Family business

BUSINESS BITS
Kendrick Go

The conventional wisdom is that one must always separate business matters from personal affairs, but what if personal matters do spill over to the business side?

This is the dilemma many entrepreneurs face in running their businesses, particularly startups that typically rely on family members and friends to run them.

Having family members and friends in a business obviously has its advantages, for they often make for highly motivated, hardworking employees. But running the enterprise without letting personal relations get in the way presents its own set of challenges.

The most pressing problem is that family members and friends in the business may expect and demand special treatment and may think they are above the rules. Very often, this demoralizes members of the workforce who are not related to the owner-entrepreneur.

To avoid that situation, this is what Tess Ngan Tian, whose two children are now working in the family-owned Lots’A Pizza, does: she and her husband, Lots’A Pizza founder and CEO Eduardo Ngan Tian treat their children as if they were ordinary employees of the quick-serve and takeout pizza chain. “As any other employee, they have to fill in the required number of hours and follow company regulations,” she says.

Ngan Tian points out that before taking her children into the business, she had explicitly told them not to expect any special treatment and to follow all company regulations. Also, to formalize their work relations, Ngan Tian drafted a family-business constitution that spells out the rules on what family members can and cannot do in the business.

Implementing the family constitution took some doing, Ngan Tian relates. The children also had to be provided a grace period for getting used to the rules.

She says that in the end, the best way to manage one’s family members is to treat them like the rank and file, and one must be ready to terminate one’s own relatives from the business if they don’t perform to par.

In the same way as managing your relatives, managing friends could be complicated and requires the same level of attention. Ngan Tian says that she experienced this in late 2008 when she invested in Chicharific, a chicharon (pork rinds) retailing business owned by her longtime friend Bards Montanido. Ngan Tian and Montanido are both members and former officers of the Association of Filipino Franchisers Inc. (AFFI).

In 2008, Montanido’s former business partner decided to sell her stake in the company because she was about to migrate to another country. Montanido then started shopping around for buyers and asked Ngan Tian, a trained accountant, to look at Chicharific’s financial statement that Montanido planned to present to a prospective buyer.

For both Ngan Tian and Montanido, the deal had obvious benefits because it would allow them to do cross-marketing and share resources to speed up expansion. Upon close examination of Chicharific’s financial statement, Ngan Tian and her husband saw that the company was a very good investment and Ngan Tian offered to buy the shares of Montanido’s sister.

At the time, the Ngan Tians happened to be considering making other investments to diversify their business. When Ngan Tian made her offer, Montanido asked the opinions of friends and colleagues before accepting it. Among the people he consulted was franchise guru Butch Bartolome. “Butch said this was the best thing to do, and that there was no better person to get as partner than Ms. Ngan Tian,” Montanido recalls.

Since the merger, Ngan Tian and Montanido have realized that trust is the most important thing in managing friends. Their having been together in AFFI for years had helped foster trust and familiarity between them, and this led them to share resources such as contacts, resources, and suppliers. “Openness is very important,” Ngan Tian adds.

Montanido says that another factor in the successful management of friends is not being greedy and jealous of one another. To this, Ngan Tian adds that to avoid conflicts, friends should avoid being makuwenta or having the habit of counting costs or profits. Trust is built, the two say, when the partners have shared values that in turn lead to having a shared mission and common goals.

“We make it a point that everything is done professionally even though we are friends,” Ngan Tian says, adding that they keep each other informed on their respective decisions and that all of their expectations from the business are clarified. “It should be win-win all the time, with each partner allowed to do her thing in peace.”