Family business: The undisrupted
AS EASY AS ABC - Atty. Alex B. Cabrera (The Philippine Star) - December 9, 2018 - 12:00am

Success in family business does not compensate for failure at home, and the latter will eventually make the former crumble. But success at home can also give a family success in business for the long term. This is not just a general, feel-good sentiment. There is scientific proof to back this up.

In the latest PwC survey on family businesses across 53 countries, participated in by 2,953 companies, businesses with double-digit growth tend to be those that have a clear sense of agreed purpose and values. These are the companies that made values part of their business strategy vs. merely articulating them.

Take the case of a 30-year-old local family business popularly known as Cravings. Mom Susana “Annie” Guerrero, a baby boomer, is the founder of the restaurant chain that has more than 30 outlets and that also gave birth to their other restaurant brands such as C3, Casa Roces, B&P, MAS Tapas and Cocktail Bar, among others. In her 70s, Annie is now more devoted to her new love: helping farmer communities, and preparing healthy, organic food while strictly observing green practices.

Marinela “Badjie” Guerrero-Trinidad, a Generation Xer, is Annie’s daughter who now actively runs and grows the Cravings Group. She and her family boldly founded the Center for Culinary Arts (CCA), a pioneer international culinary school in the country. Badjie, who is married to The Cravings Group director Rico, has two lovely millennial daughters, Bea and Pia. The young adult sisters are making the group more technology-enabled even as they venture into their individual and personal business ventures and experiments.

The three generations of the Guerrero-Trinidad family are all involved in the family business. Their family and business values allow them to treat their people like members of the family. They have bold aspirations for an environment-friendly enterprise that spews zero-waste. They welcome constant renewal through new ideas rather than treating successful formula as sacred cow. They are a microcosm of the good traits of family businesses across the world. They worry about, but overcome disruptions. Allow me this Sunday to share global learnings from family corporations:

1. Purpose over profit is at the core of a family business.

Many family businesses remain privately held deliberately. The reason behind it may have been articulated by Victoria Mars, chairperson of the global confectionery brand Mars, which realized there is a different level of obligation to deliver profits if one is a publicly held company. She said that “as long as Mars remains free, our well-being can always come before any other financial priority”.

Illy, a global coffee family business, talks of the principle of purpose over profit. When times call for it, they incur the costs and weather the pain. Illy says it prioritizes the needs of its stakeholder farmers over the needs of its own family of shareholders, and they choose to pay farmers premium prices even when times are tough. If coffee crops must be sustained, so should farmers’ businesses be. Illy appreciates that farmers cannot afford to absorb the losses as well as Illy could.

2. The middle may be missing, but the end should not be missed.

At one end, about 20 percent of family businesses were found to have no strategic plan and seem to be dead focused on keeping afloat and surviving. On the other end, the remaining 80 percent of family businesses that have a long-term plan.

The PwC study reveals that only about a third of the long-term planners are also high midterm strategic planners (with financial and non-financial key performance indicators). They account for more than 40 percent of businesses who registered double-digit growth.

The rest of the long-term planners suffer from a missing middle: that strategic planning over a three- to five-year timeframe was found to be the missing piece.

What is promising though to the point of reassuring is that 80 percent cared about their legacy. So long as that aspirational future, powered by family values, remain as their compass, there is real hope that they will find their way to that strategic middle.

3. Targets should include social and environmental returns.

There is no lying on the importance of financial returns, as it is what allows you to move forward. But environmental and social returns are also important according to Roche, a global family pharmaceutical company. Success, judged on the amount of money you receive, is no longer suitable, and thus the way business is taught should also be changed, says Roche.

For instance, Roche vice-chairman André Hoffmann narrates that because he grew up in a conservation environment, he is convinced today that what matters is the interface between humanity and nature. This translates to their business strategy – to be a net contributor to the environment – that provides the input to their products.

By law, only publicly listed companies are bound to ensure they attend to all stakeholders and not merely their stockholders. Family businesses, powered by family values, don’t need the legal compulsion. The result, survey says, is that they are the most trusted ones.

* * *

Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He is the chairman of the Tax Committee, and the vice chairman of EMERGE (Educated Marginalized Entrepreneurs Resource Generation) program, of the Management Association of the Philippines (MAP). Email your comments and questions to aseasyasABC@ph.pwc.com. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

ATTY. ALEX B. CABRERA
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