The new 6C's formula for success in Thai family businesses.

Since I started writing articles about Thai family businesses in 2546, Journal of Finance and Banking And various newspapers eventually compiled and published it as a book for the first time in 2011 under the title... "Planning for the sustainable succession of the family business." And the third time, in 2023, the name was... "A Successful Formula for Thai Family Businesses: Sustainable Succession" And the third time, in 2023, the name was... "The formula for success of Thai family businesses in a changing world." Up until the latest edition, the 4th edition, in 2568, it's an infographic book titled... "A Guide to Successful Thai Family Businesses in a Changing World" Over 22 years, I have compiled my knowledge and experience working in Thai family businesses into this book.

After that, I continued to write articles about family businesses, which were published in... Journal of Finance and Banking Many more episodes, especially those involving the use of books. ""Business Family: Lessons from 30 Global Family Businesses – The People Behind World-Class Family Businesses" Written by Professor Dr. Kritsadalert Sampantharak หรือ Teacher Nong Lessons learned from this have been applied to the 6C formula that I devised since the second printing. The first printing only had the 5C formula, lacking the sixth C, which stands for Change.

Now is the time to compile these articles for publication as a book once again. I hope that Thailand will have many more books on the management of Thai family businesses, and I want the book I've written to be comprehensive so that Thai family businesses can study it and find ways to apply the knowledge to their own businesses, especially by learning from the failures of others and reviewing their own mistakes.

Importantly, this newly published book is also available in infographic format and will be titled... "The formulas for success and failure of Thai family businesses." "Lessons learned from global family-owned companies." I expect to release it in early February 2569.

Due to the changes that have occurred in the Thai family business sector over the years, I have found it necessary to update and modernize the 6C formula to reflect these evolving circumstances. The goal is to create a contemporary 6C formula that can be adapted and applied to Thai family businesses indefinitely. In addition, I have included a section on the failures of Thai family businesses to facilitate learning from their experiences.

I would therefore like to take this opportunity to elaborate on, update, and supplement the 6C formula to make it more modern and relevant to the changes in family businesses today, as follows:

C1 Corporate Gorvenance Structure
Corporate governance and shareholding structure

Originally, C1 only discussed corporate structure, which refers to the structuring and governance of family businesses and shareholdings, whether it be the establishment of a holding company or a family business group that defines the types of entities that will hold shares in operating companies categorized by business type (Operating Company Group). This is considered a very important matter.

A new addition is the concept of good governance in business operations and the work of family members, ensuring they perform their duties legally and with integrity. This includes paying taxes correctly, avoiding dual accounting, and adhering to legal documents such as company regulations, shareholder agreements, or family constitutions. Furthermore, the roles of directors are defined to oversee both family and business relationships simultaneously, as the separation of family and business is often inseparable in family businesses, leading to problems, especially if family members treat each aspect separately. "personal" with "business" Not coming out

Good corporate governance, both in business operations and in managing family relationships, ensures accuracy, transparency, and fairness. When family members can scrutinize operations, it allows for the sustainable management of the family business in all aspects.

Furthermore, the importance of establishing a sound corporate governance and ownership structure from the outset is beneficial in tax management, preparing for M&A or M&P, and even future listings on the stock exchange. Experts in the family business world say that "structure is a friend," and establishing a good corporate governance structure is like buttoning the first button; it must be fastened correctly to ensure the business's stable and prosperous growth.

Establishing good corporate governance in both businesses and families requires the creation of legal documents, including company regulations, shareholder agreements, family charters, wills, and prenuptial agreements. This ensures that family members involved in the business clearly understand their roles and responsibilities.

Thus, this new C1 formula, which incorporates the principles of good corporate governance for businesses and family organizations, aligns with the G, or Good Governance, in the ESG framework. This is considered crucial for family businesses to adhere to these principles.

C2 Compensation and Benefit
Compensation and benefits

For the second C, I've added something... "Benefits include various family welfare benefits." come up

Compensation and benefits are often the source of conflict in almost every family. Therefore, establishing fair and appropriate guidelines for compensation and benefit allocation, whether through shareholdings or various welfare provisions, is crucial in preventing family conflicts.

In this regard, both the supplier and the receiver should communicate and consult with each other, ensuring that each understands their role and responsibilities, as well as the expectations of family members in running the business. It's not simply a matter of assuming that everyone should receive equal rights as family members.

Various case studies show that if heirs do not receive equal dividends, shares, and benefits, this unequal distribution of shares can lead to conflicts within family members.

Therefore, if heirs believe that the compensation or benefits stipulated are fair or just, there are usually no problems. Heirs should understand that fairness or justification does not mean equality. Having a clear policy and method for paying compensation in the form of dividends, remuneration, benefits, and welfare, with established rules and regulations, can help reduce conflicts among family members.

Generally, in families where parents raise their children well, disputes over inheritance, compensation, dividends, salaries, bonuses, rights, and benefits tend to be significantly reduced.

