I want to quote the Economist magazine on why family-owned businesses do not make the generational leap, “substitute the founder for a medieval monarch and the professional managers for courtiers, add a pair of rivalrous heirs with jealous wives and scheming cousins, and you have the perfect recipe for a Shakespearean tragedy.”
For years, the Yanson family conflict was a ticking time bomb ready to explode. The meltdown was just a matter of time. And the feuding family members or antagonists as we call them now are dangerously pushing the business precipitously into a cliff. A few more nudges and the whole Yanson rags to riches story will soon meet its tragic end. It can either be a buyout, division or a split, or worse protracted litigation. Any separation that comes out of any negotiation will be heartbreaking.
All told, this family business is in a state of crisis and as the warring siblings remain defiant, we are seeing an ending where there are no winners (except lawyers and taxmen), only losers. Where a once mighty business will end up in disarray, an inconsolable mother and a devastated family where generational relationships become estranged, scarred forever with the cousins growing up as strangers.
Predictably, we are seeing the beginning of the end of the family business. Unless reason prevails.
Consequence of founder neglect
Should we point to the founder’s lack of governance initiative? Yes, but it is water under the bridge now. The patriarch is no longer around to scuttle any attempt to undermine the business. The emperor is dead. The next generation entitled family members, seemingly ignorant of their fiduciary role as board members, have devilishly chosen to engage in a tug of war for control and power.
Let me be very clear. Founders started their businesses out of a certain need to survive and nothing else. Governance was never part of any founder’s language. The way the business was run was owner-centric (autocratic). Every decision starts and ends with the founder. And systems, if at all, are very informal. They are driven purely by their desire to put food on the table and scurry for payroll money.
Then a huge break happens, wealth starts to flow and the leader, in his or her desire to shelter the children from enduring what he/she went through, vows never to subject all the offspring to any form of hardship. A common and dangerous mistake by many owners.
Entitlement is a dangerous disease
At this stage, the children start to experience unprecedented comfort plus an uninterrupted serving of entitlement. With money and the promise of ownership cemented, what is there to prove? At this juncture, complacency and the desire to work decreases and a culture of entitlement emerges. Predictably, family members will now demand for highly unreasonable expectations about what they are entitled to.
From my perspective as a family business advisor looking on the outside in, it is very clear that sibling rivalries, ego, jealousy, in-laws, money, emotion, trust, power are likely to be among the root causes why the conflict erupted. I am certain that the squabble reached boiling point due to the family’s poor handling of the events leading to the power struggle. The family was simply not capable of handling disagreements.
The children were never trained in any form of governance, much less the concept of fiduciary duty or single-minded loyalty to the business. I can only surmise that their one dimensional dependence on their legal advisors pushed them to the brink of exercising one route (should mediation falter) and that is through litigation. That to my mind was a very unwise and a dangerous move meant to inflict the most damage to the family. Again, there is still hope but only when reason prevails over emotion.
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On Aug. 31, 2019, I will be sharing the stage at Manila Marriott with prominent governance leaders / family business owners in the biggest Family Business gathering in the Philippines. In the public event entitled, “Can Family Run Businesses Last Forever?” I will share the secrets in building 100-year-old enterprises. Seats are limited. To reserve, please call Aira at 09228603186 or register at events@wongadvisory.com.