NEXTGEN LEADERS

HIDDEN AGENDA - Mary Ann LL. Reyes (The Philippine Star

) - November 29, 2020 - 12:00am

It is not uncommon to hear about families, one sibling against another or worse children against
their parents, fighting about money, inheritance, or the family business.

There is this saying that money is the root of all evil. I’d say it is the love of money that is the
root.

There is nothing wrong with family-owned and run businesses. After all, many of our successful
enterprises started out as family businesses.

As pointed out in one article in the  Financial Times, while many family firms start with a strong
entrepreneur as both owner and manager, it becomes complex and problematic after a few
generations if not transitioned properly. The article noted that soon, a complex network of family
members become reliant on the business, working either as directors and staff. Some family
members are concerned about salaries, dividends, business strategy, sometimes in conflict with
other members of the same family. In fact, one of the most difficult issues, according to the same
article, is when family directors give relatives a chance in the business even if people outside the
family have stronger track records.

And so while some of the main advantages of hiring family members is their emotional
commitment to the business, disadvantages like succession planning, nepotism and family feuds
have to be actively addressed, otherwise, the end can be disastrous, the article mentioned.

One of the more successful companies in terms of transitioning the business to the next
generation is the JG Summit Group. Established by John Gokongwei Jr. after the Second World
War when he put up a trading company which imported goods from the US, and then later a corn
milling plant, JG Summit Holdings, which was incorporated in 1990 as Gokongwei’s publicly
listed holding company includes Cebu Pacific Air, Robinsons Land Corp., Robinsons Retail
Holdings, Universal Robina Corp., among others.

Today, JG Summit’s businesses include food and beverage manufacturing, aviation, real estate
and property development, banking and finance, petrochemicals, information and technology,
infrastructure, logistics and warehousing, with core investments in utilities such as power and
telecommunications, and affiliate businesses in retail and media.

Addressing a public audience for the first time after the conglomerate’s founder passed away in
November last year, his only son, JG Summit president and CEO Lance Gokongwei Jr., paid
homage to his father who built the company from scratch in 1956 and then led it to become one
of the country’s biggest conglomerates.

In his speech delivered at the first MAP NextGen Conference 2020, Lance underscored the
importance the conglomerate places on its core value of stewardship, saying that his father
instilled in them the mindset that “the family is here to support the business; the business is not
here to support the family.” This, Lance said, puts into proper perspective their family’s role and
responsibility as NextGen leaders in ensuring that the business prospers and endures for
generations to come.

Good stewardship, he stressed, meant not only creating value for shareholders and the family,
but also reinvesting majority of the earnings back into the company, with no more than 10
percent going to the family as dividends. It also meant having the business managed
professionally and hiring the best-qualified talents. This way, the family can escape the fate of
most other family-run businesses.

Lance, who took the reins as its second-generation leader, mentioned that research reveals that
only three percent ([Link]) of family businesses prosper beyond the fourth
generation.

He said that when he assumed the position in May 2018, it was very clear to him that his role is
that of a steward, a caretaker of the business that has been entrusted to him, and the
responsibility of ensuring that JG Summit continues to thrive over a long period of time.

The first on his three-pronged philosophy is putting the interest of the business ahead of the
family.

I remember writing many years back about one strategy that the family has used to avoid
conflict, and that is not to hire in-laws to run the business.

Lance shared that the first of 10 unwritten commandments that his father followed in running the
business is the rule of no in-laws.

He said that during his father’s generation, his aunts, who were 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.
Lance said that “there were situations where some of the marriages did not work. Loyalties
change. Sometimes relationships between the different in-laws from the second generation
became strained. Feelings get hurt. It is tricky deciding who among the in-laws is more
deserving, who is smarter, who would do a better job.”

There is no single formula to ensure the success of a family business and transitioning it to the
next generations. Family upbringing is, of course, a very important factor. This is one of the
reason why children who stand to inherit the reins over the business are usually assigned to the
lowest positions in the company first before being promoted. This is to remove from them a
sense of entitlement to the position of power and control, to give them a better understanding of
the sentiments of the workforce and of the consumers. Getting a masteral degree from the best
universities abroad will not ensure that the child will be able to run the business as efficiently as
the parents did. It is not just a matter of the child surviving inside the business. What is more
important is how the child, or the succeeding generations, will be able to compete against other
businesses, improve on it, keep it attuned with the needs and demands of the time, while still
staying true to the company’s core values.

