Curing the ills of the family business

Soriano

Entitlement versus control.

When it comes to running a family business, these two opposing forces, if left unchecked, could unravel a family’s hard-earned legacy.

Thankfully, there are people like Enrique Soriano III: Family business coach, professor, and senior adviser of the Wong + Bernstein Advisory Group, a strategic consulting group servicing Asean (Association of Southeast Nations) organizations related to strategic leadership, growth in Asian family businesses, organizational change and competitive strategies.

Soriano has made it his life’s work to help families, especially those running small and medium enterprises, overcome their personal issues to ensure the longevity of their businesses.

“Working in the corporate world, I was practically involved in family-owned corporations. My last engagement was as CEO of Belo Medical Group. I realized that perhaps there is a need to write a book about my experiences, and also talk about the tools [needed] to ensure the legacy of the family business owner,” Soriano says. “Usually it only lasts till the third [generation]—and that’s empirically studied.”

Soriano shares his insights and best practices through two books: “Ensuring the Family Business Legacy” and “The Kite Runner Columns,” which is a compilation of his published columns.

While unavailable in book stores, Soriano makes it a point to distribute copies whenever he is invited to speak about his work, as he delivers, every year, 150 talks both here and across Southeast Asia on strategic innovation and growth strategies. (The books are also available through W+B Advisory Group).

In his writings, Soriano mainly addresses “governance” issues, or how business owners should properly hand over the reins to their heirs to minimize conflict.

“When a business is young—pretty much a startup-—[the owner] doesn’t know anything but hard work. And when they eventually start moving up, they invite their children. But one governance element is, you don’t invite your children; they have to be experienced enough outside before they step into the business. Because if you let them take over straight from college, whose leadership style will they just copy? The parents’, so there’s no value added,” explains Soriano. “Also, there is already conflict there because while the father’s capital is hard work; [the son’s or daughter’s] is smart work. That’s when the clash happens.”

What makes it worse, adds Soriano, is when the business owners’ heirs develop a sense of entitlement as COO, or children of the owner.

“The father, for example, will no longer trust his son or daughter because he or she is lazy. So he holds on—that’s what we call patriarchal control,” he says.

He shares what he considers one great example of a father-son relationship—one that other families should emulate—when it comes to running their business: That of Andrew and Kevin Tan of Megaworld Corp. Back when Soriano was still setting up the company’s commercial and lifestyle Malls, he says the elder Tan asked him to interview a potential employee.

“He never mentioned it was his son, but he was persistent, kept on calling and asking if I was free. I said to myself, ah, this is a relative. So [Kevin and I] finally meet. I asked [the elder] Mr. Tan, what’s the arrangement here? And he said, treat him as an employee,” says Soriano. “Andrew, when I left, said, this is a legacy for you, because if he had been under me, the emotions would have been difficult. He trusted me enough to mentor his son. So the mere fact that he passed [Kevin] on to a non-family member to be trained—that’s a sign of good governance.”

Soriano shares other similar anecdotes in his books, which also have chapters on topics such as:

the key things to consider when setting up a family business;

the six essential marketing components for building a successful family business;

financial restructuring tips to turn your family business around; and

should you include in-laws in the family business?

Soriano says he is much more “persistent” now in helping family-run businesses survive their problems because of the growing number of such companies failing—and not just here in the Philippines, as Soriano also has clients in the United States, Singapore, Vietnam, Japan, and Indonesia, all facing the same issues.

“I see people telling me, ‘Can you help? We’re about to go to court. My child is too abusive, as if money is flowing from my ears.’ It shouldn’t be like that,” he says. “Out of 10 families, seven or eight are on the verge of a major fight. They say they’re ‘civil,’ but it’s more like civil war.”

One major tip he dishes out to family business owners is this: Even if your company is still small, make sure you deal with the governance issues head on right from the start.

“I always say: Money plus family is equal to conflict—which is predictable. Problems are predictable, for the most part; but they procrastinate [on addressing them]. They say, ‘oh, we’re just a small business.’ But if you continue to procrastinate, then failure will happen,” says Soriano.