FAMILY values and business values are usually not aligned.
While a business exists to create customers and achieve financial success, families have an entirely different motivation. They typically bring a less profit-centered focus alternating financial gains with trust, relationship and a lifetime engagement. These non-financial goals represent the bedrock of the family business ecosystem.
For one, family-owned enterprises are more community driven. They go out of their way to help their trade area on various social advocacies. Internally, the employees see the enterprise as an extension of their family and vice versa.
One good example was when a Philippine-based businessman (net worth $3 billion) went out of his way to do a headcount of all his employees affected by super typhoon Yolanda (Haiyan). He then secretly met and surprised each one of them with a financial package under a “pay when able” scheme and encouraged them to go back to their hometowns so they could be with their loved ones while rebuilding their homes. As a PWC report stated in one of their studies, it “is the injection of this very human element into the mix that makes family businesses unique.” I want to share another success story of how family and business governance can work for as long as the family remains committed.
Family Business A is a trading company I have been coaching for the past five years. It was founded in the 1970s and now distributes its products across the Asia Pacific. By industry volume alone, the business is ranked eighth in Asia Pacific.
The business is currently being run by second generation members composed of five siblings. Due to the lack of systems and internal structures, confusion and petty misunderstandings among siblings became more frequent. Even non-family members were always caught in the crossfire, unclear on whose instructions to follow.
Recognizing the need to overcome the generational curse, the family agreed that the eldest son would take the lead and address governance in the areas of family, business and ownership (shareholding) structures.
“We used to have heated, nasty disagreements, but because we have set some rules in place now, we can resolve problems in a more professional manner minus the emotion,” said Johnson.
Jenny, the other sibling, also remarked, “The advantage of having a family council and being constantly reminded by a family governance coach is that our disputes have become less personal. We were made to realized that we were brought up under the same roof and our father always reminded us that when conflicts do happen, we should always hold on to our values like respect, honesty and unity.”
As in most of my engagements, my intervention with this family was never a walk in the park. In my first year, it was clear that my initiatives would solely focus on family governance. It is extremely important to galvanize family commitment first as a squabbling family will never progress to embracing business governance. Forcing a disunited family to transition to business governance is a double-edged sword.
In the course of a little more than a year, we finally signed the family agreement. Immediately after, I made them formulate business governance policies to include hiring of non-family key personnel, and performance metrics, including entry and exit rules.
With professionals in place, meetings became less emotional and family members saw it as a challenge to raise their performance standards.
When every family member is fully committed, it sends a strong message to everyone to put the interests of the family business first before their own.