Zobel, Gotianun, Tancaktiong on raising kids to run family business

Posted at 03/14/2012 11:39 PM | Updated as of 03/15/2012 1:00 AM

MANILA, Philippines - For a family business, managing kids alongside non-family members is a challenge.

But at a forum at the Ateneo Family Business Development Center this week, heads of some of the country's biggest family-controlled corporations reminded the audience that their kids are one of their biggest assets.

Filinvest's Josephine Gotianun-Yap said: "The third generation is an excellent human resource pool. Where else can you find a group of people who have the same values... you have the benefit of a very long training period. There is already a built-in loyalty and pride in the business."

And it's never too early to start the indoctrination, she added.

"We have to start them young. In military terms, it's called brainwashing. In our case, we had the regular share of horror stories about wealthy families who lost their fortune due to mismanagement. So my children will tell you that they're sick of hearing the same stories over and over just to stress that they need to work."

As they grow older, education can become more structured.

Ayala Corp.'s Jaime Augusto Zobel de Ayala said, "one of the ways we instill stewardship in the next generation is educating family members about family roots, achievements over the years, and family members' roles in Philippine economic history."

"Fernando and I spend time with them not talking about complex business issues, but more about a sense of giving back a little bit..."

Parents can't take training for granted -- from early indoctrination in the values of thrift and work to internships, jobs outside the family business, and first jobs in the family business.

Martin Lorenzo of The Pancake House group said neglecting this can result in failure.

"Sometimes this is because family businesses put in their children too early, not because they're not capable or not competent. They are, but not yet ready. So my belief is they should work outside, learn and get their stripes outside first and once they learn especially from the mistakes of others, that's the time they come back into the business," he said.

Zobel de Ayala also said, "our rule, if you want to work permanently for the company, you have to work independently."
But working outside could mean working abroad, which throws up a new problem: How to get back these OFWs to come back to a Philippine-scale salary.

Gotianun-Yap said the family may have to pay the returning kid what non-family members at his level get paid, and make up the difference from its own pocket until he or she is a top executive with top pay.

"What makes it difficult these days is the retiring OFWs. Many families find they can no longer match the compensation their third generation is receiving abroad. They might find themselves unable to attract the very talent they have trained and educated," she said.

From childhood to jobs at the center or the top of hte family business, a COO child of owner learns how to preserve the values that made the business succeed, and the skill to manage and grow it.

But Lorenzo said founders can't forget to pass on another skill -- the one that gave them a business to pass on in the first place.

"Actually now, businesses don't last anymore three generations. Business cycles are very short and rapid," he said.

"The key is for the second generation to already educate and train their children to be prepped to manage very short cycled businesses that requires them to the the first generation already."

This begins a whole new entrepreneurial cycle.