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Open communication crucial in family business' succession
PICTURE this: In front of a packed hotel conference room full of media, and surrounded by bright TV lights and microphones, your father - a world renowned business tycoon - announces at the company's annual investor meeting, that he is stepping down from the chairmanship of the company that he built over the past 60 years, and is appointing you as the successor to take the business and family forward.
At that moment, the microphone, the eyes and weight of expectation, immediately and permanently shift to you. To say it's a poignant and defining moment would be putting it mildly.
According to a joint SMU-Deloitte study across South-east Asia, 77 per cent of first generation leaders prefer a Next Gen family member to succeed them . As this shift continues over the next decade, this is a scenario beginning to play out across the world, and particularly in Asia.
Called out as the 'Next Generation', descendants of the family business are hungry to take on the challenge - but in a way that has their own stamp.
And if there is one theme that encapsulates the attitude for a majority of them, it's making a sustainable impact - in the business, society and family.
"May you live in interesting times."
While the Chinese say this ironically, it is actually an exciting time to be in business.
Innovation, agility and the internet of all things is closing the gap between starts-ups and established businesses. E-commerce is changing the way consumers and businesses interact. The countries that were historically inward or outward in trade and investment focus are changing places, and markets are skittish.
Volatility and uncertainty can be disquieting, but it is also where there is opportunity.
Among this, the new generation of entrepreneurs are itching to make the changing world work for their business - not against it. Motivated to make their mark, they question previous conventions and existing business models.
Here lies a potential generational divide.
The business has become successful following tested templates, but innovation is how it will remain successful in the future.
Making change is hard enough but it can be compounded if the incumbent leaders need some convincing. While the task may seem daunting, leading through change and the injection of new ideas, can be that extra push to accelerate performance.
The desire to make an impact extends beyond the business to society at large for many of this emerging generation of leaders, and this is paving the way for sustainability being part of the family's wealth agenda.
In particular we're seeing many of our clients incorporating environmental, social and governance in how they conduct business.
This can range from adopting more environment-friendly practices, through to setting up strategies to prevent human trafficking from taking place within their supply chains.
Research conducted by the Global Impact Investing Network identified that impact investing grew by more than 25 per cent in Asia in the three years leading up to 2016 .
But make no mistake. While the rise may stem from a younger generation's outlook on the world, impact investing is still around the need to make money.
The Next Gen business owners are increasingly channelling their funds into many avenues that are now available: using their shareholder weight to invoke sustainable policies, to microfinance, and impact investing in private markets.
Adding in the element of 'family' to business can definitely be an extra layer of complexity.
Not all of the children will want to take an active role in the family business or may have different levels of engagement and leadership.
The broader question then becomes: How do you allocate the wealth accordingly, and how do you ensure rest of the family involved in the journey share a collective mission?
Many families set up committees that act like a family council to groom the next generation to be responsible owners in the future and to set the strategic direction on how to control their wealth and businesses over the generations to come.
Establishing a formal family governance structure can also act as a compass.
And when taken in stride, can instil good communication and trust. Making collective decisions around philanthropy, for example, can also be a training ground for the tougher discussions on personal wealth and succession.
The first generation may have built the business but the Next Gen carries the weight of sustaining it.
And they come with the right intentions. For them, it's all about impact: sustaining the family business, having a positive role in society and as well as their family.
Respecting the business strategy of the incumbent generation, navigating a changing world, all while ensuring the family is on board with the commercial and wealth path that has been set - it makes for a lot of spinning plates.
The task is not easy, but being a leader rarely is.
By being true to your family values and through open communication, the generational divide can actually become a generational accelerator.
- The writer is head of Private Banking, Southeast Asia, HSBC Private Banking