Family Business: Is it the Business that Keeps the Family Together? Or the Family that keeps the Business Together?
Evanna Phoon wrote the below article and she is a Senior Franchisee of Rockwills. She can be contacted at firstname.lastname@example.org
Family business is the world’s oldest and most dominant form of business organization. It ranges from small and medium sized companies to large conglomerates that operate in multiple industries and countries. Statistics has shown that family businesses outperform non-family owned companies in sales, profit and other growth measures, even for Malaysia SMEs, this statements still applies.
The reason is because they have high commitment and dedication from the family members as business owners. I think it is because the founder of the company has certain vision, legacy, values or philosophy that he want to carry throughout the business, his ideas can be channelled through the family member, but also their company employees.
Family business owners often are willing to work harder and re-invest profits into their business for long term growth. They are also very willing to pass on their knowledge and experience to their family and staff.
One SME that I acted for are owned by pure Chinese educated business owners in their late 60s (formed by two brothers); their philosophy is always to place employee benefits and continuous education of the management team and staffs at their priority. The two brothers spent RM 25,000 a day (for four times a year) to fly in an experienced entrepreneur speaker/trainers from China to internally train his employees. And because of their dedication, his employees are 90% long serving staffs that are very loyal to him and it helped grow his business globally even the founder themselves are not educated and both brothers doesn’t speak or know how to read English, only Mandarin and Cantonese.
Family businesses also take pride in their family name and because of this, they’ll work harder and this results in outperforming their competitors in the same industries who are not family business.
With this strength that’s naturally embedded in family business, it is no doubt that if the business is a family business, the chances of it surviving is higher than business form either by a few friends or partnership. The main concern is how we maintain these unique strengths for many generations.
By now, most will agree that your wealth is not only your family business or investments; your wealth is your family identity, family unity, family values and family philosophy. A family will grow larger and larger and they bound to have differences along the way.
The founder may have different interest, the children has different interest, what happens if the cousins is to come in? Or the in-laws or wives of the children start to be involved? Because of globalization, mixed marriages of different countries. What happens if you have different cultures comes into your family business?
So, back to the key question: Is it the Business that Keeps the Family Together? Or the Family that keeps the Business Together?
As there are many families trust or documents that cater to protect the business or assets but it’ll be unbalanced if we just focus on creating structure to protect the business or asset, but little emphasize on creating structures to protect the family unity.
What brings the family together? We have heard a lot about corporate governance, not a lot on family governance. How do you measure performance by your own children and relatives and what are the strategies for the company and most importantly, what are the strategies for the family? A structure to protect the family is called family governance, and how that should be put in place in family businesses especially when the second generations and in-laws starts to be involve in the family business?
Picture #1: Casino tycoon Stanley Ho, owns a multinational business empire, four “wives,” 17 children, and a family fortune that Forbes estimated to be worth $3.1 billion in January 2011. In late January 2011, a dispute erupted among his wives and children involving the transfer of ownership of his private holding company, Lanceford.
Picture #2: Lee Kum Kee: A Successful Family Enterprise Whose Wealth Lasts over Five Generations. They are often the case studies used by researchers when they are studying successful trans-generational family businesses.
In the next issue, I’ll still discuss more on family governance … Stay Tuned.
About the Author:
Evanna Phoon is CEO & Founder of www.MalaysiaWills.com, Malaysia’s first online will writing service provider for Rockwills Corporation Sdn Bhd & as-Salihin Trustee Bhd. She can be contacted via email@example.com.