Hi Folks,
A couple of weeks ago, we had a meeting with some members of a family business established almost a century ago.
The founders of the business were generous, giving away shares like ang pows (red packets) to relatives every year. When the second generation took over, they inherited the values of their parents and continued the practice.
The current generation we met can’t tell us exactly how many shareholders they have in the company because their accountant was not in the meeting and none of them knew.
The business is divided into 3 factions:
- Some want to actively modernize & revamp the business.
- Some want to enjoy the dividends without being involved as the business is profitable.
- Some wanted to continue the business exactly the way it is.
Since they were unable to get all their directors into one room, we didn’t work with them but we did gave them some suggestions – start with setting up a Family Business Board with representation from both active & inactive members, then create a Family Business Constitution and align everyone to the constitution so that they can vote on issues and be functional.
The moral of this story is, if you are currently the first generation, or you are the second generation with a relatively small number of directors who get along with each other, you should take your Succession Planning seriously and objectively set up a structure that is sustainable and adaptable across generations.
Not being objective while you are still in a position to do something about it will lead to chaos for the next generation.
Sometimes, business owners, especially those steeped in Chinese customs, are reluctant to dwell on this topic as they wish to avoid conflict and thoughts of mortality… ironically, avoiding the issue is the exact reason the next generation end up in conflict.
It is never too early to start.
Have a profitable week ahead!
The Familybiz Works Team.
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