Researched Works

Work Conditions and Management Issues in a Family-Owned College in the Philippines

Family-owned schools are significant socio-economic pillars in the Philippines. These are owned, controlled, and/or sustained by single households or clans that are major private partners of the government in promoting and in providing education to a wider public at different levels (i.e., preschool, elementary, secondary, and tertiary). Based on 2006 data of the Department of Trade and Industry (DTI), these institutions, together with other family-run and for-profit sectarian enterprises, comprise 80-90% of the 99.6% of small and medium businesses in the country, “providing some 60% of total employment…” (Te & Perryer, 2011, pp. 1-2).

Historically, Spanish colonizers and religious groups established these learning organizations (Grace & O’Keefe, 2007; Joshi, n.d.). Leslie Bauzon’s “Influence of the Spanish Culture” (1991) further states that “economic and political power in the Philippines was maintained essentially by the same families as during the Spanish colonial period.” These include the Ayalas, the Sorianos,and the Elizaldes, among others. Later, clans with Chinese ancestry (e.g., the Sys, the Tans, and the Gokongweis) followed suit. There are also businesses owned by families with Filipino surnames, such as the Magsaysays and the Malabanans.

In spite of the significant reign of Spaniards in the Philippines, Smolicz (2002 as cited in Joshi, n.d.) points out that the country’s university system follows the one used in the United States (US). In fact, the 1935 Constitution – which was implemented during the US occupation – stipulated that the State would oversee all learning institutions, resulting in the creation of the Office of Private Education. However, full governmental responsibility shifted towards more private control due to post-war economic rehabilitation efforts and the granting of independence.

Although there are studies about family-owned businesses, Kinser and Levy (2005) note the scarcity of literature involving for-profit learning organizations, particularly colleges and universities (pp. 1-2). Nevertheless, as Kishore Joshi (n.d.) writes, “The private higher education sector of the Philippines is proportionally one of the largest in the world.”

Among the early tertiary schools that have been founded by families include: the University of Manila (formerly Instituto de Manila established in 1913 by the De los Santos siblings – Apolinario, Mariano, and Maria – together with two friends); the Mapua Institute of Technology (previously owned by Don Tomas Mapua and his kin in 1925 until the Yuchengco family took control in 1999); the Adamson University (under Dr. George Lucas Adamson, his wife, and his cousins in 1932); and the De La Salle Araneta University (used to be called the Araneta Institute of Agriculture in 1946 and Gregorio Araneta University Foundation in 1978 before merging with the De La Salle University System in 2002).

Higher Education Institutions (HEIs) in the Philippines – An Overview of Issues

The higher education mapping data in 2010 reveal that out of a total number of 2,180 HEIs, there are 1,249 or over 57% classified as private non-sectarian. Joshi (n.d.) observes that many for-profit HEIs are located in cities nationwide. Yet, such accessibility has led to deficient education standards: “...private non-sectarian institutions show the poorest results in the professional board examinations.” Moreover, these schools largely rely on tuition payments to support their operations (Joshi, n.d; Kitaev et al., 2003).

Currently, the Commission on Higher Education (CHED) provides the government’s policies, standards, and guidelines (PSGs) for private HEIs. The PSGs serve as the regulatory framework of HEI owners and administrators with regard to academic programs, curricula, personnel qualifications, and other aspects of school operations.

Former CHED Commissioner Roberto Padua (2003) observes that instead of competitive market forces, cultural values and state intervention greatly affect the quality assurance of the country’s higher education system. He says that many substandard private HEIs profit from the importance Filipino families give to college degrees. Government spending on education also discourages for-profit schools from investing in quality since state-funded HEIs render “less than acceptable quality outputs” due to inequitable subsidies.

Joshi (n.d.) adds that a student’s competence, faculty criteria, and teaching facilities affect the performance of private HEIs. Unlike popular public and sectarian schools (e.g., Ateneo, De La Salle, and UP) that attract grade-conscious learners, family-run HEIs “are more open, admit more students and charge relatively less tuition than the other prestigious private institutions – leading to a trade off between the quality and student flows.” Furthermore, teachers in many private HEIs receive “low salaries and higher workload…do not make it attractive for them to acquire advanced degrees and to engage in research.” Lack of library facilities and poor rate of book use also contribute to the quality dilemma.

