Enterprising families know how

The following is an e-mail from a regular reader who happens to be an old-time friend. A college professor and educator, this second-generation entrepreneur is also deeply involved in the preparation of the third generation for a productive future.

It has been a long time since I’ve written to you. But this is not to say that I have not been following your Monday articles on entrepreneurship. Your insights have always been useful in many of my classes and seminars. And, of course, I have always credited these to your name, my friend.

In your June 2 article, "Tips for successor generations", it is interesting that Mr. E eventually gained interest in a business that was thought to be interesting only to the founder, his grandfather. It was unfortunate that his "hidden passion" was discovered and nurtured at a later time. Much difference could have resulted positively for the family and the business had this been realized earlier.

As I read you article, some topics which I take up in my classes on family business came to mind, particularly on succession planning. I do tell my students that a founder should involve his children in the business when they are still young and observe them through time. He would then know who possesses leadership traits as manifested in how such a child acts, talks or behaves as a family member and as part of the business, whatever be his responsibility. He would see who has passion for the business. He would have first-hand knowledge of how each child deals with the family when business matters are taken up in meetings or how difficulties are handles as these crop up. Also, he would be able to size up the children in terms of the extent they take to heart the vision, mission, and values of the family business. In due course, the founder can more comfortably discuss with the family the matter of his chosen successor, based on these many and varied observations plus the comments of non-family members working in the family business. This does not preclude the possibility that no family member would qualify as his/her successor or that none would be interested in being the chosen one. In this case, the founder can then extend the search to professionals.

The method saves time and prepares the family for the best choice to who can run the business well. Equally important, it serves to keep the family relationships healthy. The final choice can either be a family member or not. What matters is that the choice went through a process that the family accepted and would, therefore, be firmly committed to respect.

These comments hit the point. The family must first agree on the process. The result is not as important as the process. The family must agree on how the next leader of the enterprise is chosen. There must be a clear distinction made between the leader of the family and that of the enterprise.

While it is always best to have these two leadership positions in one person, let it not be forgotten that the qualifications for both positions are different. The leader of the family must be able to bring the family together in consensus. The family leader must be able to uphold the family values. As the guardian of the written or unwritten family constitution (which is best put in writing), he/she has the responsibility to ensure that the members live by these family values. In a sense, the family leader becomes the center or its fulcrum. The passion to keep the family together is a must.

The leader of the enterprise must have the qualities that will grow the business. However, in the process of growing the business, he/she must not violate the family values and/or constitution. And this person must also have passion for the business.

As correctly pointed out by my friend in his e-mail, the involvement of the net generation in both family and enterprise matters allows the current leaders of the family and the enterprise to gauge the performance and the potential of each member. This will definitely fast-track the process of identifying a successor.

We reiterate the importance of the process even as each family may have a different solution. What works for one family may not work for another. And for a process to be acceptable to the family, it must be seen as transparent and fair.

(Alejandrino Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).