NextGen leaders

It is not uncommon to hear about families, one sibling against another or worse children against their parents, fighting about money, inheritance, or the family business.

There is this saying that money is the root of all evil. I’d say it is the love of money that is the root.

There is nothing wrong with family-owned and run businesses. After all, many of our successful enterprises started out as family businesses.

As pointed out in one article in the  Financial Times, while many family firms start with a strong entrepreneur as both owner and manager, it becomes complex and problematic after a few generations if not transitioned properly. The article noted that soon, a complex network of family members become reliant on the business, working either as directors and staff. Some family members are concerned about salaries, dividends, business strategy, sometimes in conflict with other members of the same family. In fact, one of the most difficult issues, according to the same article, is when family directors give relatives a chance in the business even if people outside the family have stronger track records.

And so while some of the main advantages of hiring family members is their emotional commitment to the business, disadvantages like succession planning, nepotism and family feuds have to be actively addressed, otherwise, the end can be disastrous, the article mentioned.

One of the more successful companies in terms of transitioning the business to the next generation is the JG Summit Group. Established by John Gokongwei Jr. after the Second World War when he put up a trading company which imported goods from the US, and then later a corn milling plant, JG Summit Holdings, which was incorporated in 1990 as Gokongwei’s publicly listed holding company includes Cebu Pacific Air, Robinsons Land Corp., Robinsons Retail Holdings, Universal Robina Corp., among others.

Today, JG Summit’s businesses include food and beverage manufacturing, aviation, real estate and property development, banking and finance, petrochemicals, information and technology, infrastructure, logistics and warehousing, with core investments in utilities such as power and telecommunications, and affiliate businesses in retail and media.

Addressing a public audience for the first time after the conglomerate’s founder passed away in November last year, his only son, JG Summit president and CEO Lance Gokongwei Jr., paid homage to his father who built the company from scratch in 1956 and then led it to become one of the country’s biggest conglomerates.

In his speech delivered at the first MAP NextGen Conference 2020, Lance underscored the importance the conglomerate places on its core value of stewardship, saying that his father instilled in them the mindset that “the family is here to support the business; the business is not here to support the family.” This, Lance said, puts into proper perspective their family’s role and responsibility as NextGen leaders in ensuring that the business prospers and endures for generations to come.

Good stewardship, he stressed, meant not only creating value for shareholders and the family, but also reinvesting majority of the earnings back into the company, with no more than 10 percent going to the family as dividends. It also meant having the business managed professionally and hiring the best-qualified talents. This way, the family can escape the fate of most other family-run businesses.

Lance, who took the reins as its second-generation leader, mentioned that research reveals that only three percent (businessweek.com) of family businesses prosper beyond the fourth generation.

He said that when he assumed the position in May 2018, it was very clear to him that his role is that of a steward, a caretaker of the business that has been entrusted to him, and the responsibility of ensuring that JG Summit continues to thrive over a long period of time.

The first on his three-pronged philosophy is putting the interest of the business ahead of the family.

I remember writing many years back about one strategy that the family has used to avoid conflict, and that is not to hire in-laws to run the business.

Lance shared that the first of 10 unwritten commandments that his father followed in running the business is the rule of no in-laws.

He said that during his father’s generation, his aunts, who were married to his dad’s brothers, and his mother were involved in the business, but the elder Gokongwei soon discovered that this was not always ideal.

Lance said that “there were situations where some of the marriages did not work. Loyalties change. Sometimes relationships between the different in-laws from the second generation became strained. Feelings get hurt. It is tricky deciding who among the in-laws is more deserving, who is smarter, who would do a better job.”

There is no single formula to ensure the success of a family business and transitioning it to the next generations. Family upbringing is, of course, a very important factor. This is one of the reason why children who stand to inherit the reins over the business are usually assigned to the lowest positions in the company first before being promoted. This is to remove from them a sense of entitlement to the position of power and control, to give them a better understanding of the sentiments of the workforce and of the consumers. Getting a masteral degree from the best universities abroad will not ensure that the child will be able to run the business as efficiently as the parents did. It is not just a matter of the child surviving inside the business. What is more important is how the child, or the succeeding generations, will be able to compete against other businesses, improve on it, keep it attuned with the needs and demands of the time, while still staying true to the company’s core values.

Not so hidden agenda

Still on the topic of JG Summit, it’s banking business Robinsons Bank has accelerated its digital initiatives while continuing to put customers at the heart of their business development.

As a testament to this, Robinsons Bank was awarded the Omni-Experience Innovator Award for its RBank Sign Up in the recently concluded IDC Digital Transformation Awards 2020 Philippines held by leading IT market research and advisory firm International Data Corporation (IDC). It was also recognized by the International Business Magazine as the Most Innovative Retail Banking Product - Philippines 2020.

The RBank Sign Up app is one of the newest products launched during the pandemic as a response to the needs of many Filipinos. The Sign Up capability lets customers open a bank account through an all-digital and online process. With just one ID card, e-KYC, and internet connection, customers are sure to have their account details within minutes of completing the application.

RBank chief digital officer Ramon Abasolo explained that they are re-engineering primarily to improve customer’s experience and enable them more in a digitized environment.

RBank’s mobile banking has taken a new form with the new RBank Digital, which has over a hundred listed billers, from utilities (electricity, water, cable) to insurance, among others. One can also manage their savings account, credit cards, time deposit accounts, and more in just a single RBank Digital account.

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