Ways to create sustainable businesses in the property sector

In most cases, business owners were highly involved every step of the way to bring new ideas to fruition, and were supported by careful cash-flow management and good teamwork.

Consequently, these smaller companies emerged stronger after the crisis, which taught them the importance of managing both their companies and risks, and enabled them to grow from annual revenue in the hundred-million-baht range to giant corporations raking in billions of baht within 17 years.

Many companies initially struggled to build a business yielding high returns and improve the financial standing of their owners, but their objectives changed as their organisations expanded with more employees to service tens of thousands of customers and shareholders.

Thus, the focus of top management of established corporations is to build organisations that yield sustainable benefits to all their stakeholders.

Now, we see how many corporations have outgrown the capacity of the business founders to personally oversee every aspect of their corporation and, as they edge closer to retirement, this has resulted in announcements of their succession plans.

What makes it interesting to general observers is the diversity of their approaches, execution and the nature of forthcoming changes. Not only will these changes have an impact on the corporation internally, but the industry will be affected since these leading corporations collectively make up 75- 80 per cent of the market share.

We can expect to see significant differences in leadership styles between business owners and professional managers in how they think and implement ideas, such as their appetite for risk, their decisiveness in making key decisions, and how they manage people, which will affect corporate growth and performance.

The era of centralised, top-down ‘one-man shows’ will give way to a more decentralised organisation with different power nodes that need time to adjust to for managers and processes alike.

The most important aspect of the leadership handover is to create a sense of acceptance and trust in the hearts of long-term successful employees about these new leaders, whom they may initially distrust and question the necessity of making changes.

Abandoning simple systems used in organisations with just a few hundred employees for more complex systems to support a larger organisation for greater efficiency also means more divisions and responsibilities. This process has to be done with sensitivity, as it is a challenge whenever authority is distributed.

If it is not carefully managed, it can lead to greater costs from more employees and duties and become a net financial burden rather than helping generate a profitable revenue stream.

Poorly planned organisations can face a negative cycle, requiring the company to cut costs, which reduces its competitiveness in terms of the product price and quality, making it all the more difficult to sell. To boost sales, companies may resort to frequent promotions, leading to higher costs and lower profits.

This negative cycle usually has a parallel impact on the efficacy and efficiency of each manager and employee. These problems can be mitigated with clear performance measures and managers who offer timely advice and constructive feedback to their employees.

It also requires a clear system to acknowledge and reward employees who contribute to creating quality products and services demanded by customers.

All these elements – restructuring the organisation, building new teams, systems and processes, and succession plans – are currently being implemented in many of Thailand’s top real-estate companies, even though the original founders are still around and the baton will be handed to their offspring and members of their extended family.

However, most top management in the second generation is no longer limited to family members and is open to veterans from the property and other industries, who can provide fresh insight on ways to manage businesses for sustained long-term growth.