Fixing problematic family businesses

“Is inherited wealth evil?”

This is the question which Enrique Soriano, professor of global marketing at the Ateneo Graduate School of Business and executive director of strategic advisory firm Wong+Bernstein Advisory Group, poses to owners of family-run businesses, especially those undergoing a legal battle precisely because of their bread and butter.

We ask him to answer his own question—and Soriano responds with a resounding “no.”

The problem, he says, lies not in the money, but other deep-seated, unresolved issues among family members: sibling rivalry, patriarchal control, heirs’ sense of entitlement and in-law-related conflict.

“It’s not automatically about the money, or greed,” Soriano says. “That’s usually the last thing [they use against each other]. It’s deep-seated issues.”

He describes the typical path of destruction unwittingly taken by family-run businesses: The founder, usually the patriarch and a Baby Boomer, establishes his venture after the war. He works hard, because for him, life is all about survival—which leaves mom at home, with the kids. Dad worries about money, expenses, employees’ salaries.

The business then gets the break it needs. Dad and mom can now afford all the comforts they want, which they are more than happy to give the kids: great schools, a driver, etc.

“Sometimes, it can become excessive,” Soriano says. Once the kids are of age, the patriarch usually invites them to join the business, but in a way that Soriano disapproves.

“They say, ‘Follow me, because someday this will be yours. Do what I do. Be a boss like me.’ That’s like jumping out of the frying pan and into the fire,” he says. “If the father says, ‘Join me, think like me,’ to, say, five of [his kids], and they will all think like that, that creates sibling rivalry, classic entitlement.”

Soriano’s advice to heads of businesses: Encourage your kids to gain professional experience elsewhere, and when you do invite them into the family business, make sure you treat them like all your other employees, and not like he or she is automatically the boss.

As a family business coach, Soriano usually steps in when families find themselves going down that path of destruction, but are still willing to work things out minus lawyers.

“I pick the most important or core issue, before troubling myself with the other issues. Say, sibling rivalry, or when there is a generational conflict. The in-law issues must be set aside,” he says. “If the issue is the patriarch or matriarch dying, you need to step in on the ownership side to fix ownership transfers before the death happens. So I step in, work on ownership agreements, and I push for wealth preservation.”

He says about 80 percent of his clients are usually on the verge of a family breakup, but is happy to note his success rate as a consultant is at 90 percent.

“I do my best to knock some sense into them,” Soriano says. “These families must recognize the role of consultants like us, that we’re not here just to give them a piece of document. We’re here to guide them as long as we can, because any process can break, any family can relapse.”

Soriano will be sharing more of his insights on Aug. 31 at a forum titled “Can Family-Run Businesses Last Forever? A Talk About Building 100-Year-Old Companies,” which will be held at Marriott Grand Ballroom in Pasay City.

He will be joined by William Tiu Lim, CEO of Mega Global Corp.; Alfredo Pascual, president of the Institute of Corporate Directors of the Philippines; Enrique Pampolina, Deloitte risk advisory leader; and Jia Yu Chan, wealth planning administrator of the Bank of Singapore.