Soriano: Stop Building A Business. Start Building Your Legacy

I used the title above when I was invited to deliver a virtual conference talk a couple of weeks ago to an audience composed mostly of founders and second generation successors operating in the Asean region. It was a change of scenery as I was in the US and the conference was in Asia. But the gist of my talk was straightforward, that the time has come for founders to reflect about succession and for them to appreciate that methodical planning is required, especially related to the process of sharing and transferring power to their children. I also shared this powerful quote to amplify the urgency of succession planning:My Grandfather walked 10 miles to work every day,My father walked five miles,I am driving a Cadillac,My son is in a Mercedes,He said my grandson will be in a Ferrari,But he also said my great-grandson will be walking again!So I asked my son, well why is that?And he said to me,Tough times create strong men,Strong men create easy times,Easy times create weak men,Weak men create tough times!Founders must prepare for the inevitable: The critical need to step aside (at a predetermined time) as owners of family businesses. They must also acknowledge that the biggest hurdle in this intergenerational transfer of power is about understanding the difference between knowing when to do it and knowing how to do it. During my talk, I reminded the audience that to be able to institutionalize harmony and effectively preserve wealth, succession planning should start as early as 10 years before they step aside. With the economy slowly gaining momentum and the pandemic waning, founders must no longer delay this critical and inevitable handover event. There are just too many issues at stake.Management and ownership successionto the most deservingShould management and ownership continue in the family? Should the next business leader be chosen among the children? What if none of the offspring are qualified? Can a non-family member assume the role? In what capacity? As successor, mentor or transition chief executive officer? Should a founder start organizing a formal board? Who can sit in the Board? Is it necessary to have independent directors? How do they function? Will a founder’s power be diluted when the Board is in place?In any business organization, the desirable mindset should primarily focus on the following overarching values which are growth, innovation and a shared vision. And they must be reinforced based on two key corporate principles that shareholders and directors must legally embrace. These are the concepts of “Duty of care and single-minded loyalty to the company. For a family business to thrive, the leader must be mindful that any disruption that will impact growth must be taken out. It must be underscored that there is nothing in any business model that mandates succession as the exclusive domain of family members. When embarking on a governance and succession journey, every leader must realize that the greater good philosophy (what is best for the business) must and will always prevail and that the most committed and deserving, regardless whether family or non-family member, must be installed as the successor.Unfortunately for many family enterprises, corporate best practices that we espouse as family consultants are given less priority over factors like preserving the family name or culture, living up to the expectations of earlier generations, and providing business opportunities for future generations. This myopic and traditional mindset poses a challenge and a dilemma to every family-owning business and its members. But for the sake of perpetuating the business, founders must continue to wrestle with this dilemma because succession, in whatever form, is inevitable, and only the wise, objective and forward looking leader can address family succession issues before they escalate into a full-blown conflict.