By: Prof. Enrique Soriano
“With great enthusiasm, family businesses always look forward to a wish list of New Year’s resolutions and good intentions. But in a relatively short period of time, we naturally revert back to business as usual with our old habits by sweeping unresolved issues under the rug.”
Succession is a process and must be planned
One of the thorniest and often times an extremely unpleasant topic is the issue of succession. It is not only isolated to the founder and the successor but a complex process that involves all actors both inside and outside the family business. Resistance to succession comes from multiple levels including individuals (founder-entrepreneur, successor, siblings), groups, the non-family employees, the family business organization and its external environments. Senior generation leaders contemplating of retiring in 5 years must start the planning process.
Uncertainty Over who will succeed
Ownership issues are often generational and lead to conflict between parents and their children. If the senior generation is not prepared to give a definite call on when they intend to retire, the result can be frustration among the successor generation about their lack of control over the operations and direction of the business.
Confucian Orientation Can be a Catch 22 Scenario
Chinese family businesses are heavily influenced by traditional Confucian ideology and are currently facing more challenges in succession and human resource management. The general success of Chinese overseas business firms has raised interest on the influence of Chinese ethnicity on business performance and many government officials and academics attribute the success to Confucianism.
Confucianism is a way of life propagated by Confucius in the 6th–5th century bc and followed by the Chinese people for more than two millennia. Although transformed over time, it is still the substance of learning, the source of values, and the social code of the Chinese. Its influence has also extended to other countries, particularly Korea, Japan, and Vietnam.
The Confucianism philosophy teaches that the family is the basic unit of all social organizations and the core of society is not the individual, but the family (Hofstede, 1991). The business is considered a family property. Moreover, it is claimed that individuals are indistinctly connected with and embedded in a family, a group or that social organizations so that they do not exist as a separate entity (Krug, 2004). Following the value of Chinese collectivism, family members cannot do anything that will facilitate the success or the achievement of an individual to disturb the harmonious settings within the family, thus, under the circumstance of collectivism culture, individual desires are always repressed.
The Confucian value of caring for older parents reduces fear of losing financial support. This value is a very important lesson on filial piety that is taught from childhood. One of the most famous stories about filial piety teaches how children should sacrifice themselves for the sake of their parents.
The story tells how a son used his body heat to melt the ice on a river to get fish for his sick mother. In general, Confucian ideology contributes to factors that promote successful succession. Confucianism supports cooperation, mutual trust, harmony and obedience to senior leaders’ decisions. When conflicts are not resolved, piety precedes all other virtues.
Confucianism criticized
In South Korea, there has long been criticism of Confucianism. Many Koreans believe Confucianism has not contributed to the modernization of Korea. For example, South Korean writer Kim Kyong-il wrote an essay entitled “Confucius Must Die For the Nation to Live”. Kim said that filial piety is one-sided and blind, and if it continues, social problems will continue as government keeps forcing Confucian filial obligations onto families.
The LOTTE Group Corporate Succession Scandal
Such dilemma came to light late last year in South Korea involving the Hotel and Retail Giant, Lotte Group. It was a corporate succession scandal involving the intense rivalry between the two sons that led to the younger one turning against the 92 year old Mr. Shin, his father and founder and ended up ousting him as the General Chairman.
Strait Times highlighted in its report that “while corporate succession battles are not unusual in South Korea, a son overthrowing his aged father is almost unheard of in a Confucian society where respect is valued.” This is what a catch 22 is all about, a dilemma or difficult circumstance from which there is no escape because of mutually conflicting or dependent conditions. ([email protected])
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Prof. Soriano is an ASEAN Family Business Advisor, Book Author, Executive Director of Asean-based Consulting group, Wong + Bernstein Advisory and Program Director for Real Estate and the former Chair of the Marketing Cluster of the ATENEO Graduate School of Business. He is slated to deliver a talk on Philippine Business Opportunities in NY on Feb 1 at the Philippine Consulate and Boston on Feb 4 at the Harvard Campus. The talk is organized by Bagong Kulturang Pinoy (bkpinc.org), The Harvard Philippine Forum, TFC with Asian Journal as media partner. For those interested to attend, pls email [email protected]. Prof Soriano’s business articles can also be accessed at www.Faminbusiness.com