Jul 23, 2018
Third generation family-owned empires are at the epicenter of Asia’s growth story—the foundation upon which many national economies have been built over the past fifty years. But with the advent of global trade, digital technology and fast-paced innovation, these same businesses are finding it hard to keep pace. It takes capital, grit, and perhaps most importantly, world-class talent to go cross-border—a move into markets without the advantage of political connections or cultural familiarity.
To get a perspective on the challenges facing these companies and the strategies that are proving effective, I sat down in Singapore with leadership consultant and executive coach, Bill Cornwell. He’s the founder of Cascade Consulting and Professional Training and also serves as a senior faculty member at the Center for Creative Leadership. He’s been working in Asia for more than 15 years, and been a coach to dozens of family-run businesses around the region.
According to a recent McKinsey study, fewer than 30% of founder or family-run businesses survive past the third generation. That’s to be expected—if you consider the charismatic leadership of the family founders who built commercial empires from practically nothing.
Generational tensions emerge as grandkids decide to opt out or change things up, and when that happens there are two choices: either sell the business or recruit outside talent. But that means moving away from a leadership model based on loyalty in exchange for one driven by performance indicators.
It’s not an easy transition. What do businesses do? Enter private capital. Private equity investors want transparency, financial clarity, and systematic approaches. Making changes to appease investors creates tension and that’s a problem for businesses that have traditionally defined success in terms of generational continuity.
It’s a complex, knotty issue. But there is a way out. As always, thanks for listening.