Estate planning essential for family business
Estate planning is the elephant in the room for many family businesses. Often, the founder neither wants to think about mortality nor trusts his heirs to take care of the business (and of him) if he transfers his assets to them.
But estate planning is essential, because of dangers within and without. External threats include economic downturns, market fluctuations, bank security, although these are often beyond our control.
Family businesses often fall prey to internal threats. Peter Triggs of DBS Private Bank lists some of these in M2 Magazine: divorce, illness, sudden death, freezing of accounts pending probate, family disputes, unexpected litigation, being cheated during old age, business failure, personal guarantees and claims for past taxes.
Protect hard-earned wealth through mechanisms such as trusts or holding companies. Seek advice from professionals if needed, but be upfront about your goals, and expect them to be transparent in return.
Reflect on successors’ strengths and needs. Will assets be distributed equally, for instance, or does one person need more?
Think about family business goals. Are assets for successors alone, or are they also for the benefit of the community? A foundation can be the answer.
Flexibility is key. Plan now, but keep things flexible in case circumstances change.
Review estate plans regularly (once a year is a good rule) to make sure they are the optimal ones for the family and the business.
For founders who micro manage, heed Phil Libin, the co-founder and CEO of Evernote. Phil used to think he could do his employees’ jobs better than they could, whether they were programmers, accountants or receptionists.
However, micromanaging was causing him and the other employees a lot of stress. So he decided to come up with a rule: Everyone who reports to him has to be a lot better at his or her job than he could ever be.
“I’m a pretty good programmer, but [our] CTO [chief technology officer] is much smarter than I am about everything having to do with computer systems and architectures,” says Libin in Inc. Magazine.
“Our VP of products is great at planning, and running, a dozen complex product teams at the same time. I have a decent understanding of financials, but compared with our VP of finance, it feels like I can barely count to 10.”
Libin encourages all his people to apply this rule to their direct reports, strengthening employee relationships and company culture.
Should employees be friends at work? Filipinos are known for valuing personal relationships, and if we are not happy at work, how can we be productive?
This is fine, as long as we draw the distinction between barkada and colleague.
With friends, almost anything goes, with the bonds of implicit trust built through the decades. With colleagues, things are more complicated, because they may be competitors, too. They may be up for the same promotion.
A wise strategy is to be friendly, but to exercise care, making sure that what you say or do cannot be used against you someday.
Singapore career coach Adrian Tan describes forming office friendships as similar to dating.
“You inch forward, she inches a bit forward and soon enough, you are holding hands,” he tells The Business Times.
But he adds, “Manners and courtesy always have to be in place to exude professionalism.”
Tan cautions against complaining about the boss to co-workers, and suggests that topics be kept neutral to build rapport.
Even though it sounds cynical, Tan says, “At the end of the day, nobody goes to work to make best friends.”
Queena N. Lee-Chua is on the board of directors of the Ateneo Family Business Development Center. Get her book “Successful Family Businesses” (e-mail [email protected]).
Contact the author at [email protected].
