LAST week, we heard the plea of a reader, in her 70s, who laments that her three children (in their 30s) are not committed to their family retail business. The children come in late and do not work as hard as the founders expect.
With their laid-back attitude, the reader fears that the business will suffer, and nothing will be left for the grandchildren.
I quoted from US family business consultant James E. Hughes Jr., who believes that whatever generation family members may be in, they should think of themselves as part of the first generation, with the same creative mindset and persevering attitude that the founders have.
Each generation has a responsibility to devote themselves to the business, to leave a better legacy to future generations.
The reader’s children are not emotionally invested in the business. I suggested that the reader and her husband tell their children stories about the enterprise, to pique their interest and hopefully, encourage them to take pride in their legacy.
Horizontal, not vertical
Another reason why your children may not be inclined into doing their best is because of the fact that they are used to other people (in this case, you and your husband) doing the work. They may also be relying on each other, hoping that one sibling may rise to the occasion and deal with things once you and your husband retire.
This mindset is pervasive: When asked about their family, most people think immediately of their parents, grandparents, or even ancestors higher up the family tree. Rarely do people think of themselves in relation to their brothers, sisters, or cousins.
“Yet it is each generation, horizontally, that bears the critical duty of renewing the family’s social compact if a family is to preserve its wealth over the long term,” says Hughes in his book “Family Wealth.”
Hughes describes what he calls “The Horizontal Social Compact.”
“The ability of siblings and cousins to learn to work together is critical to long-term wealth preservation. Every family I have studied that is still thriving in its fifth and later generations has, either through frequent oral recitation or written documents, committed to the memories of its members the family’s shared values and the method of governance it uses to practice those values … If any generation fails to reaffirm the terms of the family’s social compact, the ability of later generations to resurrect that compact as an expression of the family’s shared values will at best be greatly diminished. Once entropy sets in through the loss of the family’s social compact, it is nearly impossible, in my opinion, for a family to regain the capacity for long-term wealth preservation.”
What does this mean for your family? Perhaps your children do not know enough about how to run your business to take it seriously. Perhaps you and your husband have always been the ones running the show, and you have not let your children decide things for themselves. Perhaps your children do not feel that they are capable enough, thus they mask their anxiety with a laid-back attitude.
Hopefully, they do not have an unrealistic sense of entitlement, and expect the business to continue without much effort on their part.
Whatever the reason though, you and your husband need to guide your children now. I know there are a million things to do in a retail business, but you need to spend time, energy and resources in training your children to take over the business, whether they like it or not.
You say that they do not work well in the business, but they rely on it financially. Make it clear that if they do not commit, then they should not depend on you to fund their lifestyles. They are already in their 30s—how long can you afford to wait?
“The most important assets a family has are its members,” says Hughes. “Businesspeople know that for a business to be successful, 70 to 80 percent of management’s time must be spent on asset growth and 20 to 30 percent of its time on liabilities. My experience of almost every family is that they get this formula reversed. Any successful businessman who hears that a rival is spending 70 to 80 percent of his time on his liabilities knows that soon he will have one fewer competitor. Families who understand this, spend 70 to 80 percent of their time growing their human assets. For example, they know that no matter how much they save in taxes, which are a cost or liability of doing business, those savings pale in comparison to the revenues lost through poorly educated family members.”
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
(e-mail msanagustin@ateneo.edu.)
E-mail the author at blessbook.chua@gmail.com.