Lust for power prevents development in family business: experts

The conference, entitled, “Business Families: Developing the Next Generations – Best Practices of Successful International Business Families” was designed for business owners, senior leaders and managers of groups, corporations and companies in Vietnam.

A recent study by Deloitte Global revealed that some 30% of family businesses continue operating through the second generation, 12% through the third, and 3% through the fourth generation.

In addition, some 61% of people said the previous generation finds it difficult to give up their control completely when they hand over their business. As a result, the younger generation often feels frustrated, since they have to persuade the incumbent generation to accept their new ideas, according to a PwC survey.

Pham Dinh Doan, chairman of Phu Thai Group and chairman of the Council for Family Businesses in Vietnam, said at the conference that these facts are true to family businesses in the Southeast Asian country.

The transition of leadership is one of the thorniest issues among family businesses.  Professor Annie Koh, vice president of Business Development and academic director for the Business Families Institute at Singapore Management University, said that the most challenging issue during the transition is clinging on to power and position by the current generation.

Koh noted that the succession must be a process, rather than an event. The next generation needs the current generation to lead, while the current generation needs to think about the issue of ‘giving up’ in a timely fashion so that the next generation can gradually take up the challenges.

Business transitions should be associated with the corresponding business development cycle so that the management team will have appropriate development conditions, she added.

Richard Loi, the Southeast Asia leader for Deloitte Private, said the most successful transition takes place when founders bring their children into the real business as soon as possible. This will help founders prepare and advise the next generation, and present new leaders with the opportunity to innovate and learn how to resolve disagreements between siblings in a family.

Furthermore, founders should cooperate with the next generation to devise a set of family governance rules whose aim is to manage expectations regarding their succession plans and how to reach different decisions.

Doan added that for the sake of successful leadership transitions, the founding generation must update their knowledge, technology and new business models. They must also become individuals with modern management thinking and breakthroughs in manpower development.

Meanwhile, he noted that the next generation should dare to have big dreams and ambition, and a willingness to overcome difficulties. The offspring generation should actively engage in the actual activities of their companies to learn from experience, and thus become more mature and stable.

Family businesses need to have a detailed roadmap in the transfer of power when the business owner realizes that the next generation has sufficient capacity to lead and run the business, according to Doan.