Equity concerns also plague HEIs. Joshi (n.d.) specifies that college admission is affected by a student’s economic status, gender, and location, among other factors. Arthur Hauptman’s Student Financial Aid in Philippine Higher Education: A Framework for Reform (2001 in Joshi, n.d.) likewise affirms that “the non-poor’ have both better access to and higher completion rates in higher education programs than those classified as ‘poor’.” Those with affluent backgrounds are more prepared for college life, while many struggle to finish high school or to secure a government or private scholarship. In terms of gender, more women are enrolled in HEIs than men who have a high drop out rate; thus, it is a challenge to retain or to help them finish college.

HEIs likewise have efficiency issues. Employment records reveal that people “with higher levels of education have higher unemployment rates. The graduates from accredited and prestigious institutions experience higher rates of employment and incomes” (Joshi, n.d.). Aside from this, CHED data highlight a mismatch between tertiary degrees and industry needs. A survey of the Personnel Management Association of the Philippines (PMAP) in 1998 divulged the inability of college graduates to secure entry-level jobs (e.g., accounting/administrative clerks, programmers, and sales executives) due to poor English communication skills, low self-confidence, and inadequate technical skills (Santamaria & Watts, 2003, p. 14).

Nature and Issues of Family-Owned Businesses and HEIs

Like any other business, governance of family-owned HEIs influences work conditions. Consequently, these circumstances affect not only how faculty and administrative employees perform their jobs, but how they perceive their employers as well. Moreover, these can either improve or decrease the quality of education produced by HEIs.

The ownership and management of family-owned businesses, such as private non-sectarian tertiary schools, “falls within one family – whether related by blood or marriage” (Te & Perryer, 2011, p. 1). These firms tend to adopt: (1) low-risk strategies to sustain ownership and management control, (2) business goals that complement family goals, (3) family values in distributing assets, and (4) organizational foresightedness (De Holan & Sanz, 2006, p. 2). The Companies Circle of Latin American Corporate Governance Roundtable’s Practical Guide to Corporate Governance (2009) published by the International Finance Corporation (ICF) supports said ideas, noting that “long-term view in decision-making” and “commitment of family management to their company” to ensure business continuity contribute to “the family business edge...” (Anderson & Reeb, 2003 in The Roundtable, 2009, p. 124).

Founders and other immediate household members usually form the first (and second) generation to operate family businesses (The Roundtable, 2009, p. 126). Bowman-Upton (1991) points out that these individuals deal with “a complex, dual system…members…are part of a task system (the business) and part of a family system.” Conflicts may arise due to an overlapping of roles, communication styles, and interests. Issues that affect family-run enterprises include:


The Roundtable (2009) further adds: (1) vague company and family relationships, including absence of legal distinction of assets; (2) informal governance-related policies that “lead to reliance on key people rather than on structures and processes”; (3) weak internal “control environment that is largely tailored to their needs”; and (4) more challenges “as the family and business grow more complex with each succeeding generation” as concerns that family-owned firms need to address (p. 127).

Management Transition in a Family-Owned Business

Lee-Chua (1997 as cited in Te & Perryer, 2011) defines a successful family business as “one that has existed for at least 10 years, is still existing, and has made a name for itself in its field.” However, these firms still have a short lifespan, with only 33% and 10-15% going through successful transition to second and third generations, respectively. Apart from this, 70% of family businesses “are either sold or liquidated after the death or retirement of the founders” due to incongruent values between the latter and the successor(s) (Te & Perryer, 2011, p. 2).

ABN AMRO Private Banking’s Asian Families: Emotional Aspects of Wealth Transfer and Inheritance (2006) reveals that young graduates who are being groomed to inherit a family business perceive such as a burden: “A sense of duty clashes with the desire to pursue personal life goals and aspirations” (p. 1). Factors like power, hesitancy to live outside the business, and limited financial freedom may hinder a founder from handing over the reign to his/her successor (Te & Perryer, 2011, pp. 3-4).

Galura (2006 as cited in Te & Perryer, 2011) advises that “succession planning should be seen as process...starts from the cradle.” Nurturing a successor’s affinity with the business while still young can help in a smooth transition in the future (p.14). Moreover, she also recommends developing a Family Constitution to set terms on various aspects of the business that can cause conflicts. Said document details clear business policies on various aspects like salaries and benefits, hiring/firing of family members, dealing with extended relatives, and profit sharing, among others (Tulfo, 2010). A well-deliberated leadership transition plan helps ensure the survival and success of family businesses, including non-sectarian HEIs.

