By: Prof. Enrique Soriano
Wishing everyone a happy new year filled with health, happiness and spectacular success!
Death is not an easy subject to talk about; nor is retirement, especially for rugged individualist and entrepreneurs or their families. But it is a subject that needs to be addressed by all members of a family owning business. Is the business merely a reflection of the founder? Is it his personal property? What part do other family members play, shareholders and stakeholders alike? Who will run the business after the founder steps down? When will the founder step down? Answering these questions and others leads to the development of what is known as a “succession plan.” Even though it is tough to plan ahead to the day when you are no longer running the business you founded, it can be exciting and rewarding to know that your creation will live on and prosper under the guidance of a trusted family member. Equally rewarding is knowing that you have provided for your family.
As noted educator and management expert Peter Drucker once said, “The final test of greatness in a Founder is how well he chooses a successor and whether he can step aside and let his successor run the company.”
Forced Succession
Many business owners think only of succession as being able to identify his or her successor but critical issues about ownership, governance, risk management, best practices related to organization development, financial management and retirement planning as well as long term strategy development are often neglected. These important elements cannot be set aside as it has a huge impact on the health and very survival of the business. As a matter of course, succession should be addressed many years before a generational transition is forced upon the company.
Many founders and next generation children are facing or will soon face similar succession challenges. But it is a very common sight when succession planning begins in response to an external event such as illness, accident, death or marital separation. Succession should not happen only as a reaction to any of the events mentioned. By then, everything might just be too late. Another major mistake founders and business leaders make is to postpone naming a successor until just before they are ready to step down. All too often, founders avoid naming successors because they don’t want to hurt the family members who are not chosen to succeed them. Yet, both the business and the family will be better off if, after observing the candidates as they work in the business, the founder picks the successor based on that person’s skills and abilities, early enough. In short, hand picking a successor must be subjected to a rigorous process of at least 5 years.
JG Summit Succession
Let me share one of the best examples of a successful transition in Asia initiated by the late industrialist John Gokongwei of the JG Summit Group. The group is a regional player and has major presence in close to a dozen countries in the Asean and the Oceanic region. With a market cap of US$14 billion and a workforce of 75,000 employees, it is involved in food and beverage production, retail, property development, banking, aviation and petrochemical. Mr. John as he is fondly called, prepared the transition 30 years ago when he gathered his immediate family, senior executives and formally introduced his successor, Lance. With six children in tow and a very supportive wife, he has excellently managed to navigate the perilous transition journey.
When Mr. John was once asked what else he would like to achieve for JG Summit, he remarked that it is to “make sure the company is in good hands, will do good for the country, good for the family, good for the stockholders.” He was once quoted as saying that the happiest point in his life was when Lance was born, the heir who has lived up to expectations. “Lance is doing a very good job,” he says.
When he passed away last month at age 93, the “changing of the guard” was flawlessly executed minus the drama that comes with most transitions. It was a class act. For family advisors tracking succession plans in Asia, the succession model of the JG Summit Group should be closely watched and emulated by other family owning businesses. The handover was the culmination of his lifelong dream of seamlessly passing the baton to his children effectively immortalizing his legacy.
