100 large family businesses contribute about 1/4 of the country's GDP

The 100 largest family businesses in Vietnam contribute about a quarter of the country’s GDP. Family businesses have played a pioneering role in boosting economic recovery after the crisis and promoting the spirit of entrepreneurship.

The above information was given at the Workshop "Professionalizing family businesses" organized by the Business Forum newspaper on the afternoon of June 24.

At the workshop, Mr. Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) said: In every economy, family businesses (FBOs) play an important role as the core of the economy.

Especially in Vietnam, the most successful businesses in recent years are private enterprises, family enterprises, not state-owned enterprises.

According to Mr. Loc, the Vietnam Business & Family Council celebrates its 3rd anniversary in a special context. The Party and the State have had many more important orientations and policies on the development of private enterprises. The Resolution of the 12th National Party Congress has many contents related to enterprise development, of which the 3 most important points are the 3 orientations for enterprise development in the coming time.

Firstly, the Party Congress affirmed that in 2020 we will basically complete the socialist-oriented market economic institution. This is the first time the Party has affirmed that the construction of a socialist-oriented market economic institution is consistent with the practices and standards of modern and integrated market economies in the world. This is extremely important, showing that we are looking at the world market economy and striving for that standard. This contributes to the formation of a modern and integrated team of enterprises and entrepreneurs.

Second, for the first time, the Party Congress Resolution said that the private economy is an important driving force of the economy.

Third, the Resolution for the first time raises the requirement for startups and the requirement to improve the capacity of the private economic sector.

According to Mr. Vu Tien Loc: "The advantage of Vietnamese family-owned enterprises is the emotional bond of trust, but it also poses a challenge in balancing this relationship with the principles of professional corporate governance. Therefore, how to handle family and kinship relationships with transparent corporate governance principles is a big challenge for family-owned enterprises."

"The generation of children born into family businesses has many advantages. Each child has been doing business since they were in their mother's womb and has begun to be inspired by business during their adulthood. The younger generations in family businesses have many advantages to access modern business management processes and have many advantages to succeed. That is why many family business brands have been resoundingly successful in the world," Mr. Loc acknowledged.

Many family businesses are effective. Illustration photo

Consulting expert Hoang Duc Hung, Deputy General Director of PwC Vietnam, said that succession, maintenance and development of enterprises through many generations is the desire of family-owned enterprises. Mr. Hung said that in a survey in the Asia-Pacific region alone, out of 5 family-owned enterprises, at least 1 enterprise has the ambition to compete internationally.

Citing global survey data on the importance of the next generation in family businesses, Mr. Hung reported on some particularly noteworthy figures: 16,000 billion USD will be transferred in the next 30 years, 40% of family businesses will be transferred to the next generation in the next 5 years. However, only 12% of family businesses can be transferred to the third generation, often due to internal problems. This is a number that Mr. Hung said is lower than expected.

The survey results also show that the majority of businesses want to improve their businesses but also understand that they have the responsibility to transfer a solid business to the next generation. Mr. Hung said that the next generation often has the mindset of improving the business after inheriting it, of which 69% of respondents said they would recruit professional personnel from outside to bring modernity and professionalism to the business. In addition, 60% chose to expand the market in new geographical areas and only 47% agreed to implement risky business projects in parallel with the main activities of the business.

"How can the next generation continue to succeed?", Mr. Hung asked and from there gave 10 golden rules for the ambitious next generation including: Accumulate outside experience first; Try before you buy; Only take on roles that are suitable for you; Be aware of your behavior; Do not put pressure on yourself; Ask for reasonable evaluation; Manage change carefully; Communicate, communicate, and communicate; Ensure that succession is a process; Enjoy this process.

Also concerned about succession in family businesses, Mr. Pham Dinh Doan, Chairman of the Vietnam Business and Family Council, said: The most obvious risk that can lead to the failure of a family business is the succession process. The transfer from one generation to the next is the weakness in the family business model.

Mr. Doan said that family-owned enterprises play a very important role in the Vietnamese economy. Family-owned enterprises tend to outperform other types of enterprises in terms of sales, profits and other growth indicators. In recent times, the strong development of Vietnamese family-owned enterprises has also helped form leading private economic groups in many fields and has made important contributions to the GDP of the entire economy.

However, every family business must always find a way to balance the interests of the family and the interests of the company. The process of transition between generations can cause conflicts between these two aspects, affecting both family relationships and business operations. On the contrary, an effective succession process will create good development momentum for the business, helping the business to renew itself in the face of changing business conditions and find new energy for growth, diversification and professionalization.

It is common for family businesses to not have a formal succession plan. This is a major risk if there are family members who are only involved in ownership but not in working or managing the business. Sometimes issues such as ownership or other rights of all members are not thoroughly discussed and agreed upon before the transition between generations, leading to each person having their own vision of how the business will operate in the future. This can lead to conflict when the next generation takes over the business.

Another common challenge is that the previous generation does not want to completely give up control even though they have transferred power to the next generation. "I am pleased with the results of PwC's 2016 Next Generation Survey conducted with nearly 270 successor leaders at family businesses globally. Up to 61% believe that the previous generation will find it difficult to completely give up control when they take over the business. They often feel discouraged when trying to convince the current generation to accept their new ideas. This is also true for family businesses in Vietnam today," said Mr. Doan.

According to Mr. Doan, in order to successfully transfer, help family businesses develop more and more, and contribute more to the economy, family businesses need to have a succession plan that is as clear and detailed as possible regarding the functions and tasks of each party involved, as well as the implementation time. This plan needs to be implemented as soon as possible before the official transfer of power so that the successor can accumulate all the necessary skills and experience to take on executive positions in the business.

For example, the current generation can create conditions for their children to try out different positions inside or outside the company, or allow them to attend board meetings or seminars and events that the company participates in. From there, the next generation can better understand the company's problems as well as expand their network of relationships.

At the workshop, experts and businesses discussed solutions to professionalize Vietnamese family businesses. Also at this event, the Vietnam Business & Family Council celebrated its 3rd anniversary, emphasizing the role of connecting typical and prestigious business families in the Vietnamese business community to help family businesses successfully achieve their development goals.

Hoang Duong/baotintuc