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Saturday, July 16, 2005
Limited perspectives, problems of succession hurt family businesses
Family-run businesses in the Philippines are on a par with those of other countries in terms of management knowledge.
However, family sensitivity that results in conflicts, unprofessional management, succession of eldest sons to manage the business—even if unqualified—and lack of global perspective for growth are some factors that put family-run businesses in the Philippines at a disadvantage.
This was the assessment of Ricky Mercado, one of the speakers of the seminars on finance for entrepreneurs and making a family business successful that will be held in Cebu on July 29 and 30.
The seminars are in line with the 2004 Entrepreneurial Academy, a program under the Ateneo de Manila University’s John Gokong-wei School of Management.
Mercado made a rough estimate that over 50 percent of the total number of businesses in the country are owned and run by families.
In general, he said, family-run businesses did not succeed beyond the second generation.
“First and second generations find it difficult to relate and work together. This is from my encounters with the many family businesses that have attended my seminars, and the main problems (raised) in consultations,” he added.
While dedication and strong entrepreneurial spirit could give a family-run business an edge over companies that are run not by family members, Mercado cautioned that dysfunctional families, a dictatorial style of parenting that deprives the children of the right to speak out, leading to a lack of succession planning, would cause the downfall of a family-run business.
There could be cost advantages of businesses run by family members because they are usually not wasteful. But frugality on
the wrong things could also put the business down, he said.
On the fact that some of the largest conglomerates in the country, like those of the Ayalas, Aboitizes and Gokongweis, are run by families, Mercado explained that many of these firms had gone public, “but they keep control in the family.
They have professio-nalized and empowered their employees in running the departments or taking more responsibilities.”
Mercado described a professionally run family business as one in which outsiders are empowered, there is sharing of information, and technically correct solutions prevail over the emotions of family members.
In line with this, he urged owners of family businesses to agree on recruitment and evaluation standards to ensure that only qualified people fill positions in the company.
Mercado said the biggest financial problems entrepreneurs face today is financial sustainability, if the gestation of the business takes longer than necessary, and the lack of reinvestment in the business for various reasons, such as family disagreements on plans and jealousy. (ALC)
(July 16, 2005 issue)
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