised upward their growth forecasts for the economies of Singapore and Indonesia, thanks to quicker rollouts of coronavirus vaccines. They revised growth projections for Singapore, Indonesia and India, from the previous survey conducted in December. Singapore is expected to achieve economic growth of 6.1% this year, up from 4.5% previously forecast. Indonesia’s gross domestic product is seen expanding by 3.9%, up from 3.6% in the last survey.” With the successful vaccination rollout in Singapore and Indonesia, we can expect their economies surging ahead this year and recovery back to pre-COVID levels for most of their industries in Q3 of 2022.
On the other hand, Inquirer reporter Doris Dumlao-Abadilla remarked that the “Philippine economy may be hard-pressed to even grow by 5 percent this year as no relief is yet in sight from the coronavirus (COVID-19) pandemic a year since the outbreak, prompting a return to tough lockdown protocols. This was according to Romeo Bernardo, economist at New York-based think tank Global Source, who said in a research note dated April 5 that the present crisis was a “concrete display of what has kept us worried all this time and why we have not been able to shake off a more pessimistic outlook for the economy.” Personally, we are still a long way to go and whatever forecasts that will come out this quarter will be a moving target. If we follow the path of Singapore, the only thing that can take us out of this mud is through relentless vaccination initiatives. I consider the latter a game changer if we want economic growth and recovery to start this year.
Prepare for the Worst Case Scenario
With a sluggish start for the country, we just need to acknowledge that the world has changed considerably and based on emerging trends that we are experiencing, survival and adaptability in the marketplace will ultimately define the kind of business DNA that will carry us through. A major enabler is leveraging the power of e-commerce in a business infrastructure, “digital solutions have democratized access to experiences and conveniences for individuals and companies,” says Clay Cowan, a McKinsey partner. The road to recovery is full of trip wires and the remaining three quarters will be a defining litmus test for family enterprises. Family members must reboot fast and every organization must now embrace a disruption-ready culture.
Know your market
The barometer of any business is the state of our economy. When there is employment, consumption increases and confidence goes up. For as long as there are jobs available, our GDP goes up. Most of our industries are part of what economists refer to as primary cyclical industries and our decline and upswing patterns can be attributed to economic shifts. With the severity brought about by the pandemic, keeping things together during this tumultuous downturn can be tough. During strategic planning sessions where I am asked to facilitate , I would always hear from talented Boards that they always consider this economic cycle as a real turnaround. That is why planning and bracing for a post vaccine recovery is important. The art of dealing with this pandemic is keeping the business afloat long enough for the economy to kickstart and recover.
Leadership
The business leader must take the lead and consolidate all qualitative and quantitative resources of the family in preparation for this disruptive second wave. In short, active family members must prepare scenario analysis covering the worst-and best-case situations. Planning is important so family members can specify the areas of intervention needed by looking at facts and figures and explaining what the immediate measures are necessary. A good example is for the family to discuss debt mitigating measures, cash flow management, austerity initiatives both for the family and the business. The company’s financial and cash position is the best source for objective decision-making and transparency is key in having family members buy into the importance of addressing mounting expenses covering employee salaries, supplier credits, loans and expenses for the family.
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