By Ricardo H. Mercado, Professorial Lecturer, John Gokongwei School of Management, Ateneo de Manila University
When I first taught in Ateneo de Manila University in 1993, the subject that I introduced was Family Business Management. The topic was not very popular then and I could not think of any other school in the country that offered the same course. The scenario was different in the United States where “Family Business” was an emerging field of study that some Universities were starting to include in their curriculum. However, in both countries, the research landscape for the study of Family Business was still in its inchoate stage. In fact, there were not enough case materials to use as reference for the classes that I am conducting. My experience during that first semester taught me a lot of things.
The students were enthused with the subject because it provided a venue for them to air out issues and concerns regarding their own families and their family businesses. Before I started teaching, I thought that an excellent management background was adequate to facilitate and teach the course. It was during the classroom interaction with my students when I realized that my knowledge in dealing with family business dynamics was insufficient. To be able to learn more about family dynamics, I decided to enroll in a diploma course of the Center For Family Ministries (CEFAM) to understand more about the workings of families: the relationship dynamics, conflict resolution, wellness enhancement, maintaining well-functioning families through therapy, and the like. It was then that I realized that family businesses run on parallel tracks. Family members have the burden of dealing with both the family and the business systems – with each system having distinct and exclusive characteristics which are not common to each other. The difficulty lies with finding the balance between having a well-functioning family whose members are actively involved with running a family business.
I realized that in the family system, the family togetherness is preserved. It is nurturing inwards towards family members. It’s a question of who you are. The family is obviously the center of concern. In the business system, the business is outward in focus. Customers, service, quality, sales, profits are its main concerns. It makes the most of change while family system seeks to minimize change. Family system is more on resolution of emotional issues while the business system is more rational in terms of accomplishments of tasks. These two polarized yet interacting systems if not understood well and not handled well could be the breeding ground for conflicts in the family and the business.
This brings me to the topic of Strategic Planning, where the business seeks to rally behind a vision-mission that gives the business the road map in achieving its goal. Family members may not realize the significance of planning, but every business needs to plan for its future. It does not matter how informal the planning may be. Environmental factors such as competition, hostile market environment, scarcity of resources such as financial capital, materials, personnel, internal capabilities all have to be taken into consideration when undergoing strategic planning. These are the same factors that would compel family businesses to plan and to map out their strategies. In formulating strategic plans, individual aspirations, corporate culture, internal biases, and the like come into play and cannot be ignored. Most family business consultants are of the opinion that a majority of family business disagreements and conflicts are not merely based on business facts and financial matters but more on issues that deal with emotions and control of the business. Many deep-seated unresolved issues could lead to emotionally-charged conflicts between family members, thus leading to the success or failure of the family business.
In teaching strategic planning, the following critical activities take place. The crafting of the vision-mission, environmental scanning, internal analysis, objective setting, strategy formulation to meet these objectives, strategy implementation which consist of budgeting, action plans, manpower allocation and finally strategy evaluation. This process realigns the strategies and its implementation for the achievement of the objectives, as well as the stated vision-mission of the family business. In order to move forward, it is a must that family businesses have these in place. Changes in direction can happen in order to arrive at the intended destination in the most efficient manner. The question is how do the families get involved in the strategic planning for the business? Should they do it over the dinner table while dining? Should they set up impromptu informal meetings? Is occasional chatting with the founder and other family members appropriate? The venues mentioned maybe acceptable for casual meetings but on the other hand, might be too informal and lack depth for long term strategic planning for the business.
The family council then becomes the “formal” venue in discussing the plans. Several meetings do take place in strategizing for the business until all family members agree to the plans and all are fully committed. I will talk about formation and the conduct of the family council in my future articles. The family council if well conducted contributes to a functioning family resulting in a high level of goodwill that exists among family members. High goodwill deters major conflicts since minor conflicts are addressed and resolved as these arise.
In the many family business seminars that I conducted through the John Gokongwei School of Management (JGSOM) of the Ateneo de Maniila University, a survey of around 150 participants was made to help me address some family business concerns that the participants revealed. In the survey only 33% have vision-mission statements and only 45% have strategic plans. Only 40% have family councils. I wonder how others discuss or formulate plans if at all, or how they assess their business directions. I was surprised to find out that only a small 13% had succession plans. The question of: “Who takes over the business?”,becomes the poignant question which could not be answered by 87% of families surveyed.
