Elements of Family Enterprise

Do you know the different between Forbes billionaires ranking and Indonesia 40 Richest List? The world billionaires is focus on individual wealth, while Indonesia list reflects a number of family fortune. There’s a lot of rich family and family business in the country. Some survive, some don’t. In order to survive, some create their own rules of game, like the Hamami family did (see Lasting Value or Built to Last). In regard to extend knowledge about family enterprise, I interview Albert Jan Thomassen, member of the Family Business Consulting Group and an expert on family business governance. He is also a colleague of Professor John L. Ward, who is helping the Hamami family construct their family constitution.

Pudji Lestari (PL): What are the elements of a good structure for a family enterprise?

Albert Jan Thomassen (AJT): In my experience in meeting and working with family enterprises all over the world there are a few elements I consistently see appearing in successful family enterprises. The first is that those families have independent non-executive directors on their boards next to family members. They balance family passion and entrepreneurship with outside expertise and wisdom. Secondly, they are able to attract and maintain talented non-family executives and only appoint qualified family members in executive positions. A third element is that they have regular family meetings or have a family council where they develop and discuss a shared vision, strategic issues like succession and clarify the values important to them and to the business. A fourth element is that they have a family constitution. It is a set of principles and rules that ensure a sound working relationship between the family and the business as well it helps the family to come to good decision making and dealing with disagreements or conflict. A fifth element is that successful family enterprise purposefully and thoroughly prepare their next generation for the responsibilities of ownership and leadership as well to foster the entrepreneurial spirit.

PL: What is a typical amount of time to organize a family enterprise??

AJT: Successful family enterprises also understand that structuring the family and it’s relationship to the business is one of continuous work. For example when families start with a family constitution, often with outside help, this may take two to three years. But then the actual implementation brings new questions to the table to be explored and discussed. Having regular family meetings or a family council in place than makes it easier. There is structured platform to discuss and come to decisions. When succession becomes an issue I often see families taking five to ten years to prepare the next generation, plan leadership and ownership succession and allow the leading generation to let go and find new roles.

PL: What are some of the reasons a family might want to create a more organized structure?

AJT: Successful entrepreneurs know that when they want to keep their company successful they need to structure and organize it. Successful enterprising families know this is even more true for the family itself. To remain successful as owners of a business and as leaders they need a more organized structure also. As one family CEO of a large company: “It is sometimes more difficult to manage the family than to manage the business but for me it is worth the time everyday. Because our family is well organized the business is benefiting from it continuously.”

PL: Why some family businesses get listed and others don’t?

AJT: I have seen various reasons why families decide to go public with one or more of their companies. A first reason is to have access to finance and the possibility to grow their company faster and better than they could have done otherwise.
A second reason is that some families see that a listed company is better able to attract talented managers. And if it is than a listed company that also has ‘owners with a face’ that can even be a double advantage.
A third reason is that families say that being listed forces them to professionalize their governance and management structures faster and better.
A final reason is that getting listed allows some family members to sell their shares.

PL: Have you ever handle or study any case of family enterprise in Indonesia? If yes, what are the common problems? And what are your suggestions?

AJT: I have come across several family enterprises in Indonesia. Interestingly some of their common problems are problems that family enterprises all over the world face: Managing succession and the tensions between generations, dealing with family conflicts in a way that business continuity is not affected but also that family harmony is restored, managing the growth of the company especially when it is not so obvious that family members will be in the management in the future. The suggestions: Don’t think as an entrepreneur who is involved in day to day operations but think as an owner who has the responsibility to ensure business continuity and prosperity and what is needed to pass it on to the next generation.

Albert Jan Thomassen, member of the Family Business Consulting Group and an expert on family business governance. http://www.efamilybusiness.com.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s