Entrepreneur Series: How to Lock in Family Unity

What are the key ingredients for successful succession and legacy planning in a family business? We look at the promise and pitfalls involved.

Many of us take family unity for granted, but not HSBC Private Bank’s Global Head of Family Governance and Family Enterprise Succession, Bernard Rennell. Having worked over many years with family businesses worldwide, Rennell is painfully aware that many entrepreneurs, who assume family unity will remain intact with little or no effort, are those who too easily fall into the three-generation trap — and subsequently lose it all.

Think Strategically

While many family businesses plan strategically for their businesses, Rennell says business families fall into the three-generation trap due to failure to think carefully or strategically enough about ownership transition. And those that avoid the trap? “They all have one thing in common,” says Rennell. “They apply a similar degree of energy and strategic focus to planning at the ownership level, and particularly for ownership transition, as they do for their family businesses.”

Looming Tragedy

Avoiding family conflict is key to protecting family wealth, he insists. “There are a lot of families in this region that haven’t planned anywhere near as well as they think they have — and the looming tragedy is that we’re going to see some really nasty family disputes emerging in Asia in the coming years.”

Success Stories

Those avoiding the trap take ownership transition seriously. By the third generation, some sell, while others divide their empire into separate businesses. A third option entails continuation of the business, with family members playing different roles and the wider family still benefiting from the wealth it generates. Achieving this requires avoiding fragmentation of ownership; having a framework for collective decision-making; and legally integrating the two.

Constitution Mirage

Don’t mistakenly believe a family constitution is sufficient, warns Rennell. While a step in the right direction, they are generally not sufficient if you want to succeed in the longer term.

Be Transparent

For Rennell, hearing panel discussions where the generations confront these transitional issues openly is really heartwarming. He notes, “The very open discussion about values, and about longer term plans is very constructive and very helpful.”

To gain more first-hand action points on business and succession planning, watch our insightful videos of Indonesia’s Rachmat and Suriadjaja families.

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