Not so hidden agenda

Still on the topic of JG Summit, it’s banking business Robinsons Bank has accelerated its digital
initiatives while continuing to put customers at the heart of their business development.

As a testament to this, Robinsons Bank was awarded the Omni-Experience Innovator Award for
its RBank Sign Up in the recently concluded IDC Digital Transformation Awards 2020
Philippines held by leading IT market research and advisory firm International Data Corporation
(IDC). It was also recognized by the International Business Magazine as the Most Innovative
Retail Banking Product - Philippines 2020.

The RBank Sign Up app is one of the newest products launched during the pandemic as a
response to the needs of many Filipinos. The Sign Up capability lets customers open a bank
account through an all-digital and online process. With just one ID card, e-KYC, and internet
connection, customers are sure to have their account details within minutes of completing the
application.

RBank chief digital officer Ramon Abasolo explained that they are re-engineering primarily to
improve customer’s experience and enable them more in a digitized environment.

RBank’s mobile banking has taken a new form with the new RBank Digital, which has over a
hundred listed billers, from utilities (electricity, water, cable) to insurance, among others. One
can also manage their savings account, credit cards, time deposit accounts, and more in just a
single RBank Digital account.

For comments, e-mail at mareyes@[Link]

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5 STEPS TO TAKE BEFORE APPROACHING AN INVESTOR FOR

By Hillel Fuld, Tech marketer and startup adviser@hilzfuld

Credit: Getty Images

When building a startup, like it or not, in most cases, you are going to have to raise external
capital to give yourself some runway. There are, of course, companies that don't raise capital and
bootstrap, and while that is recommended, it is not feasible for most companies who want to
invest in growth. Once you decide that the time has come to raise that capital, the worst thing
you can do is take the first check offered to you without doing your research. 

Here are five steps to take before approaching an investor for your startup:

Narrow down your search by stage and space.

This is a crucial step that so many entrepreneurs don't understand. Not every investor is right for
every company. Some investors have an appetite for early stage companies, while others avoid
them because of the high risk involved. Some investors avoid certain verticals and will never
invest no matter how great the company is. 
As an entrepreneur, it is your job to have a target list of investors who are relevant for you,
because approaching the wrong investor makes you look bad and wastes everyone's time.

Study the portfolio of that investor, mainly for competitors.

Once you have narrowed down your search and have a list of relevant investors, you are going to
want to make sure that the investor you are targeting does not already invest in a competitor. The
last thing you want is to send your confidential investor deck to someone who can give it to your
biggest competitor.

Additionally, the chances of an investor deploying capital in two companies that are direct
competitors are slim to none and it is your job to do that research and not pitch that investor.

Speak to entrepreneurs who have raised from that investor.

This might be the most important step of all. Once you have an investor in mind, speak to CEOs
who have raised money from that investor in the past. Some of the questions you should ask are
"Is the investor entrepreneur friendly?" "Does the investor provide value beyond a check?"
"When the going gets tough, does that investor step up or give up?"

It is a very big mistake to take money from someone who will make your life more difficult.
Being an entrepreneur is hard enough as it is, the last thing you want is an investor who will
make it harder.

Research the investor using their social channels and search engines.

If the investor you have in mind passed all the above tests, now it's time to do some deeper
research. Now, you don't have to agree with everything that investor tweets about, but it is
recommended to read what he puts out there, just to make sure that there is a cultural fit.
Remember, this person is not just an investor, they are going to be a partner for the whole
journey of your startup, you are going to want to get along.

Find your mutual friends and ask for a warm introduction.

After you have done all that research and decided on an investor you would like to pitch, don't
send a cold email, but rather, find someone who knows him and is willing to make a warm intro
and maybe even put in a good word.

This sounds like an obvious point, but any investor will tell you that they get endless cold pitches
every day and most of the pitches that end up with a meeting or even an investment come from
warm intros made by people they trust.
We all read about these mega investment rounds and we glorify raising capital. Not enough
attention is paid to the process of raising capital from the right person at the right time.

Inc. helps entrepreneurs change the world. Get the advice you need to start, grow, and lead your
business today. Subscribe here for unlimited access.

Nov 29, 2020

The opinions expressed here by [Link] columnists are their own, not those of [Link].
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