The ideals of a family-owned company need to guide the way in-laws are handled within the company.
There is no predetermined format for the planning of succession in family enterprises. Years of planning go into determining both the method by which the current owner of a family business turns the reins to their kid or children and the level of success that the transfer achieves.
Nonetheless, even those who make detailed plans and have “the chat” with their offspring about how the business should be operated may still encounter obstacles. Now, more than ever, the offspring of family owners desire to go out on their own, some in an effort to flee the grasp of the family empire and others merely to obtain experience in the “real world” before eventually returning to the family firm. Nevertheless, this raises a number of problems, including how long the owner intends to be gone, when they have plans to return, and what will take place if the owner passes away or becomes unable to care for themselves before the transfer is completed. The manner in which these families navigate this shift might determine whether or not their family-owned businesses continue to thrive through successive generations.
I had the opportunity to sit down with two couples at the FT Family Business Forum Asia that was hosted at INSEAD in the month of August. Both of these couples had gotten what I refer to as “the call,” which is a late-night phone call from a parent founder who says, “Can you come and join me now?” The impact that “the call” has not only on the children of the family company but also on their partners, some of whom may need to relocate with them, is an essential element of “the call.” Both stories provide intriguing new insights into how the families dealt with the difficulty of succession in their extremely successful family companies and the role that their wives played in those processes.
It is time to return home
Two quite distinct family companies were represented by the folks with whom I chatted. Pearl Yu, who is the daughter of the company’s founders and who was living in Shanghai with her husband Derek Zhu at the time, received the call while they were there. Keystone Cable is a power cable manufacturer situated in Singapore. Both Pearl and Derek were progressing through their careers by working for huge global corporations on rotation. Although they were on rotation, they had been living separately in several nations; nevertheless, the most recent one brought them together in Shanghai. After a very short period of time, Pearl’s father called and begged her to return home.
Fratelli Cosulich Group is a family firm that specializes in providing shipping services, and Timothy Cosulich is the sixth generation of his family to work in the company. Once he and his wife Alexandra Commelin had successfully coordinated their work schedules to allow them to live in the same nation, they both received a phone call. Alexandra relocated from France to Italy, which is Tim’s native country, and he returned to Hong Kong to be with her. Nevertheless, a few months later, he got the call and ended up working in the family firm in Singapore.
Both sets of parents had quite divergent perspectives regarding their children’s partners. Pearl’s family was aware of the fact that in order for her and Derek to return home, they would need to give up their professions in corporate America. They were also aware that if Derek returned to Singapore, he would need to switch positions and even sectors. Hence, the family came to the conclusion that he should join them. Derek stated that Pearl was the primary person responsible for recruitment. “It’s obvious that I had a few second thoughts. But I believe that it was when the parents expressed their complete endorsement that I said to myself, “Well, maybe that is a possibility.”
On the other hand, things turned out very differently for Timothy’s family. “In our family, we have a rule that states in-laws are not permitted to work in the company. We are aware that adhering to this guideline might result in us losing some talent, but running a family business inevitably involves some degree of conflict of interest. You are adding another layer of difficulty to the situation by including your in-laws. Alexandra has come to terms with this fact and is now pursuing her own profession.
Provide them with a choice
Yet, the two families have certain similarities in many aspects. They make decisions based on the principles they hold dear, and they give their children choices on whether or not they should join the family company. Pearl’s family made it a priority to ensure that she was able to get her master’s degree in addition to working outside the family company before she returned. Prior to joining the family business, she held positions at Roche and the Singapore Economic Development Council, both of which provided her with invaluable expertise and insight.
In the case of Tim, even though the family had stringent rules about in-laws and there was no parental involvement in the hiring process of their children (Tim negotiated his position with his uncles, for example), he was granted a seat on the board at his request. This was despite the fact that the family had no parental involvement in the hiring process of their children. “I did not want to be on the board so that I could make choices; rather, I wanted to be on the board so that I could observe and learn from the way that they were making decisions.” “Because in particular two of my uncles are fairly elderly, and I realized that I did not have all of my life to learn from them,” he added. “I wanted to make the most of the time I had to learn from them.” In addition to this, it was decided that Tim would wait one additional year before joining the company because he was in the midst of a significant project at The Maersk Group and was earning vital expertise in the process.
Having the conversation about it
Before making “the call,” there is also a significant amount of preparatory work to be done. There is more than one talk that has to take place in order to convince a child to take part in the family company. Pearl stated that it is a process that never comes to an end. “We have twins, and they are just over a year and a half old at this point; nonetheless, we have already started taking them to corporate functions, so the practice begins at an early age. I counted it as a great stroke of luck that my parents never really made me feel obligated to come home directly after school. I was given the chance to go out there and accomplish whatever it was that I desired to do. Hence, I believe it is something that it is really important for me to provide to my children, and that is the option to decide for themselves.
There are many more contexts in which adaptability is required. Many children, particularly the offspring of affluent family business owners, choose to further their education at international business schools and pursue careers in the corporate world. That is asking a lot of you to give up it. They are forced to give up the status of working for a huge global organization and return to the relatively unrecognized business that their parents run. This may result in less desirable titles or compensation, or even a lack of structure that is already accustomed to the employee.
“The conversations took place with my three uncles, and while they were kind and pleasant, they were not at all simple. First and foremost, the position and the long-term professional goals. Coming from a background in consulting and having worked for three years in a very large multinational corporation like Maersk, I was used to having everything laid out in a PowerPoint presentation, having a clear structure, and knowing exactly what I would be doing in the future. However, this was not the case when I joined my family’s business, which was a sole proprietorship. Tim stated, “I had no idea what my position was going to be, nor did I know who I would be reporting to.” “My suggestion for family companies would be to focus on how to develop a meritocratic structure and culture inside it,” he continued. “My advice would be to focus on how to create a meritocratic structure and culture.”
Their respective families’ beliefs contributed to establish how they would be introduced into the business and how much spousal engagement was sought, despite the fact that the two scenarios are entirely distinct from one another. This is the only resemblance between the two sets of circumstances. The fact that they brought their children into the business, on the other hand, had a significant effect on their wives, and both of them had to find their own unique way to adjust. Both Alexandra and Tim put their attention solely on their professional endeavors in their own right. According to Alexandra, one of Tim’s aunts once gave the following piece of marriage guidance: “‘Marriage should be like two cypress trees, living side by side but not in the shadow of each other.'” I’d say it’s going fairly swimmingly for us up to this point.” Although though Derek was accepted into the family of his wife’s parents, it took some time for him to develop a relationship with his in-laws. “Joining a family business is a commitment for the long haul, and just like anything else, it is a process that requires time.” It takes time to build a connection with the individuals who work at a firm, and even more crucially, it takes time to build trust between the parties involved. That, in my opinion, is the most vital point. “So have the patience to realize that things will work out if you have the proper mindset and you have the appropriate support,” he continued. “So have the patience to understand that things will work out.”