By Fung Mei Lin, Entrepreneurial and Private Business, Lead Partner, PwC Malaysia
Families who own successful businesses and have a vision for their future generations in that business need to plan for that vision today. Family business owners need to have a strategy in place to leave the family and the family business in a better and stronger position for their future generations. We discussed the importance of having a strong owner strategy in our previous blog.
The objective of having an owner’s strategy that is customised to your own family’s needs is that it sets a common understanding for all relevant family members to move forward with the same vision, and addresses the relevant areas that could potentially create conflict among your family members. Conflict or potential conflict if left unattended, over time, can and will manifest in cracks in your family members’ relationship with one another. When family members are not able to interact well with one another, it is likely to adversely affect your business as they will be unable to see eye-to-eye with each other when deciding on key business matters.
The challenges that could lead to conflict most commonly happen at the second generation and beyond. There are current owners who feel there is no need for them to have a strategy for their future generations as the relationship among family members are currently harmonious or they believe that the next generation will resolve their own issues in time. Here is where lessons learnt from other successful family business owners can create a powerful impact in ensuring a lasting legacy for their families.
Based on experience, the following 6 building blocks are key in coming up with your customised owner’s strategy:
Goals and values
Owner business model
Roles and people
Source: Prof. Dr. Peter May, founder of INTES Family Business Academy, part of the PwC network
The 6 building blocks are sufficient to cover the relevant areas in developing your own owner strategy. It is important to remember that in developing your family business’ owner strategy, the process is more important than the end goal, and there must be active participation by the family members.
To give you an idea, here are some questions that could be raised in the course of developing an owner's strategy. Do note that these questions are not exhaustive:
Ultimately, here are 5 benefits of having an owner’s strategy:
Strengthens family members’ bond and unity as they have worked together to identify and articulate their thoughts and wishes to produce and document the family constitution
Results in higher levels of trust, openness and attachment once the difficult conversations have taken place
Ensures clarity and transparency. The family members know what the agreed process is and how to use it to address most obstacles in a timely manner when they arise
When the agreed way forward is put in writing, it is clear and everyone is on the same page
Smoothens the transition from the current generation to the next
Our studies have shown that taking the time and putting in the effort to develop an owner’s strategy is an important contribution towards family cohesion and the future success of the family business.
Fung Mei Lin
Tax Partner and Entrepreneurial & Private Business Leader, PwC Malaysia
Tel: +60 (3) 2173 1505