Effects of Leadership Succession on Employees of a Family-Run Organization

In an interview with the heads of a marketing communications company built in 1910, Dennis Warren (2010) asked about “the impact of a co-president transition” on employees. One of the two brothers said that the transition went “very smoothly” and that they “run the business with the same values.” These successors continue to encourage “individual initiative and personal growth”, as well as mutual respect like when they refer to their workers as “colleagues” instead.

Bernhard and O’Driscoll (2011) said that transformational and transactional leadership have an effect on the “psychological ownership for the family business and for the job” among non-family employees. Such perception facilitates a link “between leadership style and affective organizational commitment, job satisfaction, and turnover intentions.” These findings echo the notion that organizational climate perceptions are influenced by directive and participative management styles, as well as by work-related beliefs and values (Vijayakumar, 2007, p. 249).

References

ABN-AMRO Private Banking. (2006). Asian families: Emotional aspects of wealth transfer and inheritance. Retrieved from http://www.abnamroprivatebanking.com/uae/

Anderson, R. C. & Reeb, D. M. (2003). Who monitors the family. SSRN Discussion Papers. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=369620

Bernhard, F. & O’Driscoll, M. P. (2011, June). Psychological ownership in small family-owned businesses: Leadership style and nonfamily-employees’ work attitudes and behaviors. Group Organization Management, 36 (3), 345-384. Retrieved from http://gom.sagepub.com/content/36/3/345.abstract

Bowman-Upton, N. (1991). Transferring management in the family-owned business. Emerging Business Series. Retrieved from http://www.sbaonline.sba.gov/idc/groups/public/

Companies Circle of the Latin American Corporate Governance Roundtable. (2009). Practical Guide to Corporate Governance. Retrieved from http://www.ifc.org/ifcext/cgf.nsf/

De Holan, M. & Sanz, L. J. (2006). Protected by the family? How closely-held family firms protect minority shareholders. Retrieved from http://conocimiento.incae.edu/ES/centros-academicos-investigacion/pdfs/ProtectedByThefamily.pdf

Grace, G. R. & O’Keefe, J. (Eds.). (2007). International Handbook of Catholic Education Challenges for School Systems in the 21st Century, 2, 15–22. Netherlands: Springer.

Joshi, K. M. (n.d.). An exploration of private sector financing of higher education in the Philippines and its policy implications for India. The Asian Scholar. Retrieved from http://www.asianscholarship.org/asf/ejourn/articles/Kishore%20Joshi2.pdf

Kinser, K. & Levy, D. C. (2005). The for-profit sector: U.S. patterns and international echoes in higher education. PROPHE Working Papers 5. Retrieved from http://www.albany.edu/

Kitaev, I.; Nadurata, T.; Resurrection, V.; & Bernal, F. (2003). Student loans in the Philippines: lessons from the past. Policy Research and Dialogue Student Loans Schemes in Asia, 1 (5). Bangkok: UNESCO Bangkok/IIEP. Retrieved from http://www2.unescobkk.org/elib/

Santamaria, J. & Watts, A.G. (2003). A framework for the design of career information, guidance and counseling services in developing and transition countries. Country Report on the Philippines. Retrieved from http://siteresources.worldbank.org/INTLL/Resources/

Te, J. & Perryer, C. (2011). Management succession in the bamboo network: Case studies in Chinese-Filipino family owned businesses. Asian Forum Business Education Journal. Retrieved from http://www1.rbac.ac.th/conference2011/Download/AFBE%20Journal.pdf

Tulfo, W. G. (2010, May 22). Business families gather at Ateneo for FBDC Seminar Series. Retrieved from http://www.admu.edu.ph/index.php?p=120&type=2&aid=8421

Vijayakumar, V.S.R. (2007, July). Management styles, work values and organizational climate. Journal of the Indian Academy of Applied Psychology, 33 (2), 249-260. Retrieved from http://medind.nic.in/jak/t07/i2/jakt07i2p247.pdf

Warren, D. (2010, July 6). David & Ben Grossman – Interview. The Business Leader Post. Retrieved from http://www.businessleaderpost.com/2010/07/david-ben-grossman/


Written by Leann Zarah (leannzarah@gmail.com)

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