Family business is one of the foundations of a strong economy throughout the world, including in Indonesia. Many large companies were initially built from scratch by founders full of passion and ambition. They started from the basics, worked tirelessly, and finally created a successful business. However, as time goes by, many of these family businesses face major challenges when they arrive in the hands of the second or third generation.
The term "the first generation builds, the second generation develops, and the third generation destroys" is often heard when discussing the continuity of a family business. This is not a new phenomenon, but a reality that has long been faced by businesses around the world. In fact, according to research, only about 30% of family businesses survive into the second generation, and only 12% survive into the third generation.
Why does this happen? What causes the failure of a family business in the hands of the next generation? This article will discuss this phenomenon in depth, find out the root of the problem, and provide solutions to ensure that family businesses can survive for several generations.
The "Third Generation Is Destroying" Phenomenon
The phenomenon of "third generation destroying" does not only occur in Indonesia, but also in various parts of the world. Many large companies were successfully built by the first generation, then grew rapidly in the hands of the second generation, but began to disintegrate or fail under the control of the third generation. There are several main factors that cause this to happen.
1. Losing the Spirit of Hard Work
The first generation, who started a business from scratch, generally have an extraordinary work ethic. They grew up in often challenging conditions, and their success came from hard work and perseverance. They understand that to achieve something great, it takes struggle, sacrifice and time.
However, when the business is established and becomes successful, the second generation and especially the third generation often do not experience the same struggles. They grew up in comfort, receiving all the amenities and luxuries that previous generations did not enjoy. As a result, they do not have the same spirit of hard work and perseverance as their predecessors. The security of inherited wealth means they tend to be spoiled and less likely to appreciate the value of the hard work required to keep a business growing.
2. Education Isn't Relevant to Business
One of the main causes of family business failure is when the children of the next generation receive an education that is inappropriate or irrelevant to the family business. For example, if a father builds a large business in the manufacturing industry, but his children choose unrelated educational paths, such as medicine or the arts, then there will be a significant knowledge gap when the time comes to take over the family business.
This is not to say that an arts or medical education is not important, but in the context of a family business, a lack of alignment between children's education and the type of business they inherit often causes major problems. Children are not equipped with enough knowledge to run or develop a successful business. As a result, they have difficulty taking over, and often the business stagnates or even collapses.
3. Lack of Early Involvement
Many Chinese family businesses in Indonesia have managed to survive for several generations because their children were involved in the business from an early age. From childhood, they are taught to help in the store, deal with customers, or understand operational processes. This makes them familiar with the business and develops a deep understanding of how the family business functions.
In contrast, in many other families, children are often kept away from business activities. They grew up focusing more on school and personal life, without being directly involved in the family business. As a result, when the time comes for them to take over, they do not have enough practical experience and feel unfamiliar with the business. This lack of involvement from an early age is one of the factors that causes family businesses to fail in the next generation.
4. Differences in Vision Between Generations
Each generation has a different vision and perspective on business. The first generation probably started a business with a simple goal, namely to make money to meet family needs. The second generation may see the opportunity to develop a bigger and more advanced business. However, when it comes to the third generation, this vision is often blurred or even lost.
The third generation often grows up in the financial comfort established by previous generations. They may not have the same drive to work hard or develop the business further. In some cases, they even choose not to be involved in the family business at all, preferring to pursue different careers or personal interests. This lack of vision often causes internal conflict within the family and ultimately affects the continuity of the business.
5. Unprofessional Management
Family businesses are often managed in a way that prioritizes emotional relationships over professionalism. Important decisions in business are sometimes made based on family relationships, not on competence or business needs. For example, a child may be given an important position in a company simply because he or she is the owner's child, even though he or she does not have sufficient skills or experience.
This unprofessional management can result in wrong and inappropriate decisions, which ultimately harm the business. When a business starts to lose direction and is not managed well, the chances of surviving amidst intense competition become increasingly small.
Chinese Business Success: What Can Be Learned?
One group that often succeeds in maintaining the continuity of family businesses is those of Chinese descent. In Indonesia, many businesses of Chinese descent have been able to survive for several generations and continue to grow. What is the secret behind their success? There are several important lessons that can be taken from the success of Chinese businesses in maintaining the continuity of family businesses.
1. Involvement of Children in Business from an Early Age
As discussed previously, many Chinese families involve their children in business from an early age. Children are taught to work in shops, help with production, or understand finances from a young age. This helps children to develop a deep understanding of how a business functions and makes them better prepared to take over in the future.
2. Relevant Education
Apart from involving children in business, Chinese families also ensure that their children receive education that is relevant to the family business. They send their children to schools that teach management, finance, marketing and other skills essential for running a business. With the right educational provisions, children are able to bring innovation and new ideas that can develop businesses further.
3. Combination of Practical Experience and Formal Education
Apart from formal education, practical experience is also very important. Children from Chinese families are often taught to go directly into the field, observe how businesses are run, and be involved in making important decisions. This combination of practical experience and formal education gives them comprehensive knowledge and the ability to run a business well.
4. Openness to Innovation
Although Chinese families often maintain existing business traditions, they are also open to innovation and new technology. Children from the next generation are taught to take advantage of technological developments and changes in market trends to develop the family business. The ability to adapt to current developments is one of the keys to success in keeping a business competitive and relevant in the market.
5. Implementation of Professional Management
One of the advantages of Chinese family businesses is their ability to combine family management with professional management. They do not hesitate to recruit professionals from outside the family if needed, and business decisions are based on analysis and company needs, not just emotional connections.
Solutions to Maintain Family Business Sustainability
To maintain the continuity of a family business for several generations, there are several steps you can take:
1. Involve Children in Business from an Early Age
Involving children in business from an early age is essential to ensure they have an understanding and emotional attachment to business. This also helps them develop a sense of responsibility for business continuity.
2. Provide Relevant Education
Make sure children get an education that is relevant to the needs of the family business. If the business operates in a certain industry, direct them to study areas that can support the business, such as management, marketing, or technology.
3. Provide Practical Experience
Practical experience is essential to complement formal education. Children must be given the opportunity to be involved
at directly in business operations, so they understand the real challenges faced by the business.
4. Implementation of Professional Management
Even though it is a family business, it is important to implement professional management. Don't hesitate to recruit outside experts if necessary, and make sure business decisions are made based on objective analysis, not just family relationships.
5. Open to Innovation
The business world is constantly changing, and companies that do not adapt to changing trends and technology will be left behind. The next generation must be taught to be open to innovation and ready to adopt new technology that can help develop business.
6. Avoid giving excessive privileges
Giving children too many luxuries or privileges without teaching them the values of hard work can have bad consequences. Make sure children understand that to sustain a business, it takes dedication, hard work, and a deep understanding of the business itself.
Conclusion
Maintaining the continuity of a family business is not an easy thing, especially when facing differences in vision and work enthusiasm between generations. The phenomenon of "third generation destroying" is a reality faced by many family businesses throughout the world, including in Indonesia. However, with the right strategy, a family business can survive and thrive for several generations.
Involving children in business from an early age, providing relevant education, and implementing professional management are some of the important steps that can be taken to keep the family business successful. Ultimately, the success of a family business depends largely on how the next generation is prepared to face challenges and take over the business with dedication and innovation.