Soriano: I am not ready to share power

·4 min read

“I feel I may be the problem. For one, I am not entirely sure if I am ready to exit.” That line is part of the letter that I shared in my previous article highlighting the mental anguish of a founder (many founders/owners actually) going through the struggles of passing the baton. The desperation of the 72-year-old founder requires real and concrete answers in order to comfort and allay his fears. It has reached a point where he does not know what to do anymore. We finally got to talk virtually and as I listened to his concerns, I was able to unravel what has been bottling him up for years. Below are excerpts of his questions and the answers I shared.

Question: I want to retire but I am not ready to let go of power. Is there some sort of structure related to a power-sharing model in the family business? Is this dilemma common among founders or is this just me? I have asked other consultants but they seem to provide me with general answers. I want specific responses and I feel those with a real experience like yourself can shed some light on my situation.

Answer:Stop procrastinating. Start the process and embrace a different perspective.

You started the trading business from humble beginnings with nothing. Today, you have a diversified group that continues to grow rapidly in size and complexity, expanding into new industries like food and real estate. I am not sure about the shares you have given your children, but I am assuming you have kept the majority of the voting shares. We can discuss ownership succession separately but for now, let’s talk about management transformation. The Gen 2 are all of age and in their 40s, you should be thankful that all three of them are working in the family business.

The first priority, and perhaps the most difficult step, is to change the mindset that has made you successful. Typically, founders started their businesses from the ground up. Resources were limited so it was an arduous step by step, opportunity by opportunity process. In reality, there was no plan when you started the business. Sharing power with your children, albeit difficult, is one of the first steps in starting the succession journey. Confronting your fears that your children will abuse their newfound power when you hand it to them requires a different perspective. And it starts with trust.

Question: I get what you mean about adopting a different perspective but where and how do I start?

Answer: Stop mixing business with family. Start professionalizing the business.

Mixing both family and business issues is like speeding downhill on a rain-soaked, dangerous zigzag road using a car with defective brake pads. Having family issues in the business is always full of emotions and contains subjective decision-making. In many cases, it causes internal friction that can compromise scale and growth and it usually leads to conflict. Founders must demonstrate that business is always about metrics (sales, debt, quality control, supply chain, margins, returns, etc.) whereas family highlights personal needs, support and relationships. I suggest you untangle this confusion. Combining both can be a messy transition because emotions are involved. Stop this practice while you are still on top. Business is business and family is family. To minimize the blur, document the rules, clarify the roles and set up a family council. Set the tone for change and designate the children as co-decision makers so they can define the right time and place for involving the family structure in the business. You must respect the decision of the council.

Question: How do I plan the process, especially the sharing of power with my children?

Answer:Limit your day-to-day management of the business. Start planning around major priorities. Document family agreements and establish the rules of engagement.

The time has come for owners like you to start thinking and planning about crafting a family charter and incorporate the transition of empowering and sharing power. I refer to it as planning, embracing and committing to the succession journey, or PEC for short.

To be continued...

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