THE International Institute for Management Development (IMD) encourages Thai family businesses to build strong corporate governance in order to survive and compete at the highest level.
"The company without good corporate governance can be successful only when the market performs well, but the company with strong corporate governance can stand long-term competition," Denise Kenyon-Rouvinez, director of IMD's Global Family Business Centre, said yesterday.
Family businesses need to provide effective succession and development plans as the factors to build strong corporate governance, she said.
IMD together with Kasikornbank and Switzerland's Lombard Odier Group yesterday held a seminar to help Thai family businesses prepare for successful transitions.
Kenyon-Rouvinez believes business owners have to decide precisely whether their companies will appoint family members or hire professionals to manage the business in the future. The failure to choose the right candidates as successors can have significant impacts.
If the successors have short-sighted or unprofessional management skills, the firm could go out of business.
Also, successors often become less interested in running the family firm, which results in the discontinuation of the business in later generations. The failure of transformation between generations can be seen nationwide, with 70 per cent of family businesses not being able to survive into the second, and even fewer making it into the third.
Business leaders need to be passionate about the company's products and services and attempt to develop their management skills and creativity at all times in order to be able to compete in long-term.
Meanwhile, IMD advised that family businesses should be adaptable in the globalisation era. Fast-developing technology can bring more opportunities for business to grow.
"The common problem facing the family business is that the family members cannot distinguish between business operations and family relationships," said Teeranun Srihong, president of Kasikornbank.
He said the distribution of earnings among the family members can be based on sentimental values. Emotions get involved in the situation when one receives a greater amount of money than another, which leads to personal conflicts.
The establishment of a family council is important in terms of reconciliation between members when arguments occur. The council can act as a middleman to negotiate a solution to the conflict.
Family businesses make up more than 89 per cent of the US business sector, 83 per cent in Europe, and 75 per cent in Middle East.