HONG KONG, November 12, 2009 - Many family businesses fail because of family tensions, not as a result of business decisions, according to Jaime Augusto Zobel de Ayala, Chairman of the Ayala Corporation, one of the oldest conglomerates in the Philippines. Zobel is the seventh-generation of his family to lead the firm, which is now celebrating its 175-year anniversary.
The Ayala Corporation has interests in real estate development, banking and financial services, telecomunications, electronics, and information technology. Its roots date back to 1834 when the founders, Domingo Roxas and Antonio de Ayala, established the Casa Roxas trading house.
Zobel says a number of unifying threads have contributed to the firm's longevity, including a strong entrepreneurial sense. He also noted that his Spanish ancestors settled permanently in the Philippines, a former Spanish colony, quickly establishing local ties. "Early on in the family history, they decided to become Filipino," he said.
Zobel conceded his firm has had its fair share of luck, as the company pioneered forward. "Preserving assets sounds fine in theory. Given what's happened to economies around the world, it sounds like a sound strategy. But it thwarts the spirit of taking risk, and that is an issue that any family business will have to face."
He partly attributed the company's success to the egalitarian attitude adopted in choosing the right leadership. "At a time when it was unfashionable for women to take leadership, the company was led by women on two or three occasions. It was never an issue. Sometimes the husbands would lead; in-laws as well."
For many family businesses, succession is critically important and continues to be a challenge. "I see a lot of tension in some family businesses. A looseness in leadership that allows tensions to brew. In our case, a voting and equity structure is in place; leadership was chosen and picked by a great-uncle and grea-aunt who consolidated the shares. One positive effect of that was that he managed to bring us back together again, close to a single ownership structure."
In Zobel's case, succession was fairly equitable. "My brother and I decided very early on to co-manage the business together. We are basically co-equals, but with different titles. That has worked nicely for us. In our country, where business, social networks, and politics intermesh, there's a lot of time needed to cover so much ground, so it's helpful to be brothers and pass the baton on to each other."
He said his corporation has harnessed some of the best talents available in the Philippines. "Professional management was essential. My brother and I took it a step further. We decided to restructure the company to have strong governance. We tried to find the best professionals we could to take on the CEO job. We relegated our roles to Chairman and Vice Chairman of the company."
Zobel said he has set his sight beyond the Philippines. "We built up a strong franchise in our country. Both my brother and I feel that if we stick to the Philippines only, this will cap our ability to grow. We started to chart some path outside the country."
To achieve this goal, the Ayala corporation has put capital into building an international outsourcing business, an electronics company with six manufacturing plants in China and a pan-Asian footprint, and is investing in real estate in Thailand, Macau, and China.