Thanks to Vietnam’s process of economic reform and international economic integration and based on the values and assets of the family within the national culture, the development of family businesses in the country has been in the spotlight in recent years.

The barriers and challenges facing family businesses, however, still pose major questions that need to be answered. At the “Building the Next Generation of Leaders: Lessons Learned from Successful Families in the World” seminar held for the second time on August 7 in Ho Chi Minh City, VET spoke with international experts and business leaders about this issue.

Difficulties in selecting an heir

Ms. Vu Kim Hanh, Chairwoman of the Vietnam High-Quality Goods Association and Vice President of the Leading Business Club

After choosing a business successor, giving them empowerment is always an issue for family businesses. The first problem in selecting an heir is taking an affirmative stand, choosing a talented individual that is devoted to their career, whether a child or a relative, the eldest son or the second child, or a daughter or a son.

Incumbents must understand that the basic requirement in selecting a successor is to create the conditions for them to learn and develop self-discipline in fulfilling their heavy responsibilities. In addition to training, it is necessary to encourage young family members to immerse themselves in the business environment. By this we can know whether they are suitable. Are they willing to self-develop? Do they have the ability to withstand pressure? Are they able to work in groups and utilize resources? Can they manage change?

There are those who possess these qualities but are uninterested in following in the footsteps of their parents. But living and working in a family business environment also makes it easier for the subsequent generation to fulfil their potential and determines what training may be needed.

The choice of a successor is problematic, with issues such as international economic integration, the demands of sustainable development in a challenging world, and the necessity to remain abreast of digital transformation.

I was among the first group of entrepreneurs to be successful in business and to choose their successor. I have heard stories about selecting a successor in other companies, even large family companies going through transition, such as An Phuoc, Minh Long I, and My Hao. One similarity in them all is that they didn’t put their children or grandchildren into key positions early on, but instead had them start working in a lower position so they could gain experience and work their way up.

A basic mistake made in the transition to children or grandchildren seems to be ambiguity between “the right of ownership” and “the right to manage the business”. This is why many major companies around the world engage a CEO, while the heir runs another business and the two companies develop in parallel, rather than letting the heir, who is not yet ready, ruin the family business.

Solid preparation for successful transition

Ms. Dang Thi Huong Lan, CEO of the Miocen Limited Company

Business transition is not just related to work but also the transfer of the vision of company leaders to the future generation. Only then can businesses continue to grow and stand firm without the previous leaders needing to remain involved. When transferring a business, the most important issue lies in the choice of a leader. The business must be prepared for the transition and make an appropriate choice. Whether it is a family member or an employee of the company will depend on the leader putting the development of the company first. In family businesses, the successor is usually a child or grandchild. Preparations for the transition must be done at an early stage, and the company leader must prepare three matters:

Firstly, choosing a successor who has the qualities, passion, and enthusiasm for the field of business. A company leader should spend time sufficiently evaluating potential successors and making a final choice.

Secondly, it is necessary to give direction to the successor, as succession is not merely the transfer of a business or a company to the next generation but the transfer of a vision. When the heir understands and sees the dedication of the generations that came before, they will appreciate the opportunity that has come their way.

Thirdly, leaders should equip their heirs with knowledge, leadership skills, and a commitment to work towards the goals of the business. All of this must be in line with the business’s development.

Role of banks in family enterprises

Mr. Hoang Minh Hoan, Deputy General Director in charge of Finance and Resources, Saigon Commercial Joint Stock Bank (SCB)

Family enterprises need to have a significant number of shares held by the family and that family can affect important business decisions. Family enterprises also have to go through many stages of development. They have their own “secrets” to survive and grow and grasp the market so they always have good ideas. The problem is that they do not have enough resources (capital, personnel) to turn ideas into action strategies, and those ideas are more likely to be acquired by larger enterprises.

Banks and businesses have a symbiotic relationship. SCB Bank does not distinguish between customers. We focus on evaluating businesses in many respects: market, production, business. At the same time, we help in terms of information to assist enterprises in identifying potential market risks and fluctuations, such as understanding the reputation of the partners they intend to do business with.

Overcoming barriers in mindsets between generations

Ms. Nicole Scoble Willams, Director of the Center for Excellence in Future Work Models, Deloitte Group

In an era where family businesses face unprecedented opportunities and challenges during Industry 4.0, strategies for leadership transition are a priority and strategic imperative. Today’s leaders of family businesses need to adopt new thinking on how to prepare the next generation for the realities of business, so they can maintain the company’s relevance and competitiveness in the digital age. To enable future readiness, family businesses need to think about three major changes:

Firstly, enterprises need to adapt and be open to change. The company of the future has a network of semi-autonomous, multi-skilled, multi-sectoral teams that resolve problems through collective action to achieve large-scale innovation.

Secondly, business leaders must apply progressive thinking in order to promote links and rapid cooperation between internal and external ecosystems, including involvement in the ecosystems of other markets and businesses.

Thirdly, leaders of family businesses need to understand how to exploit the collective wisdom of people and machinery, using cognitive technology to automate work and increase human capacity while exploiting open sources to approach talent with the necessary skills at the right time and in a timely fashion. Leaders of family businesses need to join their successors and together make changes by altering their business mindset.

Finally, today’s extraordinary technological change is a call to action to link generations to open up new and different avenues to experiment with new technologies and models of business to strengthen, not lose, the traditional strengths and inherited characteristics of family businesses.

Factors that the next generation of leaders need to focus on in the new era

Mr. Alain Goudsmet, Founder & Chairman, Mentally Fit Global Group, and Coach of Leaders of Multinational Corporations

The market rules of today are no longer “the big fish eat the little fish” but have instead become “the fast fish eat the slow fish”. Business leaders participate in a competitive environment with speed, adaptability, and an ability to react quickly and make decisions in the “new game”. Successful leaders are not “superheroes” who find solutions to problems in their business. For businesses to grow sustainably and continually rise to new heights, they need to become a “Leader-Coach”, and help individuals and teams in the business achieve goals that the individuals and teams may not think are possible.

Leader-Coaches are people who have an ability to gather the team together, who are passionate about training the team to maximize their existing capacity, give the team confidence in themselves, constantly inspire them to encourage them to act, and who are ready to empower others so that they make proactive decisions in line with the common mission and goals of the family business.