LY SMU Publication: The Straits Times, p D2 Date: 14 March 2009 Headline: One up for the family

"Unity is strength. Both family and company must work really hard

together, in order to brave this coming storm." Mr Alvin Lee, 43, managing director of f@-m Audio House

T HEY are often derided as stodgy and a bit slow on the up- take when it comes to modern business dynamics but family- run firms seem robust enough

these days to hold out against making the job cuts hitting the rest of the economy.

What once seemed like business vices - excessive thrift, too many family mem- bers in top jobs, a cautious approach to expansion - now look like virtues as the economic storm hammers the bluest of blue chips, destroying thousands of jobs in its wake.

A straw poll of 20 family-run opera- tions by The Straits Times found that none had retrenched a single worker, nor plans to.

MI Chng Seng Mok, 59, chief execu- tive officer and chairman of Poh Heng Jewellery, which hires about 200 people across its 12 shops here, says his company has never laid off anyone in its 61 years of business.

"We don't believe in quick fixes during bad times. Many employees have been with us for many years and we consider them a part of our extended family," says Mr Chng, the son of the firm's founder, the late MI Chng Tok Ngam.

Audio House managing director Alvin Lee, 43, goes even further, andbrands re- trenchment as a "waste" rather than a cost saving.

"Most of our employees are trained from scratch. We have invested a lot in them," says Mr Lee, whose fhn has two outlets with a 150-strong workforce.

Most of these family businesses are classified as small- and medium-sized en- terprises (SMEs) but they are the bedrock of the economy which provides a substan- tial proportion of employment. Accord- ing to Spring Singapore, SMEs accounted for 48 per cent of Singapore's gross do- mestic product (GDP) and provided 62 per cent of the jobs in 2007.

Professor Tan Wee Liang, an associate professor of entrepreneurship and law at the Singapore Management University, whose research interests include family businesses and small business manage- ment, says: "Family businesses are known for treating their loyal employees as family members, and are thus loathe to lay off employees.

"The personal involvement of busi- ness-owners and their family members in enterprises creates a sense of community that enables them to weather the vagaries of businesses and economic turbulence."

But while many family concerns are not retrenching, it does not mean their bottom lines are not hurting.

"Business has definitely been affected by the crisis," says MI Clinton Ang, 35, managing director of Cornerstone Hock Tong Bee, a family-run wine exporter and retailer now in its third generation.

January, he says, was its worst month, and profits are down 30 per cent.

One the family

Small family-run businesses are proving to be lean and nimble as they adapt quickly to a fast-deteriorating market.

The Straits Times examines how good old-fashioned family values are now a decided business asset

But perhaps most family-owned firms can afford to take a longer view mainly be- cause they are not publicly listed and do not have impatient shareholders to answer to. Even listed family firms can hold out against short-terrnism if the fam- ily has retained sufficient control.

Take Eu Yan Sang International, a pub- lic-listed company selling Chinese medi- cine through 152 outlets across Asia, in- cluding 38 here. The firm, which employs more than 300 people here, celebrates its 130th anniversary this year.

As group chief executive Richard Eu, 61, says: "My concern is how do we sur- vive for another 130 years, not next week or next year.

"My objectives for the company are not purely profit-driven, and planning for the long haul rather than short-term profits means that we don't practise re- trenchment in bad times."

Instead, he plans to deal with the downturn by cutting costs using wage freezes and reduced bonuses but keeping all his staff. "We suffer together but we al- so stick together as a company," he adds.

Having a more informal, less hierarchi- cal organisational structure also enables a nimbler response when quick action is re- quired.

"My managers joke that I'm able to make almost every decision in under a minute," says Mr Ang, who has 35 em- ployees in his wine business here. "I was practically born into the business, so I'm

What once seemed like bushem vices - excessive thriii, too many f i y members m top jobs, a cautious approach to expansion - hok like virtues as the economic storm hammers the bluest of blue c&s

able to make informed decisions extreme- ly quickly."

He recalls how he decided within 30 seconds whether to sell his company's 97 million stake in a food and beverage company. "In a flst organisation like my company, I'm always in the h o w and the information is all at my fingertips. So ac- tion is rapid and decisive," he says.

MI Adrin Loi, 54, executive chainnan of Ya Kun Kaya Toast, which employs 284 people in its 31 local outlets, recalls how quickly the company responded to the egg shortage during the 2004 bird flu scare.

"Within a matter of hours, we had staff out buying eggs from supermarkets and minimarts to make up the supply," he says. "As a result, we did not have to raise prices and were able to absorb the additional cost."

It also helps that many f a d y business- es are habitually conservative and were in a good financial position before the eco- nomic crisis struck.

"With the family name at stake, we have always adopted a slow and steady ap- proach and are careful not to over- expand," says MI Eu. "Business decisions tend to err on the conservative, so we are not over-exposed if there is a crisis."

For example, over the years, he sayshe has resisted taking up the many opportu- nities to diversify into other investments like property or franchising the company name. ''We don't deviate from our core business," he adds.

m. ST PNOTO: LIM SIN THAI

Thrift also runs in many family enter- prises, which helps keep costs down.

The management at third-generation Tai Hua Food Industries, which makes and sells soya sauces and condiments, and hires about 80 people, flies economy instead of business class when travelling on business. Managing director Thomas Pek, 48, says: "We also try to stay at rea- sonably priced accommodation."

Some bosses of family firms go a step further by travelling only on budget carri- ers. "I travel by budget airlines for all my trips, even when times are good," says Mr Ang of Cornerstone. "It's important to encourage thrift by example."

Audio House has also started imple- menting a "Save $1, Earn $1" scheme to keep employees motivated. "In this cli- mate, big sales quotas discourage the staff," says Mr Lee. "Sol tell them to sim- ply save $1 a day, be it on paper or pen ink, and try to earn $1, even if it's just by selling another pack of batteries. A little adds up to a lot."

Keeping it in the family also means the business is a labour of love among kii. Overtime pay is unheard of, which saves on labour costs in tight times.

"We don't talk about overtime pay when we're working for the family. There are no limits to how hard we work ," says Winey Kopitiam director Woon Tek Seng, 61, whose family members went back to run outlets on the first day of Chi- nese New Year.

"As business nets toucher. havine fami- ly members jogw in &e &utletslboosts flaahe morale." mees Ya Kun's Mr Loi. "wylek by ex&&, and our positive at- titudes encourage the staff to work just as hard."

Labour costs can also be quickly and in- formally adjuded, with family members mutually agreeing to take home smaller pay packets. Tai Hua's MI Pek says that if things worsen, his family members' pay will be the fQst to be sacrificed. "As the head of the business, they should take the lead and have their pay cut first if the need arises," he says.

For all these reasons, experts say familv-run businesses - once thought to be oitdated, unprofessional models- are well-equipped to ride out the current cri- sis.

MIS Kee Ai Nah, director of Retail, Pur- niture, Textii and Apparel at Spring Sin- gapbre, which works with SMEs, says: "They have been around for more than one generation. Many survived and grew stronger in the past economic downturns, realisiig the need to build a solid corpo- rate foundation as a springboard for growth."

Audio House's Mr Lee agrees. "We've pulled through many times, from 9/11 to the Sars period. The crisis will not last for- ever. We will just have to hang in there," he says.

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Source: The Straits Times O Singapore Press Holdings Limited. Permission required for reproduction.