Wednesday, March 14, 2012

10 Commandments of the Gokongweis

Ten "secrets" that enabled the Gokongwei business conglomerate to successfully transition from a closely-held family enterprise to a large and diversified publicly-listed corporation, as related by JG Summit President Lance Gokongwei in a recently-held forum at the Ateneo de Manila University.

1. No in-laws

During his father’s generation, Lance's aunts (married to his dad’s brothers) and his mother were involved in the business, but the elder Gokongwei soon discovered that this was not always ideal.

“There were situations where some of the marriages did not work. Loyalties change. Sometimes relationships between the different in-laws from the second generation become strained. Feelings get hurt. It is tricky deciding which in-law is more deserving, which is smarter, which would do a better job.”

2. No moonlighting

If one is working for JG Summit, one can only own passive assets that do not require their attention such as property, shares, bonds and the like.

“If you work for the company, you must be either fully in the business or completely out. In running the business, you must be actively involved, with full-time commitment and focus.”

3. No conflict of interest

As a family member, one cannot set up a business involved in supplying or transacting with the JG Group of Companies.

“Around 20 years ago, my family learned this lesson. In one of the family manufacturing companies we acquired, one sibling was involved in an outside business supplying the company. Another was involved in a business that sold the final product for commission, and another was involved in a business that sold the scrap. As each party was concerned with his own interests, nobody was thinking of the interest of the family business.”

4. No work, no pay from the company

“The family member must work to receive a salary. There should be no fake pay. You must have a real, full-time position in the company. In my family, we do not receive allowances after graduating from college. If as a parent you want to give your child money from your own salary or dividends, that’s your prerogative. But the family is not going to pay for this.”

5. Personal assets should be kept separate from company assets

Personal expenses should be paid from one’s own pocket--including personal travels via the family-controlled Cebu Pacific and personal hotel stay at the family-owned RLC hotels, and even shopping at the Robinsons retail stores.

6. Pay must be based on contribution to the business

In order for the family member to live and think independently, the family business must pay the right salary for the right job, but the pay must be adequate enough so that the family member will not be dependent on the parents for support.

“The amount you will receive is based on merit and not who you are in the family totem pole.”

7. Being family is no guarantee of employment

“There comes a time when there is not enough jobs for everyone in the family. Oftentimes, professionals may even be better in running the day to day operations.”

8. Avoiding working directly under one’s parents, specifically at the start of a career

“When I first started, I did not report to my father. I worked for my uncle and another manager. If you are too close to the person, you usually won’t get good feedback. The parent might spoil the child or he may be too harsh. There is also danger of bringing issues and arguments home.”

9. Give the next generation wings 

Also part of this rule is “have a fixed retirement age” for the business.

“I have seen many families where the patriarch passed on the responsibilities to the next generation successfully and some passed it on too late.”

10. There can only be one boss

This rule is related to succession. The role of the family and owners is to prepare a board to appoint a successor.

“You must establish a process to appoint the leaders. My dad and his brothers established a clear process on who can decide who the next leaders will be. They created an outside board whose role is to appoint and fire the CEO. This is critical so that a business can smoothly pass on from generation to generation, and achieve longevity.”

via PhilStar

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