In her book, Successful Family Businesses: Dynamics of Five Filipino Business Families, Queena Lee-Chua wrote that a business could succeed or fall for many reasons, one of which is family. She estimates that family businesses make up between 80 percent and 90 percent of all businesses in the Philippines. In fact, big businesses here are owned by families (e.g. SM Investment Corp, JG Summit and Ayala Corp.). Like all other businesses, these big ones started small. So, how did they become successful, and how have they survived this long?
According to Lee-Chua, one of family businesses’ most sensitive issues is succession.
As a former corporate employee, I’ve always thought that succession would be straightforward. For example, when Queen Elizabeth II died, her eldest son, Prince Charles III, inherited the throne. Apparently, in businesses, especially family-owned ones, succession is more complicated. Factors such as the involvement of relatives and in-laws, technical competence, outside professionals and employee respect in choosing a successor must be considered. In some cultures and conservative businesses, gender is also a factor. Lee-Chua also discussed how the businesses were performing and where they were headed. Objectives and long-term goals were mostly decided by the company president/CEO, who was also the head of the family. However, some families made decisions collectively.
One of the author’s main points was the idea of the individuation of family members. “Individuate” means “to form into a distinct entity.” Family members should not confuse their roles in the family with their roles in the business.
The book implied that the ability to individuate depends primarily on one’s family’s background and dynamics. The relationship between family members could also depend on their culture. For instance, one family discussed in the book was very traditional.
The major decisions were made solely by the father. His wife and children had very little say in all matters. So, when he made his eldest son the heir, many people left the company because the eldest son had never been involved in the business, unlike the youngest daughter and her husband, who were very much involved and respected by the employees.
As a result, the third generation of the family did not want to be part of the company because of the drama. During family reunions, there was always tension among the siblings and their families. So, instead of achieving individuation, the family members became disengaged. This case sounds like something you would watch in a television series, but this is real.
I recently finished my insider action research, the capstone requirement that is equivalent to a thesis in our MBA program. I used the family business framework called the Three-Circle Model of Renato Tagiuri and John Davis in my research. The authors stated that “the family company has unique, inherent attributes” that are “sources of advantages and disadvantages” to the company. These attributes include simultaneous roles, shared identity and lifelong common history. For example, can a founder separate his roles as a CEO and father? Do issues among family members affect business decisions?
When my action research collaborators and I tried solving problems, we wouldn’t always succeed. Our tendency when we failed was to point fingers and blame others. During these occasions, I would sometimes think about the shortcomings and limitations of my family in problem-solving. Resolving problems would sometimes require us to take risks. My family members have never been risk-takers. I’m the exception. Investing and starting a business during the pandemic was my idea, and I’m the first in our family ever to start a business.
Even so, I would never lambast or bring up past issues to them to get my message across. As children, we were taught to respect our parents. I still accompany my mom during her long walks and treat her (and sometimes my dad) to coffee and cake and run errands for her. In the bigger picture, it’s best to realize that my family and I are still young entrepreneurs, and we have a lot to learn and a long way to go.
I believe that families such as the Sys, the Gokongweis and the Ayalas had similar challenges, but were able to move past their personal hurdles, which contributed to the growth and stability of their businesses. Having good values within the family can be THE FOUNDATION of a family business.
Matthew Eli G. Baluran is a business owner and an MBA graduate of De La Salle University. He can be reached at matthew_eli_baluran@dlsu.edu.ph.
The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.