Family Business Article
Family succession planning
Under the guidance of the Founder, the selected successor candidate should be provided the necessary training
By Bing Matoto
April 18, 2023
Succession planning for leadership change is a critical attribute for any collective body of people intent on ensuring the smooth continuity of their reasons for being. This applies not only to formally organized and widely owned entities such as corporations and foundations but also to family-owned, closely held enterprises. Succession planning, in fact, is a universally held good governance practice favored by institutional investors and mandatorily imposed by government regulators for compliance purposes on corporations whose operations affect the public interest, such as publicly listed corporations, utilities, securities issuers and dealers, banks and insurance companies.
For progressive-minded family-owned businesses, it is undeniable that succession planning is surely a vital consideration for any patriarch. We need only to scan the local business headlines of past and current corporate goings-on to observe the storied successful head honcho successions of major family-controlled conglomerates such as of the Ayala, Aboitiz, Ty, Tan and Sy Families; as well as the abject failure of some to achieve harmony resulting in unfortunate intra-family litigation.
What is family succession planning and what does it entail? During the Rotary Club of Makati’s regular meeting last week, guest speaker Ricardo Mercado of the Family Business Development Center of the Ateneo de Manila University drew a large crowd as he shared with the club members, most of whom were patriarchs themselves, senior corporate executives and professionals, some key takeaways and insights on the local scene for family-owned businesses.
Family Succession Planning
For progressive-minded family-owned businesses, it is undeniable that succession planning is surely a vital consideration for any patriarch.
What were Mercado’s key sharings?
In closing, if I might add my own takeaway which I believe has been a clear trend among closely held family businesses, going for an IPO not only provides significant financial returns for the Founder and his family, but with the new-found responsibility to the investing public and other stakeholders, the stage will necessarily be set in place for the professional management of the enterprise regardless of filial ties.
Until next week… OBF!
For comments, email [email protected]
Read more: https://tribune.net.ph/2023/04/18/family-succession-planning/
Read more Daily Tribune stories at: https://tribune.net.ph/
Source: https://tribune.net.ph/2023/04/18/family-succession-planning/
For progressive-minded family-owned businesses, it is undeniable that succession planning is surely a vital consideration for any patriarch. We need only to scan the local business headlines of past and current corporate goings-on to observe the storied successful head honcho successions of major family-controlled conglomerates such as of the Ayala, Aboitiz, Ty, Tan and Sy Families; as well as the abject failure of some to achieve harmony resulting in unfortunate intra-family litigation.
What is family succession planning and what does it entail? During the Rotary Club of Makati’s regular meeting last week, guest speaker Ricardo Mercado of the Family Business Development Center of the Ateneo de Manila University drew a large crowd as he shared with the club members, most of whom were patriarchs themselves, senior corporate executives and professionals, some key takeaways and insights on the local scene for family-owned businesses.
Family Succession Planning
For progressive-minded family-owned businesses, it is undeniable that succession planning is surely a vital consideration for any patriarch.
What were Mercado’s key sharings?
- No matter how successful the family business has been, deciding on who will take over the helm of the business when the inevitable passing of the founding patriarch happens is a tricky, sensitive and highly emotional dilemma that needs to be properly addressed and planned for well in advance, ideally with the assistance and guidance of an impartial counselor.
- Statistically, 44 percent of family businesses survive the first generation. The success rate of the enterprise drops to 40 percent by the second generation. By the third, this drops to 15 percent and by the fourth generation, only 1% percent survives.
- In a survey of well over 100-plus Family Business Seminar participants, the important concerns that surfaced by order of priority were: harmony in the family; the growth direction of the enterprise; succession transition; financial matters; and operational continuity issues.
- Patriarchs, however, could be an obstacle to a smooth transition because of reasons such as the founder’s fear of retirement; underestimation of the value of succession planning; founder’s myopia to his own limitations; inability to accept the inevitability of death; reluctance to relinquish power; and, the egotistical belief that only he can run the business he founded.
- Successful succession happens when the Founder initiates, promotes, follows through on the succession plan; and when the whole family is fully committed, able and united to ensure the continuity of the business for generations to come.
- The selection of the successor, whether within the family or outside, should be based on the corporation’s core values, an objective assessment of the organization’s needs, and the corresponding leadership qualities and competencies required to manage the business.
- Under the guidance of the Founder, the selected successor candidate should be provided the necessary training to develop the identified skills and competencies lacking based on a needs analysis development plan following a predetermined succession timeline.
- And, finally, perhaps the most important step to ensure and preserve family harmony, the Founder and the siblings should reach an agreement on the appropriate family constitution that will bind all and be the basis for the selection of the successor and other family related concerns such as compensation, and the involvement of the succeeding generation and in-laws in the family business.
In closing, if I might add my own takeaway which I believe has been a clear trend among closely held family businesses, going for an IPO not only provides significant financial returns for the Founder and his family, but with the new-found responsibility to the investing public and other stakeholders, the stage will necessarily be set in place for the professional management of the enterprise regardless of filial ties.
Until next week… OBF!
For comments, email [email protected]
Read more: https://tribune.net.ph/2023/04/18/family-succession-planning/
Read more Daily Tribune stories at: https://tribune.net.ph/
Source: https://tribune.net.ph/2023/04/18/family-succession-planning/
