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Building legacies:Family business succession in South-east Asia

1"The legacy we leave is part of the ongoing foundations of life, those who
came before leave us the world we live in. Those who will come after will
have only what we leave them. We are stewards of this world, and we
have a calling in our lives to leave it better than how we found it, even if it
seems like such a small part."

The results of the study in family business succession in Southeast Asia were
really a surprised. How come that Singapore a well-known financial capital and the New
York City of Southeast Asia is the least with only 58% respondents to have a
succession plan among the countries surveyed? What could be the factors that might
affect family business succession?

Factors might affect Succession

In Family businesses, continuity transition imposes a wide variety of important
changes. Family relationships must be rebuilt, traditional patterns of impact redistributed,
and management and ownership structures. According to Lansberg (1988) , Founders
are one of the factors that might affect succession planning. Although the founders are
often aware of the benefits that comes from succession planning, they also face
psychological obstacles to manage their exit from the business. A difficult obstacle to
continuity planning is the founder’s reluctance to cope with his death, as to begin
continuity planning means they are approaching death. The founders also resist
continuity planning because it includes giving up their directing of the daily business
operations. Also, they may resist planning because of the fear that retirement means
that they may lose the position and respect in the family, and could lose significant part
of his identity.
Moreover, according Santiago (2000) that the western research suggests that
family business owners must prepare for leadership succession in a systematic manner
to ensure continuity. A review of succession experiences of eight family businesses in
the Southeast Asian country to the Philippines seems to indicate that the key to smooth
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succession for group oriented families is not entirely dependent on succession planning.
Rather, a family business’s smooth successions dependent on the process being
consistent with family values. In fact, valuing the preservation of the family unit helps to
avoid the ill effects that normally accompany the absence of succession planning.

Ownership Generation
In line with the respondents’ attitudes towards succession plan, 74% of the
respondents agreed that Leadership succession is an essential part of their company’s
long-term growth strategy. True enough that leadership succession might be part of
long term growth strategy of the company. On the other hand, according the same
study the respondents surveyed according to the ownership generation. On the fourth or
more generations, only 4% left continuing their family businesses. If the respondents
believe that leadership succession is a long term growth strategy then whythe chances
of maintaining the same status loses from one generation to another?
According to Ward (1987), as larger and larger numbers of family-held
companies change hands from one generation to the next, more and more family
legacies are lost due to poorly planned transition. With new owners with different values
taking over these firms, the impact is often negative, both in terms of company
productivity and profitability, but also in terms of negative influence on families and
communities. Astrachan (1988) has revealed through the examination of the impact of
family firms undergoing a transfer of management that sensitivity to the existing culture
of the firm and the local community is critical to the continued success of the business.
Working from both a sociological and economic perspective, Benedict (1968) observes
how the family firm is more important in the initial rather than the later stages of an
economic systems development .At the same time his conclusions suggest the
continuing important of a family firms characteristics in a deteriorating or unstable
system. In addition Berenbeim (1990) has examined the findings of qualitative study of
twenty large family businesses (above $100 million) from the United States, Europe and
Latin America. His study focuses on the family businesses that have successfully
completed the transition from founder to professional management, and it identifies
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many of the emotional and managerial dilemmas that arise as companies move from
one generation to next.

Seeking External Advice

In the interview of Richard Eu, group chief executive, Eu Yan Sang on advocates
clarity and frank dialogue in family governance, he said:
“Availability of talent varies generation on generation, and family firms
must be open to taking on external talent where necessary.”
According to Jake Olds (2012), it is important to look both internally and
externally when devising succession plans. Most well-devised succession plan for c-
level executive’s departure will be ineffective if it’s five years old – potential successors
change career direction or leave organizations, while individuals who are relevant now,
may not be in near future. In this case, Richard Eu’s idea was clearly undebatable.
One in five firms has yet to seek external advice on family governance. Mostly as
per study, first generation companies are least likely to have consulted an advisor. This
is due to a combination of low awareness, denial and cultural sensitivities surrounding
talking about death because they don’t want to appear that they are wishing the worst
upon their parent or grandparents. However, the results with those respondents who
have atleast US$1 Billion were different they have all sought external advice especially
on tax liabilities and estate planning.
Bajaj and Kale (2017), studied on how India’s Family-Run Businesses Are
Transitioning to External Leadership. They concluded that the decision to bring aboard
an external professional is not easy for family-run businesses. There can be a high
degree of distrust, as some members of the family worry about losing control of
something that has been internally controlled for years. The culture fit can be hard to
mesh, at least initially. And there can be unreasonable expectations heaped upon the
new executive. However, the results can be quite positive for the business, resulting in
an external executive who brings a smart perspective on operations, wide-reaching
personal connections and valuable global experience.
“You are actually allowing a professional to come to your kitchen and cook.
And you’re not looking over their shoulder to see what they are doing.” -
Sanjay Jorapur, Hero Motocorp
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He also emphasized that

