Soriano: The JG Summit succession model

Enrique Soriano

WISHING everyone a happy new year filled with health, happiness and spectacular success!

Educator and management expert Peter Drucker once said, “The final test of greatness in a founder is how well he chooses a successor and whether he can step aside and let his successor run the company.”

Many business owners think only of succession as being able to identify his or her successor but critical issues about ownership, risk management, sustaining the business, financial discipline and retirement planning as well as long-term strategy development are always neglected. These important elements cannot be set aside as it has a huge impact on the health and survival of the business. As a matter of course, succession planning should be strategic and must encompass the whole gamut of organizational development.

Critically, founders must plan the transition years before a generational event is forced upon the company.

The dangers of forced succession

Many founders and next generation children are facing or will soon face similar succession challenges. But it has become an all too familiar refrain when succession planning suddenly appears in response to an external event such as illness, accident, death or marital separation. Succession should never happen only as a reaction to any of the events mentioned. By then, everything might just be too late.

Another major mistake founders and business leaders make is to postpone naming a successor until just before they are ready to step down. Founders avoid naming successors because they don’t want to hurt the family members who are not chosen to succeed them. Yet, both the business and the family will be better off if, after observing the candidates as they work in the business, the founder picks the successor based on that person’s skills and abilities, early on. In short, handpicking a successor must be subjected to a rigorous process of at least five years.

JG Summit successful transition

Let me share one of the best examples of successful transitions in Asia initiated by the late industrialist John Gokongwei of the JG Summit Group.

The group is a regional player and has a major presence in close to a dozen countries in the Association of Southeast Asian Nations and the Oceanic region. With a market cap of US$14 billion and a workforce of 75,000 employees, it is involved in food and beverage production, retail, property development, banking, aviation and petrochemical. Mr. John as he was fondly called, prepared the transition 30 years ago when he gathered his immediate family, senior executives and formally introduced his successor, Lance. With six children in tow and a very supportive wife, he has excellently managed to navigate the perilous transition journey.

When Mr. John was once asked what else he would like to achieve for JG Summit, he remarked that it is to “make sure the company is in good hands, will do good for the country, good for the family and good for the stockholders.” He was once quoted as saying that the happiest point in his life was when Lance was born, the heir who has lived up to the expectations.

“Lance is doing a very good job,” he said.

When he passed away last month at the age of 93, the “changing of the guard” was flawlessly executed minus the drama that comes with most transitions. It was a class act. For family advisors tracking succession plans in Asia, the succession model of the JG Summit Group should be closely watched and emulated by other family owning businesses. The handover was the culmination of Mr. John’s lifelong dream of seamlessly passing the baton to his children, effectively immortalizing his legacy.