Family harmony was the number one concern in the survey, with growth and direction as the second most ranked concern. Financial and other management issues such as management, marketing personnel ranked the lowest. This tells me that family harmony being the number one concern is perhaps due to many families having no family council. This perhaps led to the no vision-mission, erroneous strategic plans, lack of commitment of family members which leads to the division and uncharted directions for the business, or worse, ignored individual aspirations which results in resentment of individual family members with their own family and their family business.
The findings are disturbing. Much needs to be done in helping family businesses move forward in a healthy fashion. In the John Gokongwei School of Management), we have initiated to address not just the undergraduate course for students wanting to learn about family businesses, but also the past generations. The Entrepreneural Academy of JGSOM has conducted family business seminars and workshops, attended by founders, 2nd and 3rd generation family members, in-laws, and professionals. Twice, the Family Business agenda was adapted in the Business Leadership Forum (BLF) of the JGSOM with over 500 participants.
The Family Business Breakfast Roundtable was established as a venue in which family business owners can express concerns, issues, and problems. In this event participants engage in discussions centering on topics such as sibling rivalries, inflexible management, effectiveness of the family council, teamwork, harmony etc. This is a regular event and The Entrepreneurial Academy of JGSOM has also included seminars on family businesses. In the field of research, JGSOM has joined other Universities in conducting studies on family businesses and has completed a study on “How to Professionalize the Family Business”. Almost completed is the study on “When, How, and Why Family Businesses Strategize”. A proposal is in the pipeline to do research on “Leadership in Family Businesses”.
Learning the dynamics of the family business entails much work. Teaching the course, interacting with students, seminars, workshops, and research help us better understand the complexities of family business. This way family concerns can be addressed properly.
1Article written for Entrepreneur magazine by Ricardo Mercado, Professorial Lecturer of John Gokongwei School of Management, Ateneo de Manila University.
He maybe contacted through his email: [email protected] / [email protected]
2Family Meetings by John Ward, PhD & Craig Aronoff, PhD
When I first taught in Ateneo de Manila University in 1993, the subject that I introduced was Family Business Management. The topic was not very popular then and I could not think of any other school in the country that offered the same course. The scenario was different in the United States where “Family Business” was an emerging field of study that some Universities were starting to include in their curriculum. However, in both countries, the research landscape for the study of Family Business was still in its inchoate stage. In fact, there were not enough case materials to use as reference for the classes that I am conducting. My experience during that first semester taught me a lot of things.
The students were enthused with the subject because it provided a venue for them to air out issues and concerns regarding their own families and their family businesses. Before I started teaching, I thought that an excellent management background was adequate to facilitate and teach the course. It was during the classroom interaction with my students when I realized that my knowledge in dealing with family business dynamics was insufficient. To be able to learn more about family dynamics, I decided to enroll in a diploma course of the Center For Family Ministries (CEFAM) to understand more about the workings of families: the relationship dynamics, conflict resolution, wellness enhancement, maintaining well-functioning families through therapy, and the like. It was then that I realized that family businesses run on parallel tracks. Family members have the burden of dealing with both the family and the business systems – with each system having distinct and exclusive characteristics which are not common to each other. The difficulty lies with finding the balance between having a well-functioning family whose members are actively involved with running a family business.
I realized that in the family system, the family togetherness is preserved. It is nurturing inwards towards family members. It’s a question of who you are. The family is obviously the center of concern. In the business system, the business is outward in focus. Customers, service, quality, sales, profits are its main concerns. It makes the most of change while family system seeks to minimize change. Family system is more on resolution of emotional issues while the business system is more rational in terms of accomplishments of tasks. These two polarized yet interacting systems if not understood well and not handled well could be the breeding ground for conflicts in the family and the business.