“It is vital to have open channels of communication among family
shareholders and business leaders.”
Most business families convene at least once a year. However, those 2business
with more than 10 years; standing are more likely to meet frequently, perhaps because
older companies have more previously-involved family members who like to keep in
touch with their firm’s progress. It could also indicate that firms with good
communication among family members have higher longevity. This conclusion of the
study has been supported by Bessy (2015), that succession plan’s problems including
frustration, lack of respect and the feel of no risk of losing the family member can be
most mitigated by an open and transparent communication.

Gender and bloodline no longer an Issue

Based on the surveyed respondents, being the most capable business leader
does not necessarily mean being a son or even a family member. Indonesia has the
highest percentage of respondents agreed with 90%, while Singapore and Thailand on
the lowest percentage of respondents agreed with 64% and 60% respectively.
Furthermore, only 3% of the respondents said that they have chosen a non-family
member as successor in the latest leadership transition, 97% still a family member.
Regarding the gender of descendants, 8% of the respondents said that they have
chosen their daughters as successors in the latest transition, while 92% have chosen
sons as descendants.
The results garnered on gender of the descendants proves that male dominance
is still a practice. On the study conducted by Remery et. al (2014), the results show that
there is a clear gender difference regarding ownership. Men strive more often for full
ownership, whereas women opt for shared ownership, even when controlling for
relevant variables such as the presence of children.It is said that Shared ownership
might be more complicated in terms of governance and management than full
ownership. In addition this might have social implications as opportunities for shared
ownership might stimulate more women to take over the family firm, and therefore
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contribute to more diversity among family business owners. In the study of Azucena et.
al (2016), concluded that there wasdiscrimination based on sex, in the research they
have found that there are families thatgive the same opportunities to their offspring
independently of their gender. However, when there is only one successor in the family
firm they found a certain prevalence ofmales. Thus, in the 21 cases were primogenitors
were the ones who remained in thefirm, sixteen were men and only 5 women. The
reason behind this could be, as literaturesuggests, that when the primogenitor is a
woman, the business is sold or disappearsmore frequently than when the primogenitor
is a man.However, gender is not perceived, in general, asan important factor to become
a successor for the respondents.
As the respondents believe that the most capable person should lead their
companies whether they are family member or not. This has been supported by the
study conducted by Littunen and hyrsky (2000) they have examined factors that
influence that survival and success of 200 Finnishfamily and non-family in the metal
based manufacturing industry, over the first three years of their operations. The features
that the study includes owner-manager personality attributes,entrepreneurial
competence, and
motives for the start up. Strategic choices of the firms were also examined. The study
found that family firmswere better equipped to survive beyond the early entrepreneurial
stage than were no family businesses. Theentrepreneurial abilities and resources of the
family business owner enable them to operate relatively successionin the nearby market,
often with one unique product. The family firms were more conscious of survival and
family well-being than profitability on market position. A higher mortality rate was
discovered among the non-family firms. Failed firms were often established with
unrealistic expectations, and their performancedeteriorated rapidly after their early
success.

Conclusion
Building a business is hard; Building business with a family is harder, and
Building family business is the hardest. There are several factors that might affect the
succession on family business, this was discussed on the first part. Moreover we also
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found out that the attitude of successors play a big part to maintain the business as it
varies from one generation to another. Seeking an external advice is no longer a big
deal, as it helps the company growth and chances of longevity. Gender is also not an
issue to be chosen as a successor but being the most capable person to run the
business. In the end, I therefore conclude that family businesses will continuously exist
but will be subjected to change and regular evolution.

Works Cited:
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Legacy.Chelsea Greenwood.December 3, 2012. Print
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Vicente, Azucena; Idígoras, Idoia and Aldamiz-echevarría, Covadonga. GENDER INFLUENCE ON THE
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