Putting the ‘success’ in ‘succession’ for Asia’s family businesses.
Putting the ‘success’ in ‘succession’ for Asia’s family businesses.
From the corner store to the massive conglomerate, the influence of family businesses on the world economy is undeniable. They are where future leaders are nurtured: HSBC Private Banking’s 2016 report The Essence of Enterprise reveals that 56 per cent of entrepreneurs in Asia come from a business-owning background. Yet, family businesses can also be hotbeds for conflict. While most might see power struggles and disputes within family members as inevitable, Bernard Rennell sees them as red flags.
As HSBC Private Banking’s senior adviser to the CEO, Key Client Coverage, and global head of Family Governance and Family Enterprise Succession, Rennell has been observing and advising family businesses worldwide, helping them manage conflict, and put out a succession plan.
“Families that have evaded the well-documented ‘three-generation SPECIALtrap’ – whereby wealth is lost by the third generation – have all succeeded in avoiding family disputes. Their commonality lies in a separation between ownership and management,” Rennell highlights.
A PRESERVATION OF VALUES
This means finding the best talent to continue the business, and continuing a business not just for preserving wealth, but preserving values. Johannes Suriadjaja, president director of Indonesia-based property, construction and hospitalityfirm PT Surya Semesta Internusa Tbk, feels that the key role of the founder is to share and translate the fundamental belief systems upon which the business was built. “The most important thing in a family plan is what you believe in — the values of the family,” he opines. “This has to be passed on, communicated to all branches of the family, and understood by all.”
And one of the key values shared by such successful families in the business sector – regardless of nationality or industry – is the business leader’s motivation to drive the company forward. Thus, much rests on the individual’s ambition and character.
As president director of PT Triputra Investindo Arya and vice-president chairman of PT Adaro Energy Group, one of Indonesia’s biggest privately owned business groups, Theodore Permadi Rachmat recognises that this is a fundamental reason not to insist on your children continuing your legacy. “Don’t force your children to become your successor if they don’t want to,” he advises. “Life starts with passion. If you cannot use your passion, you will never be happy.”
Suriadjaja adds that it is important to listen and understand the wishes of the younger generation. “You have to really know the character of your son or daughter, and find out their goals in life.” His daughter Christina Suriadjaja is certainly grateful to have his support despite having followed a different path. The co-founder and chief strategy officer of accommodation booking site Travelio.com attributes shared family values of integrity and respect to have helped her garner the trust of shareholders, leading to a nine-time return on investment in less than 15 months.
“For a family member to become a manager , he must undergo a fire test.”
“You have to really know the character of y our son or daughter, and find out their goal s in life .”
In planning for succession, Rachmat notes that he does not believe in birth rights. “For a family member to become a manager, he must undergo a fire test. It all depends on whether he fails or succeeds.” His opinion is echoed by Suriadjaja, who highlights that talent has to be the ultimate test of leadership. “In terms of the generation to come, eventually you have to also look at who is qualified.”
When planning his own succession and ownership transition, Rachmat – who is Indonesia’s 12th richest man – brought his children together to discuss his will, insisting on open dialogue. “I said, ‘It’s completely transparent. Do you agree with the will? If not, let’s resolve this today, because I might not be here tomorrow.’” His son, Arif Rachmat, the secondgeneration CEO of agricultural commodities company PT Triputra Agro Persada, says his father’s straightforward approach helped get all of the issues out in the open. “I think transparency and clarity are very important, and he completely spells out his will — what percentage the next generation will have, even for the generation after that,” he says. “So I know, even today, how much my children will have as a percentage of the company. And he’s done it in a very fair manner.”
Even with this approach, the Rachmat family’s legacy plan is a constant work in progress. Legacy mapping is clearly a task that takes time. Yet in Asia, especially, few family businesses broach the subject.
While Rennell notes that many Asian businesses are still managed by the first or second generation, and might deem themselves too young to consider succession planning, it is never too early to put things in motion. Speaking at a recent HSBC Entrepreneur Series event, Rachmat senior shares this: “You have to start the discussion (about succession planning) as soon as possible. Because, sometimes, it can become too late.”
