Family-run firms ‘outperform’ rivals

DESPITE issues that hound family-owned businesses, at least three foreign studies have shown that family enterprises outperformed competitors that were non-family owned in the stock exchange.

For professor Jacob Cabochan of the Ateneo Family Business Development Center, such studies shows that being family-run has its advantages.

He also cited a Harvard study that concluded there was a higher value for companies still run by the founder than companies run by hired professionals or the second generation.

However, he also noted that problems arise when the company’s founder passes on and the business is left to the second and third generation to run.

Cabochan, who is also a senior consultant for Premier Business Family Consultants (PBFC), said that without the patriarch whose authority was not questioned, siblings may not be as willing to work together once the patriarch leaves the company.

Conference

Such issues and solutions are expected to be tacked on April 13 at the Family Enterprise Excellence Conference.

Organizers hope to attract families who are in business together to learn best practices on family governance and professional infrastructure, how businesses attract family members and other professionals to work in the business and how family businesses transition more adeptly into the next generation of leaders.

Cabochan said it is not only in Asia where there is a belief that family-owned enterprises and wealth are often lost in the third generation.

Aside from the Chinese proverb “prosperity does not last three generations,” Cabochan cited several other sayings originating from England, Spain, Portugal, Italy and Germany with a similar message.

Oftentimes, Cabochan said the next generation struggle with taking over, as the company founder did not serve as a good role model, being dictatorial and having no transparency and no collaborations with other members of the organization.

For Ellen Soriano, director of the University of Asia and the Pacific’s Southeast Asian Business Studies department, tension between the first generation and the next ones come when the younger generation tries to impart what they learn from their education.

Cabochan said this conference will teach them new habits in transparency and shared authority.

He admitted that interest in family enterprise management came up only recently, just 10 years ago. He believes this is because family enterprises that were founded after World War 2 have begun to transition to the next generations.

But with not enough data on family corporations, the organizers hope to set up a center dedicated to family owned companies to get to the bottom of it.

PBFC president Jon Ramos said that proceeds of this April’s conference will help set up the Family Enterprise Excellence Resource Center, a non-stock, non-profit program dedicated to family-owned companies in the Visayas and Mindanao.

He assured that this foundation will be tailor-fit to the Visayas and Mindanao family enterprises and will not be copying the other centers from other areas.

Organizers admitted that there were not enough resources on family-owned enterprises and that the available data are focused on larger enterprises that are Manila-based.

Lessons

Ramos said creating an institution for this will help small and medium enterprises understand the lessons they want to impart.

“If this was not crucial, there would be no need to hold a conference or put up a center. But studies show that there is a need, not only in the Philippines, but all over the world. Passing on wealth across generations is a challenge,” he said.

Mandaue Chamber of Commerce and Industry president Phillip Tan noted that 80 percent of his members are from the second generation of family-owned companies and that the third generation of the families are about to start joining the organizations.

He hopes the center will help address the educational gap that the first generation lacks from the the younger ones, noting that most first generation founders were unable to complete a degree.

Organizers hope to see 500 participants this year, saying professionals who work for a family-run organization will also benefit from the sessions.

Ramos said they will invite at least two Cebu-based tycoons and three successful families in business, aside from experts in family enterprises such as economist Bernardo Villegas.

A fee of P5,500 will be asked of each participant, although they are willing to give discounts to groups or early bookings. A part of the proceeds will be given to fund the projects of the Oblates Sisters who run shelters for abused children and prostituted women.

The conference will be held at the Waterfront Cebu City Hotel.

After establishing a center dedicated to family enterprises, they also hope to establish the Family Enterprise Excellence Awards to recognize family businesses that have lasted 50, 75 and 100 years to inspire other families to carry on. Nominations will be opened at the conference.