Family business – example of central group

Tiang Jirathiwat moved from China to Thailand with no asset. In 1947, he started a general store in in Samphanthawong district, Bangkok’s Chinatown. In 1957, his son, Samrit Jirathiwat, opened the first Central Department Store in Wangburapha and developed later on. In 1968, Central Silom was run with loss because people thought the imported items might be too expensive !

After two years, the Jirathiwats changed the strategy and made profit. Some family members (2nd Generation) were sent to study abroad and came back to develop Central Chidlom with Siblings and relatives. So, Central Chidlom made profit since its first year. Management Styles :

First Generation : Tao Kae (concerned on cost of goods, loss and profit) Second Generation : Committee (concerned more on investment and finance) Third Generation : Family Council

(development by family members under the family’s rules and regulations)

The business transition from the first to the second generation was not complex, but from the second to the third generation was more complex, since nowadays there were much more business factors. For Central Group, which has been operating with many family members, there must be the rules and regulations besides the business issues. To be more focused on the third generation, they must work together and compromise “conservative” and with the “aggressive” styles ! Rotation and Distribution

When to business turns to be more complex and operated by the larger numbers of family members, to make decisions is not simple. All Jirathiwats must know all A, B, C and D steps. Moreover, since the family members are graduated and have experiences in various fields, the work rotation and distribution are very efficient. Different families of Jirathiwats will work together, which leads to the family relation and unity.

Jirathiwats is in charge of knowledge and experience of all family members. They focus both on “Drive and Control” as well as “Transition” of the family business. “The elements of strong business are Strategy, Money and People – money will bring strategies successful, but without good people, there won’t be an effective implementation”. (Tos Jirathiwat, CEO of CRC since 2002) Challenges

In general family business, the CEO is wearing three hats; head of the family, business owner and the administrative CEO. This person must well balance all three actions, to be more specific, if he is focusing more on business issues, the family relationship can be weak.

He should support the family members to be gradually evolved the business to make the members feel with this “family business” and are willing to involve of the business continuously. Hence, the conflict of interest will not be existing among the business performance and family harmony. This will make the transition to the next (4th) Generation the most possibly efficient. “The business competition is same as the war, which needs not only the individual ability but team work ! “ Preventions

“We must separate into two main issues; issues among family members and issues among stakeholders” (Tos Chirathivat, CEO of CRC since 2002) 1. Family CouncilFrom this reason, Family Council has been set in order to direct all Jirathiwats and give them rights and compensations. Here are some issues on Family Council : – Descriptions of a good member of Jirathiwat

– The Rights that all Jirathiwats will receive, for instance, funds of birth giving, education, infrastructure expenses in family house, health care and hospitality.

2. Family Business ConstitutionFamily constitution is strategies and solutions which should be implemented to deal with family-related matters that impact on business issues. It is necessary for family business to set regulations or rules in order to prevent conflicts that can happen. By the way, conflicts are the cause that creates regulation or rules. An effective Family Business Constitution might include: – criteria for joining the family business

– a definition of roles- responsibilities of active- mechanisms to be adopted for the transfer of ownership and leadership. Jirathiwat Family also has a Family Constitution which will maintain harmony and co-operation, also solve conflicts. Agreements for family business are a clear, simple, understandable and enforceable set of guidelines for the effective operation and continuance of the enterprise. The 8 following issues are the Family Constitution of Jirathiwat, which seems to be very strict, but to link all family members together and to the family business:

1.All Jirathiwat families must stay in the same house, doing all activities together. 2. Everyone must respect in seniority, for example, parents will teach children, elder brother will teach his younger siblings. 3. Ranking is more important than age.

4. Democracy comes first and everyone has a right to express ideas. 5. All boys must be sent to Assumptions, girls to Mater Dei and everyone should be sent abroad. 6. The responsibities in business will be distributed to each, based on age, not seniority. 7. A bad action will be broadcasted to all family members as a bad example. 8. Instead of giving compliments, those persons who have good outcomes, will receive more business tasks and responsibilities. Lesson Learned

Joel Arthur Barker said that “a set of rules and regulations (written or unwritten) that does two things” which are 1. It establishes or defines boundaries For Central: Everyone must have 6-year-experiences outside before coming back work with family 2. It tells you how to behave inside the boundaries in order to success For Central: Not doing business that competes with family business family business or relies on the mail family business. Prevention Before Solve

– by setting regulationsPut the right man on the right job- separate people up to their potential

Last but not learst, as Jirathiwat has a policy in a form of “Executive Committee” operated by CEO group, business issues are apart from family issues. This is why they can have a strong family relationship, in the meanwhile, the business has been very well operated and continuously worldwide expanded only by family members.