Soriano: Wealth will not last two generations: The consequences of a low AQ

Soriano: Wealth will not last two generations: The consequences of a low AQ

When your successors have low Adversity Quotient (AQ), they may struggle to cope with challenges and setbacks effectively. This lack of resilience can lead to risk-averse decision-making, an inability to adapt to changing market conditions, and a reluctance to innovate.

It is a fact that many next generation family members have low AQ. It is another fact that when next generation successors have low AQ, there is a huge risk that the business they will inherit will likely suffer. AQ is a crucial factor in determining how individuals respond to and navigate challenges, setbacks, and uncertainties. When successors lack resilience and adaptability, the business they inherit is more vulnerable to various negative outcomes.

Expected ramifications vary but in my experience mentoring next generation leaders based in Asia, the most common characteristics of adult children with low AQ are the following:

a. They struggle to cope with challenges and setbacks;

b. Their lack of resilience and risk aversion can hinder decision-making and stifle innovation;

c. They may resist change and find it difficult to adapt to evolving market conditions;

d. Their leadership effectiveness may suffer, leading to internal conflicts and reduced employee morale;

e. Family conflicts might arise, further hindering business operations;

f. Without the ability to overcome obstacles and drive growth, the business may stagnate or decline, potentially jeopardizing its long-term viability and success; and

g. With poor leadership, eventually other stakeholders may lose confidence in the business, affecting its reputation and growth prospects.

Tough times create strong men

“Tough times create strong men, strong men create easy times, easy times create weak men, weak men create tough times!” This powerful statement poses a warning about the potential dangers that can arise across generations for family-owned businesses.

Tough times create strong men: This phase refers to the early stages of the family business when the founders or the first-generation entrepreneurs face numerous challenges and hardships. They have to be resilient to survive, innovative, and hardworking to thrive and grow the business successfully.

Strong men create easy times: As the business becomes successful, the second generation, who grew up witnessing their parents’ hard work, may experience a more comfortable and prosperous environment. They benefit from the efforts of the previous generation and often enjoy the fruits of their success without fully understanding the struggles that led to it.

Easy times create weak men: The third generation, having experienced relative ease and abundance, might become complacent and lack the same drive and ambition as the founders. They might not fully appreciate the value of hard work and resourcefulness.

Weak men create tough times: With a weaker work ethic and entrepreneurial spirit in the succeeding generations, the business can face challenges and decline, leading to tough times once again.

Founders/leaders must act now

This cycle illustrates how the strength of character, resilience, and determination in the founding generation can lead to success. However, as subsequent generations may lose sight of the hardships that built the business, they might not be as equipped to face challenges, potentially jeopardizing the sustainability of the family business. To break this cycle, it’s essential for family businesses to pass down not just the wealth but also the values and work ethic that made the business successful in the first place.

And finally to manage these predictable challenges, it is crucial for the founders or current business leaders to recognize the next generation successors’ low AQ and take appropriate steps to build their resilience and leadership skills. This may involve advisors or non-family executives mentoring, training, providing exposure to difficult situations, and encouraging a growth mindset.

So what will it take for next generation members to have the same level of adversity quotient?

Find out on Saturday, Aug. 19, 2023, at the Crowne Plaza Manila Galleria when next-generation leaders Alliance Global chief executive officer Kevin Tan and JG Summit president and CEO Lance Gokongwei share their experiences on stage during the “Family Business Continuity: Ensuring a Fail-Proof Succession Plan” event. It will be an engaging and enlightening forum that will focus on the myriad of challenges and strategies for ensuring a successful business across generations. To register, please contact Marivi Estrada of ICON Executive Asia at 0977-835-5533.

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