Managing advisors of family businesses

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ATTY. ELEANOR LUCAS ROQUE

ATTY. ELEANOR LUCAS ROQUE

More than 80 percent of all businesses in the Philippines are family-owned. The nature of these businesses covers a whole range, from the small sari-sari stores to the big malls like those of SM and Ayala. Yet, despite the vast disparity in their sizes and profits, most family businesses share the same quest to preserve and grow their businesses.

In today’s interconnected, hyper-competitive economic climate, it’s essential for family businesses to have a strong team of advisors—individuals who can offer sound professional advice to help owners make the best possible decisions for both their business and their family.

Unfortunately, building and managing such a team can be a challenge—and, in some cases, it can actually cause more headaches than remedies. In a research conducted by the Society of Trust and Estate Practitioners (STEP), family business owners revealed that one of their top challenges was simply finding advisors with the ability to offer holistic advice—that is, advice that does not neatly fit into product-oriented professions.

Perhaps at the heart of the problem is the fact that some family businesses hire advisory teams that are essentially made up of competitors. Filipinos always like to have a second opinion. This is true not just for doctors, but even for business advisors; they often retain simultaneously two competing law firms or two competing financial advisors. Thus, the advisors are often unwilling, or unable, to talk to one another, leading to either a duplicity of advice or costly advisory gaps.

Additionally, advisors are typically trained to offer purely technical advice—and may have trouble applying it to the context of a family enterprise or recognizing the unique role that family relationships play in effectively putting that advice into practice.

The quarterback advisor
While inefficiencies surrounding the traditional way of offering advisory services are still too common, there are signs that, indeed, the times may be a-changin’. Business advisors now recognize that advising family businesses needs a different skill set. For instance, some advisors are now trained under a comprehensive standard of education and practices designed to enhance the skill sets of professional advisors, allowing them to offer advice that’s better suited to a family’s personal and business needs.

Similarly, advisors trained to work with family enterprises could offer both technical and interpersonal advice and are honed to understand a family’s specific goals so as to find the most appropriate solutions. In many ways, they act as a sort of quarterback—aligning advisors and transforming competitors into collaborators. They also work diligently to understand the nature of the family business dynamics, and how different relationships or life events could potentially impact the family enterprise as a whole.

Having an advisor hold this type of lead, or “quarterback” role, can benefit the family business in a number of ways, including:

Defining the needs of the family enterprise. Every family enterprise—like every family—is unique. A lead advisor will work with the family members to better understand the needs of the family and the business, including their primary concerns, future goals and dynamics.

Pre-qualifying advisors. Because they’ve spent years developing a strong network of accounting, banking and legal professionals, these lead advisors can save time by helping the family build a cohesive professional team that will work with the family system and their unique needs.

Fostering better-tailored advice. The family enterprise “quarterback” can help make sure there’s no significant duplication—or gaps—in their advisory services. They’ll also be able to recognize when an issue requires a solution or when it simply needs to be more effectively managed.

Enhancing communication. The lead advisor can take steps to ensure all advisory team members are on the same page and that no one is left out of the loop. This leads to more efficient and specific decision-making by all advisors.

Above all else, the family advisor must have the complete trust of the family members and must understand the unique dynamics of the family. For example, if all business decisions must first be approved by the matriarch, then the family advisor must be able to recommend how to make a particularly drastic measure acceptable to the matriarch. Sometimes, relying heavily or solely on financial or legal bases for a particular recommendation would not suffice to convince the decision makers in the family.

Ironically, some owners find it difficult to efficiently and effectively manage their own family enterprise’s advisory team. The team that is supposed to help and assist them can prove to be another additional friction point that must be separately managed. In such case, it is highly important to consider finding a family enterprise advisor to take the lead. Such a move could not only enhance the advisory services received, but it may even help the business owners save time and money and more importantly, heartache.

Atty. Lea Roque is head of the Tax Advisory & Compliance Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 21 partners and over 800 staff members.

ATTY. ELEANOR LUCAS ROQUE

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