Establishing fair, appropriate, and adaptable compensation and benefits can prevent conflicts. This can be achieved by clearly defining various benefits and welfare provisions, such as through a family holding company or constitution. These provisions could include dividend policies, performance-based compensation for heirs, and various welfare benefits. Having a committee overseeing member benefits and welfare, potentially including external members in the decision-making process, will further reduce conflicts.

C3 Communication
Communication

This "C" hasn't been added; it only incorporates methods of communication that involve reflective listening and reflection, as well as creating a coaching system with mentors from older generations or independent professional judges to assist in communication.

Communication issues are also a major cause of conflict in most families. Many families lack effective communication, and often misunderstand communication as simply giving orders. Therefore, effective communication isn't about direct commands; it requires a two-way process, the most important of which is reflective listening.

In particular, listening to the opinions of family members from different generations—Gen X representing the passing generation and Gen Y and Gen Z representing the receiving generation—requires family members to practice effective communication, discussion, and thoughtful listening. It's also important to give family members opportunities to offer and present new ideas. These moments of communication foster both family relationships and business success.

The communication process might begin with drafting relevant legal documents, such as company regulations or family charters, which should stipulate regular meetings and discussions, ensuring that heirs are informed from the outset.

Having a mentoring system where senior or professional individuals coach or mentor younger generations creates a powerful form of communication. This is especially effective when conflicts or disagreements arise in the workplace or family relationships, allowing for efficient conflict management, resolution, and the search for solutions. It's advisable to involve external individuals or independent facilitators in resolving conflicts, and frequent, both formal and informal, communication should be scheduled.

C4 Conflict Resolution
With conflict management. Conflict Management

For the fourth "C," I've added Conflict Management because the original "C" only discussed resolving disputes through negotiation, mediation, and compromise, including disputes related to family members' stock trading. However, business conflicts are common. Therefore, when disputes arise, a robust conflict management mechanism is crucial. This might involve open dialogue, identifying the root causes of the conflict, and collaboratively finding solutions. A neutral third party or independent director could act as a mediator to facilitate compromise and resolve the conflict amicably, preserving family relationships even if business opinions differ.

Such conflict management processes should therefore be documented in legal records, including company regulations, shareholder agreements, family charters, wills, and prenuptial agreements. These documents can serve as guidelines to reduce future disputes. Training and communication skills in resolving conflicts should be implemented alongside the third "C," which is effective communication, to enhance the effectiveness of conflict management.

C5 Care and Compassion
Generosity and kindness

Kindness and compassion towards family members and stakeholders involved in the family business are paramount in fostering family harmony and preventing conflict. While legal documents encompassing C1-C4 may provide some protection and effectiveness, the fifth "C" is crucial. It is this fifth "C" that significantly reduces conflict (especially within C4) and provides effective conflict management strategies.

This fifth "C" cannot be prevented or codified in legal documents as mentioned above. Instead, it should begin with the nurturing of the next generation through kindness and the transmission of the founder's goals and values. This could be outlined in a family constitution that involves family members in defining the purpose of the family business. The goal is for family members to conduct the business with love, compassion, and kindness towards family members and stakeholders, fostering unity and social responsibility, rather than solely focusing on maximizing profits. This approach will strengthen the family's stability.

In fact, the fifth "C" is actually applying ESG principles to business management. This includes using principles such as the Four Sublime States of Mind (Brahma Vihara 4) and the Four Principles of Social Harmony (Sanghahavattu 4) that I've written about in my book, as well as applying Buddhist teachings to family business management.

C6 Change
Change

This C remains unchanged because family business owners must adapt and change their businesses quickly. This sixth C, change, includes both controllable and uncontrollable changes.

Currently, there are increasingly more uncontrollable changes. In particular, the sixth "C" that has emerged since I wrote about has become much more prevalent. Recently, this has included emerging pandemics like Covid, wars, ESG issues, technological changes, and AI.

Family businesses need to transform and adapt to the changes that are happening, and I believe that in the future we don't know what other changes will occur that will require family businesses to constantly adapt.

External changes are beyond our control, but internal changes that we can implement and control include our mindset and work methods, which need to be fast, technologically advanced, and up-to-date. As for external changes that we cannot control, we should manage the risks as much as possible.

Family business owners must therefore continuously learn and acquire new knowledge, including learning from other family businesses around the world, especially the causes of failure for other family businesses. This will help them adapt their businesses to keep up with the times, whether it's setting goals, succession planning, ESG impact, or adopting technology and AI for future sustainability, without repeating the mistakes of past family businesses.

Business change is inevitable. While expecting others to change can be difficult, changing oneself is easier, especially when the supplying and receiving generations have differing opinions. "Each side wants the other to change." Why don't we consider changing ourselves first before wanting others to change? Open communication and listening to each other will enable the family business to adapt to change in a timely manner.

Therefore, I hope that this new 6C formula for successful Thai family businesses will serve as a guideline for family business owners to lead their businesses to growth and sustainability from generation to generation, fulfilling the aspiration I once set for myself. "Long live Thai family businesses!"

The next part will write about... "The formula for failure in Thai family businesses" I've added everything to complete the new book's title. Please stay tuned with bated breath!