This brings me to the topic of Strategic Planning, where the business seeks to rally behind a vision-mission that gives the business the road map in achieving its goal. Family members may not realize the significance of planning, but every business needs to plan for its future. It does not matter how informal the planning may be. Environmental factors such as competition, hostile market environment, scarcity of resources such as financial capital, materials, personnel, internal capabilities all have to be taken into consideration when undergoing strategic planning. These are the same factors that would compel family businesses to plan and to map out their strategies. In formulating strategic plans, individual aspirations, corporate culture, internal biases, and the like come into play and cannot be ignored. Most family business consultants are of the opinion that a majority of family business disagreements and conflicts are not merely based on business facts and financial matters but more on issues that deal with emotions and control of the business. Many deep-seated unresolved issues could lead to emotionally-charged conflicts between family members, thus leading to the success or failure of the family business.
In teaching strategic planning, the following critical activities take place. The crafting of the vision-mission, environmental scanning, internal analysis, objective setting, strategy formulation to meet these objectives, strategy implementation which consist of budgeting, action plans, manpower allocation and finally strategy evaluation. This process realigns the strategies and its implementation for the achievement of the objectives, as well as the stated vision-mission of the family business. In order to move forward, it is a must that family businesses have these in place. Changes in direction can happen in order to arrive at the intended destination in the most efficient manner. The question is how do the families get involved in the strategic planning for the business? Should they do it over the dinner table while dining? Should they set up impromptu informal meetings? Is occasional chatting with the founder and other family members appropriate? The venues mentioned maybe acceptable for casual meetings but on the other hand, might be too informal and lack depth for long term strategic planning for the business.
The family council then becomes the “formal” venue in discussing the plans. Several meetings do take place in strategizing for the business until all family members agree to the plans and all are fully committed. I will talk about formation and the conduct of the family council in my future articles. The family council if well conducted contributes to a functioning family resulting in a high level of goodwill that exists among family members. High goodwill deters major conflicts since minor conflicts are addressed and resolved as these arise.
In the many family business seminars that I conducted through the John Gokongwei School of Management (JGSOM) of the Ateneo de Maniila University, a survey of around 150 participants was made to help me address some family business concerns that the participants revealed. In the survey only 33% have vision-mission statements and only 45% have strategic plans. Only 40% have family councils. I wonder how others discuss or formulate plans if at all, or how they assess their business directions. I was surprised to find out that only a small 13% had succession plans. The question of: “Who takes over the business?”,becomes the poignant question which could not be answered by 87% of families surveyed.
Family harmony was the number one concern in the survey, with growth and direction as the second most ranked concern. Financial and other management issues such as management, marketing personnel ranked the lowest. This tells me that family harmony being the number one concern is perhaps due to many families having no family council. This perhaps led to the no vision-mission, erroneous strategic plans, lack of commitment of family members which leads to the division and uncharted directions for the business, or worse, ignored individual aspirations which results in resentment of individual family members with their own family and their family business.
The findings are disturbing. Much needs to be done in helping family businesses move forward in a healthy fashion. In the John Gokongwei School of Management), we have initiated to address not just the undergraduate course for students wanting to learn about family businesses, but also the past generations. The Entrepreneural Academy of JGSOM has conducted family business seminars and workshops, attended by founders, 2nd and 3rd generation family members, in-laws, and professionals. Twice, the Family Business agenda was adapted in the Business Leadership Forum (BLF) of the JGSOM with over 500 participants.
The Family Business Breakfast Roundtable was established as a venue in which family business owners can express concerns, issues, and problems. In this event participants engage in discussions centering on topics such as sibling rivalries, inflexible management, effectiveness of the family council, teamwork, harmony etc. This is a regular event and The Entrepreneurial Academy of JGSOM has also included seminars on family businesses. In the field of research, JGSOM has joined other Universities in conducting studies on family businesses and has completed a study on “How to Professionalize the Family Business”. Almost completed is the study on “When, How, and Why Family Businesses Strategize”. A proposal is in the pipeline to do research on “Leadership in Family Businesses”.
Learning the dynamics of the family business entails much work. Teaching the course, interacting with students, seminars, workshops, and research help us better understand the complexities of family business. This way family concerns can be addressed properly.
1Article written for Entrepreneur magazine by Ricardo Mercado, Professorial Lecturer of John Gokongwei School of Management, Ateneo de Manila University.
He maybe contacted through his email: [email protected] / [email protected]
2Family Meetings by John Ward, PhD & Craig Aronoff, PhD
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