At the most recent summit of the Family Business Network, groups of young people and business-attired elders swarmed the lobby of the Singapore Ritz Carlton, in one of the most inspiring and unique gatherings I have ever experienced. In total, some 700 family business owners from more than 40 countries, and a range of sectors from manufacturing to clean tech, attended – some representing centuries-old firms.
This gathering of the global elite - the royal families who have untold power, and a tradition of living in a gilded cage - was deeply at odds with the negative media image of global business. With all of their hereditary wealth and power, the focus of the conference and most members of the group was not inward on self-congratulation, but outward on how they, as business leaders, were taking on the challenge of the social transformation needed in the world today. Given the option to hide, sit back and enjoy life, these businesses instead were united in realizing that their personal and family success depended upon a shared future for the whole planet. As a global group, representing every continent and political system, their unity of purpose and values overshadowed the differences of culture.
Their view of business was quite different from the financial focus of an investor’s conference – less about profit, and more personal and value-based. Their family ownership seems a bit like having a responsible parent overseeing the business, making sure that the focus on profitability does not come at the expense of other values – like the support of employees, the community and the environment. Sustainability pioneer John Elkington noted in his keynote that this orientation leads spontaneously toward what business leaders call the triple bottom line (people, profits and planet).
Values across generations
Second- and later-generations of family enterprises actively connect their activities, from philanthropy to sustainable business. As families, they often had different family members engaged in foundations and several business ventures. By articulating their values, they asked about how they were reflected in their investments, how they ran their businesses, how they lived in their community, and what they would leave generations to come. The values conversation across generations in their family led them to ask for socially responsible investment and business operation, often challenging activities their family had pursued in the past. Because they began as a family and were deeply connected to each other, their concept of ownership was broader and more extensive than that of ownership by a group of strangers.
The summit focused on how the family’s values were expressed, not on profitability. Families shared what they had done, how they changed over generations, and the struggle to balance these competing priorities. Fernando Zobel de Ayala, sixth generation family leader of a leading company in the Philippines, told how his family’s concern about the cost and quality of water in poor communities led to a family investment in water treatment that reduced the cost of water tenfold. While such a concern is shared by many, few families have the means to move from a problem to such a comprehensive and sustainable response. This is only one of ways his family exercises leadership in their adopted country.
Maintaining entrepreneurialism, philanthropy
The contribution and emerging leadership of the younger generation is a core reason for this commitment by families. Family founders created successful and visible companies, and provide the best to the next generations. This offers a challenge to their children: what do they want to do that is meaningful to them, that adds to the family and to the community? Of course, some next generation family members (who do not attend such conferences) simply become consumers of the family wealth. But those present have taken a different advantage of their elite professional educations. Their stories were about a personal developmental journey. Through their education (mostly in other countries like the US) and travel, they became aware of unrealized needs in their own and other communities, which led them to ask how their family, with all its resources, could make a difference. Some shifted from a business focus to social entrepreneurship.
For example, Ghazi Faisal Binzagr, scion of a Saudi trading family, knew since he was very young that he was not destined to be a trader. His family accepted his unusual choice to study for a doctorate in organizational development, and his community development work with local villages. Over time he has become what he calls a “merchant teacher” who combines his social commitment with his family skills of trading. Similarly, Melissa Kwee, whose family developed the building where the conference was held, was moved after her education to work with under-developed communities. After developing her skills as a non-profit leader, she recently joined the family business, the first member of her generation to do so, with an expectation that she will combine her values and skills with the family’s real estate focus.
Dialogue across generations
The blending of generations at the conference was another aspect of the unique culture of family enterprise. Some younger family members noted that it was not easy for them to share their new values in their family. It was difficult to get their elders to listen and to take seriously of these new ideas. They had been successful and knew how they wanted to do things. The younger generation had to develop credibility by working outside and demonstrating that their ideas had substance.
The problem of business innovation was explored in several sessions. Family elders noted that their traditional ways were hard to change. Often, some event or crisis around them led them to be more open to the younger generation. Dialogue across generations, where the tradition and legacy of the elders were balanced by the new realities encountered by their heirs, was a key theme. Elders heard from other elders how they had changed, and learned to let go and trust their children. A session by a family patriarch and a business professor from India on the need for elders to shift their role from control to another form of leadership, talked about the need to learn to listen to their children, rather than mold them.
This was not a quick, easy or even a natural progression. One business leader noted that there had been more change in the business climate in the last 20 years than in the previous 480 years of his family business. His business almost did not survive as they faced change as they had never before. The need for deep change means the success of the previous generations is not guaranteed for the future. A family enterprise cannot focus on social transformation if it does not sustain itself by innovating in its business model. The next generation are the stewards; they must bring to the family business not just what they want, but what the business needs. But they want to do this by balancing the needs of the diverse group of family owners, and the needs of the business, and the community. What a task!
The new generation, far from sitting back and harvesting the fruits sowed by their parents, may have to resurrect a greatly challenged business with a grand history. Several members of the Loy family of Malaysia - including siblings, their spouses, and outside managers - shared their challenge of turning around a business after the untimely loss of two family members. They also faced differences within the family - a group of siblings who in the past were more competitors than partners - who were now placed in partnership over a struggling business. While respecting the legacy of their parents, the new generation had to create their own model of making decisions and operating the business. With their own values like collaboration and social responsibility, they developed a different way of working together than that which they learned from their parents. Illustrating collaboration and trust by throwing around an orange for each person to speak, the Loys talked about how they formed a family council to decide such issues as a family, so that they could be effective in leading the business.
The summit celebrated a way of doing business that stands in deep and stark contract to the rational model of a business run solely for profit, with attention to the financial return to unrelated owners, whose interest in social issues, if they exist at all, are explicitly outside the sphere of the business. These family owners felt personally responsible not just to run a profitable business, but for the welfare of their employees, the community where they did business, and future generations. Data were cited from studies suggesting that family businesses with this focus were more profitable long-term than similar public companies.
The idea that business has to be impersonal and rational flies in the face of the dynamism of family enterprise, and the stark statistic that while there are many large public companies, the majority of world commerce, both privately held and public companies, is owned, controlled and often managed by a group of people who have deep and personal relationships with each other, and a deep connection to issues beyond profit.