Shirtsleeves to Shirtsleeves in Two Generations – Part 2

By Prof. Enrique Soriano

When the successors of a family business possess a low Adversity Quotient (AQ), they often struggle to effectively handle challenges and setbacks. This lack of resilience can result in risk-averse decision-making, an inability to adapt to shifting market conditions, and a reluctance to embrace innovation.

It’s an undeniable reality that a significant number of next-generation family members exhibit a Low Adversity Quotient (AQ). Equally true is that when these successors possess a low AQ, the business they stand to inherit is at substantial risk. AQ plays a pivotal role in shaping how individuals navigate and respond to challenges, setbacks, and uncertainties. When resilience and adaptability are absent, the business becomes more susceptible to a range of detrimental outcomes. Drawing from my experience in mentoring next-generation leaders across Asia, I’ve identified common characteristics of individuals with low AQ:

1. Coping Struggles:They find it challenging to handle adversity and setbacks effectively.
2. Impaired Decision-Making:A lack of resilience and risk aversion hinder their decision-making and stifle innovative thinking.
3. Resistance to Change:Adaptation to evolving market conditions becomes difficult, as they resist change.
4. Leadership Effectiveness: Their leadership might falter, leading to internal conflicts and decreased employee morale.
5. Family Conflicts:The lack of ability to surmount obstacles can lead to family conflicts that disrupt business operations.
6. Stagnation or Decline:Inability to overcome obstacles and drive growth might lead to stagnation or decline, jeopardizing long-term success.
7. Dwindling Confidence:With poor leadership, stakeholders may lose faith in the business, affecting reputation and growth prospects.

Tough Times Forge Resilience

The adage, “Tough times create strong men, Strong men create easy times, Easy times create weak men, Weak men create tough times,” serves as a poignant reminder of the generational cycles in family-owned businesses.

Tough times create strong men: Founding entrepreneurs face challenges and adversities in the early stages of the business. They must be resilient, innovative, and hardworking to establish and nurture the business.

Strong men create easy times: As success unfolds, the second generation enjoys a more comfortable and prosperous environment, often reaping rewards without fully grasping the hardships endured.

Easy times create weak men: The third generation, accustomed to abundance, may lose the drive and ambition of the founders due to a lack of exposure to hardships.

Weak men create tough times: Subsequent generations with diminished work ethic and entrepreneurial spirit might lead the business into challenges and decline.

Founders and Leaders Must Act

This cycle highlights how the strength, resilience, and determination of the founding generation lead to success. However, as later generations lose sight of the struggles that forged the business, they might lack the preparedness to face challenges, endangering the business’s sustainability. To break this cycle, family businesses must pass on not just wealth, but also the values and work ethic that underpinned the initial success.

To address these foreseeable challenges, current leaders must acknowledge the next generation’s low AQ and take measures to bolster their resilience and leadership skills. This could involve mentoring, training, exposing them to demanding situations, and promoting a growth mindset, possibly through advisors or non-family executives.

So what will it take for next generation members to have the same level of adversity quotient?

Find out on August 19, Saturday, at the Crowne Plaza Manila Galleria when next-generation leaders Alliance Global CEO Kevin Tan and JG Summit President and CEO Lance Gokongwei share their experiences on stage during the “Family Business Continuity: Ensuring a Fail-Proof Succession Plan” event. It will be an engaging and enlightening forum that will focus on the myriad of challenges and strategies for ensuring a successful business across generations. To register, please contact Marivi Estrada of ICON Executive Asia at 0977-835-5533.