All in the Family: Too many secrets

“There is a notion not only from the employees but from the family members as well, that many family businesses keep too many secrets regarding information about the management,” say Jakarta family business consultants A. B. Susanto and Patricia Susanto in their book, “The Dragon Network.”

Several reasons exist.  First, many families fear tainting the family reputation when dirty laundry is aired in the open.  In Asia, especially in Confucian cultures such as Chinese, Japanese or Korean, the imperative to have a clean reputation (which may sometimes be very difficult to maintain in the business world) is paramount.  In the Philippines, gossip and rumors spread fast, and sadly, they virtually center on negative things, not positive ones.

Therefore, many family businesses, including those that rely heavily on non-family professionals, keep a tight grip on management, fearful that any leak of any indiscretion (such as unsavory affairs or drug addicted leaders) may tarnish their public image.

Second, many family businesses are worried that competitors may gain access to so-called proprietary information, ranging from trade secrets and marketing strategies to manufacturing formulas and even secret sauces.

Though safeguarding intellectual property rights is becoming more difficult in the age of open media, many businesses guard their precious secrets very closely.  They try to prevent any leakage by enforcing rules such as having employees who resign promise that they will  not work for a competitor for a specified number of years, or even making sure that they leave all sensitive documents in the workplace, and not bring any to work on back home.

Third, family businesses are often dominated by a founder who tends to be distrustful of others.  Founders often take pride in the thought that they created the company from scratch, thus, they believe that they are the ones who know what is best to do all the time.

Since these founders wield ultimate power, they are not shy about using it, especially to keep other employees in line.  Since they naturally distrust others, they will tend to keep matters private, often not revealing these not just to non-family employees but from other family members as well, even their successors or own siblings.

I know of family businesses wherein some of the younger generation left to work for another organization rather than stay in their family company, solely because their fathers or uncles do not trust them to do things well and keep many secrets from them.

Weaknesses

According to the Susantos, there are two other reasons why many businesses keep secrets.

Fourth, “the company is afraid that employees will leave after they find out about the company’s weaknesses.”  I am not so certain this reason is prevalent in Filipino family businesses, because frankly, many employees who are secure in their jobs will probably not leave the company even if the latter is morally dubious.

The all-too-many scandals involving corruption, bribery, tax evasion and so forth reveal the sad fact that in business, all too often, the desire for profit comes first, whatever the cost, and employees frequently collude with management to cover up or to keep things secret.

Only employees who are morally upright or those who have other options will leave just because they do not agree with what the company does.

Fifth, “the leaders feel guilty because the company has made a big profit or revenue while at the same time not providing good compensation for the employees.”

This may happen more often, and companies that do not care about their people will tend to keep secret the real profits they make.

The financial scandals that rocked the United States (Enron, Lehman, and so many others) reveal that top management would often divide the spoils among themselves, leaving lower-level employees shocked and bankrupt.

“Whatever the reason, keeping too many secrets could undermine trust, weaken company morale, and produce substandard performance,” say the Susantos.  “In the end, many of the company’s best talents leave.  Too many secrets also spark conflict among family members.  Remember that employees need sufficient information so that they can work well.  Therefore, the company should provide its employees with accurate, complete, timely, and actual information.  We can say that excessive secrecy might become the root of the family firm’s inability to sustain.”

Next week:  Become more transparent

Queena N. Lee-Chua is on the Board of Directors of Ateneo de Manila University’s Family Business Development Center.  Get her book “Successful Family Businesses” at the University Press ([email protected].)  E-mail the author at [email protected].