It?s called the third-generation curse and it terrifies all bilyonaryos who have worked hard to build their empire from scratch.
Family business guru Eric Soriano said that this curse ? where the third generation wipes out the fortune created by the first generation and nurtured and expanded by the second generation ? was usually abetted by ?an overly controlling patriarch? and the next generation?s ?dominating sense of entitlement.?
Soriano, however, offers five tips on how to break gloomy forecasts that fewer than one percent of family-owned enterprises beyond the third generation:
Good parenting and shared values – Family is the core of society and this is the springboard of character of the kids. Integrity, hard work, and fairness usually start when parents espouse the same values that helped them in building the business from the ground up.
Clear agreement – In any kind of relationship, there should always be clarity. When one member of the family enters the business, there should be a proper delineation of duties and expectations. Soriano said parents should stop behaving like a father or mother on business-related matters involving the children. It is crucial to never ever reward bad behavior.
Employment Contract – The constant overlapping of family, business, and ownership can be a dangerous thing and here?s where an employment contract comes in handy. Soriano said compensation should be commensurate to credentials and based on what the child could contribute to the business. The worst mistake when it comes to grooming their children to take over the family business, is telling them things like ?someday, you?ll own this.?
Stewardship – Only when a business owner appoints the most capable and competent leader could an excellent stewardship be assured. The successor should be able to see that he is only taking care of the business for the next generation.
Preparing succession early – Succession is not something that should be taken lightly. Successful power transitions always come with thorough preparation and early efficient child rearing where the next generation of leaders from the family learn the value of hard work and not entitlement.
Soriano will host Alliance Global Group, Inc. chief executive officer Kevin Tan, son of bilyonaryo Andrew Tan, in a talk about family, business, and ownership governance systems at the Manila Marriott Hotel in Resorts World Manila, Newport City on August 25.