Alliance Global: Father-and-son Andrew and Kevin Tan on family business

Self-made entrepreneurs often find it hard to pass the baton to the next generation and ultimately end up damaging the business they worked so hard to create, not to mention their relationship with their children. Why do you think that is?

Andrew Tan: Every situation is unique among self-made entrepreneurs and their children. You also have to consider the nature of their business, and the environment in which that business operates. I believe that a company’s succession planning is successful when the current leaders and the next-generation leaders are both aligned when it comes to three aspects: purpose, passion and proficiency.

Purpose refers to the company’s vision, backed by the company’s core values. Passion refers to the leader’s commitment to the company. Proficiency refers to the leader’s acumen and ability to run the company. Different generations bring their own strengths and ways of working to the table. But if those three aspects are consistent from generation to generation, the business is more likely to continue growing.

Kevin Tan: I truly believe that working in a family business is not a birthright. Being a family member or the next in line does not mean he or she is best suited to take on a specific job or run the company altogether. I think the acceptance and realisation of this early on can help set the right context thereby preserving relationships within.

For next-generation leaders, we were always taught at a young age that educational achievement, skills and work experience are absolutely essential. But my father would always emphasize that more importantly, a true leader must possess passion, integrity, love for the company and the business.

The process seems to be going smoothly within your family. At what point did you start making your own succession plans, how did you know when you were both ready to make that step and were there any bumps in the road?

AT: For us, the process was always very natural. We didn’t have a timeline. My children grew up knowing that I had my own businesses. We would talk about what I did for work. As a father, I believe that it’s my job to make my children interested in the various businesses. But I saw long ago that I wasn’t running a simple family business anymore.

Having said that, I didn’t pressure my children to work for me - I thought that if they wanted to, they would do so at the right time. Kevin opted to join me first in Megaworld, the real estate arm of Alliance Global. He rose to become CEO of Alliance Global after proving that he has the creativity and commitment to move the conglomerate forward.

KT: I’ve always been cognizant of my role and my eventual duties as the eldest son, early on in my life. I have seen how hard my parents have worked to build up our companies. My dream has always been to help continue their legacy, but I always knew that nothing was ever guaranteed or that things would not necessarily just be handed to me or to my brothers.

We work under a meritocracy system both at home and in our companies. So naturally, I've had to work hard over the last 20 years to build my credentials and earn my right to be where I am now.

Since working together what have you learned from each other, what things do you approach in the same way, what things do you differently and have you ever really disagreed about something?

AT: Kevin and I are often on the same page about our businesses, even if our personal experiences have shaped us and our management styles differently. I’ve been in business for over four decades, and I think the knowledge and experience I gained during those years allows me to give Kevin helpful advice when necessary.

For his part, Kevin is keen on exploring even more opportunities for innovation, especially in digital technology. Throughout the pandemic, innovating through digital transformation programs was one way that allowed us to quickly adapt to the new realities of doing business.

KT: I’ve learned a lot from my father. I am very grateful to him for patiently imparting his experience and wisdom. Growing up, my father taught us the value of hard work, excellence in everything that you do, integrity, humility and compassion for those who have less in life.

I have always respected his wisdom, and therefore I believe myself to be quite obedient. Furthermore, my father does not command people, instead he uses his power to persuade, to make you believe in his purpose and vision.

When you are sitting where I am sitting and you are listening to the words that I am also hearing, it is very difficult to disagree with a visionary who has a purpose you are completely aligned with.

What are your favourite parts of the business, what do you consider your proudest moments and what new ventures would you each like to develop in the future?

AT: I honestly find every aspect of business interesting. There’s just so much to learn! When it comes to my proudest moments, there are very many. But if I have to cite a few examples, they would be our companies’ milestone moments.

For Megaworld, that milestone moment would be the creation of the township concept. Megaworld pioneered the live-work-play township in the Philippines, and it is a concept that has grown exponentially in value. In 2020, the company marked 31 years in the real estate industry.

