CEBU

Soriano: Will your family business survive for generations?

Inside family business

THERE is an Italian saying, “Dalle stalle alle stelle alle stalle,” which means, “From the stables to the stars and back to the stables.”

As a business leader, do you sense the business slowly slipping away? Is it struggling year after year? Are your personal and business aspirations no longer aligned with the vision and goals set by the family? Are your children not committed in helping the family business? Are they constantly squabbling during meetings? Is there jealousy and interference from some disgruntled family members plaguing the operation of the family business? Is the business dependent on one individual, namely, the principal owner-manager?

Many family business managers tend to be consumed with short-term operational issues. These are taxes, finances, sales, marketing, and day-to-day operating problems. Family businesses are commonly at a disadvantage when it comes to acquiring resources, largely because their owners are more conservative.

Are these events happening in your family business? You are not alone. These are issues that manifest from founder stage to sibling partnership stage all the way to the cousin consortium stage. In any of these stages, the survival of an enterprise entirely depends on generational creativity. Business endurance or leaving a legacy from generation to generation requires hard work and commitment. It means believing and living the vision of the founder.

In a research jointly conducted by Wong + Bernstein and Icon Executive Search on family enterprises based in Asia, there appears to be a growing trend that shows family run businesses outperforming non family run business. Not only do they perform better, the study also showed that when a family business successfully hurdles three generations, the likelihood of sustained success is cemented. Creating a family business legacy is a challenge for owners of family businesses. The past and the present stature of a family business will determine its future existence or demise. Much of course depends on business and talent management and generational transition.

James Olan Hutcheson’s article in 2007 titled “The End of a 1,400-year-Old Business” says it all: “The world’s oldest continuously operating family business ended its impressive run. Japanese temple builder Kongo Gumi, in operation under the founders’ descendants since 578, succumbed to excess debt and an unfavorable business climate in 2006.” What are the factors that contribute to the success of Gumi and his descendants’ temple building enterprise from 578 to 2006? Construction of Buddhist temples is based on the stability or continuing presence of the Buddhist religion. Buddhism is a stable belief system that has millions of followers or adherents for thousands of years. The other key factors include a blend of flexibility and conservatism. Rather than choosing the oldest son as successor, Kongo Gumi turned over the reins of the business to a woman, the grandmother of Masakazu Kongo. Masakazu Kongo was the last president of Gumi’s business empire and the criteria for succession was based on “health, responsibility and talent for the job.”

In essence, the Gumi Case shows that the elements of conservatism and flexibility can be mixed to stay in the same business for generations. Variation from the principle of primogeniture is a must to stay afloat. So, why the demise given the above success factors? What lessons can family business owners learn from Gumi? Hutcheson explains, “Despite its incredible history, it was a set of ordinary circumstances that brought Kongo Gumi down at last.

To be continued


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