Keeping family business intact to boost jobs

Keeping family business intact to boost jobs

Tony Hotland, Jakarta

Have you ever thought that running a family business would be
less brain-busting than a nonfamily business because family
members cause fewer conflicts and are easier to manage? Think
again.

Research by The Jakarta Consulting Group, which claims to have
assisted some 300 family companies, shows that such companies
indeed face hurdles in establishing good management, business
continuity and professionalism.

A family business can be defined as either a family-owned
business, in which the founders are also the shareholders, or a
family-run business, in which the founders also run the entire
business or at least occupy key posts.

According to AB Susanto, a managing partner at the consulting
group, family businesses contribute annually up to 82.44 percent
of total gross domestic product from the private sector.

"Therefore, keeping such businesses running is a priority as
it can help address the problem of massive unemployment in the
country," Susanto said last week.

He underlined that up to 80 percent of family businesses were
in labor-intensive sectors such as trade, manufacturing and
agriculture.

For instance, the Djarum Group, established in the 1950s, is
concerned with trading, transportation and property, and employs
at least 75,000 people in its 70 or so companies.

However, poor business continuity, professionalism and
management have led a number of family businesses to the verge of
breakdown.

"Nine out of 10 family companies experience those problems.
Half seek help (from consultants), while the other half sweep it
under the carpet until the problems get out of control," Susanto
said.

Continuity measures should be announced at least five years
beforehand to make sure that the offspring meet the standards
required for particular positions, he said.

"During that time, the bosses can assess objectively who is
best and the possible candidates can strive to lift their level
of expertise. Selection should not be based on blood
relationships alone," he explained.

Susanto argued that the worst aspect of family businesses was
that it involved many who were related by kin, a situation that
would require compromise and tolerance at a higher level.

"Family issues should not be allowed to outweigh business
decisions because that undermines professionalism. Besides, the
second or third generation is more vulnerable than the founders.
They start to lose solidarity as they begin to envy their
relatives, who may have greater authority or higher salaries," he
said.

Susanto also stated that problems could occur if a company
started employing professionals from outside the family, as they
might have a different remuneration structure to that of the
family members. Such matters should be defined clearly and
fairly, he said.

Of paramount importance, Susanto said, was the development of
trust between family members because it would initiate better
communication and help to prevent conflict.

In the end, he said, a long-lasting family business could be
relied on as an effective tool to create jobs and boost the
taxation revenue.