How to Transform Family Business

The Family Business is a book published by The Jakarta Consulting Group, a company that has consulted a lot of family businesses for several years. With this track record, it is not surprising to see that all chapters in this book are based on practice, not just a theory.

The major problem in family business usually is to accommodate family’s objective along with company’s objective. Usually, an owner views the business as a place for his family members, especially his children, to get connected each other in warm relationship. On the other hand, business has an objective to earn revenue and profit in order to give dividend for shareholders or to expand the scale of business.

It is not unusual then to hear the proverb about family business as follow: first generation establishes the business, second generation maintains the business, and third generation ruins the business. There are not many world class companies who still survives under leadership of third generation.

Most of world class companies dominating market nowadays are run by professional, not family members. Most of them are also listed in stock exhange. It is correct that IBM once has been led by family member of third generation, but it is due to his capability not because he is the off-spring of the founder.

A conflict may happen in family business when the owner would like to keep on running the company with his style of entrepreneurship. As a matter of fact, when the company is expanding, it needs system, something the owner is not concerned with.

Sometimes, the owner hires professional from multinational company only to show off to the competitor that his company is bonafide and rich enough to pay them. In reality, this professional is never given adequate authority to lead the company, so their existence is like a tiger without teeth.

One of major problems in family business is when there is no succession plan. If someday the owner passes away, the off spring will fight each other to acquire the estate. This book gives the solution by recommending the owner to prepare his successor, either taken from his children or taken from outsiders. The most important thing, his successor has ability and competence to run the business.

This book also recommends strategy which has to be adapted by family business to be world class company. The best way to transform this company is by going public. Formulating vision, mission and strategy must be conducted properly. Performance of employee must be measured regularly by key performance index in order to implement fairness to all employees.

Syndrome of spoiled child must be paid attentively in order to avoid conflict. From the beginning, all children should be given same level of opportunity to join the company. After a while, they must be evaluated if they are suitable for being a CEO or not. If their talent is not suitable, it’s better for them to establish another company instead of joining the existing one.

There are many other interesting topics in this book such as what kind of professional is needed, life cycle of family business, tips and advice to successors, etc. It is highly recommended for the owner of family business, the successor and professional. (Hery Azwan: 18/12/2007)

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