From one township - Eastwood City - in 1996, Megaworld now has 26 townships, integrated lifestyle communities, and integrated lifestyle estates across 50 cities in the country.

After 41 years, Emperador has become the largest liquor company in the Philippines. It was only a few years ago that we decided to pursue global expansion. In 2014, we acquired the world’s fifth largest Scotch whisky company Whyte and Mackay.

Two years later, we acquired the oldest and largest brandy company in Spain, Fundador. We also acquired Mexico’s brandy company Pedro Domecq El Presidente. Those milestones made us all very proud.

Through the years, I’ve always been asked about my bucket list. Honestly, it remains to be seen what new ventures are on the horizon. If I see certain room to grow, or a new opportunity to advance further, I go out and take it. One thing is for certain - I only go into businesses that I’m passionate about. That means the excitement will always be there.

KT: Every part of our business is important and interesting, but personally, for the past 20 years, I have enjoyed building places that appeal to our younger customers. These are places like our lifestyle malls, museums, hotels and resorts and our various unique thematic townships. This is something I personally continue to work on with vigour until today.

At the moment, I’m also very much enjoying driving the digital innovation of our various companies. We have created a company called AGILE Digital Ventures under Megaworld, whose role is to create and invest in tech start-ups and solutions that will bring Alliance Global into the new digital realm.

I also believe there are still a lot of opportunities for the private sector to be a partner with the government in helping the country progress through the development and investment of vital infrastructure. This is why we set up Infracorp specifically to spot opportunities to enable such partnerships.

Lastly, what makes me the proudest is to have witnessed my father achieve his lifelong dream to build the largest liquor company in the Philippines. What was astounding about this feat, from my personal perspective, was our vast overseas expansion from 2014 to 2016, when we acquired Whyte and Mackay, Bodegas Fundador and Casa Pedro Domecq, respectively.

Nothing makes me prouder than to see the Philippine flag raised in all of our properties overseas.

The company has a strong focus on sustainability and helping the local community. What inspired that and why is it so important to the family? Are there particular areas you each like to focus on?

AT: Sustainability is about longevity, not just in business, but in all aspects of life. Each and every one of us has a responsibility to do our part in creating a more sustainable world. When our world is sustainable, we ensure that future generations will thrive. I believe that any fairly successful company should make an effort to give back to society. And I think we can start with helping the local community.

Through its companies, Alliance Global has lent a helping hand to charitable groups and causes that reach out to marginalized people all over the country. Through the years, these humanitarian efforts have benefited more and more sectors of society.

Personally, I want to give back to society through education - and with good reason. When you give poor people the chance to be educated, you’re opening the door to a better life for them. Giving college scholarships grants to deserving, less-privileged youths is a number one priority for our Megaworld Foundation. Education has always been close to my heart. I came from humble beginnings, and I can say that my education helped me achieve my dream of becoming an entrepreneur.

KT: Sustainability is a top priority for Alliance Global. One of the most notable achievements for our group for 2020 was the creation of a group-wide initiative called “SustainAGIlity.” It is basically a call to action for all the companies under Alliance Global to make a strong commitment and develop a short- to long-term strategy to drastically reduce our carbon emissions, and eventually to achieve complete carbon neutrality in 10 to 15 years’ time.

We believe in the urgent need for a more sustainable way of life, in order to preserve our earth’s natural resources, because by 2050, the world’s population will be almost 10 billion (from only six billion in 2000).

Our CSR programs are equally as important to us, especially the work done by our various foundations. At Megaworld Foundation, we have given 7,000 scholarship grants since 2007.

But during this pandemic, our CSR efforts took on a much wider spectrum as the companies under Alliance Global deployed 4.1 billion Philippine pesos (US$85 million) to help in various efforts such as feeding programs for underprivileged communities, fulfilment of the various needs and requirements of our frontliners, helping our overseas Filipino workers, creation of COVID-19 testing facilities and increasing testing capacity.

We are now also joining several conglomerates in the race to bring in the vaccine for our fellow countrymen, as we work to help revive our economy in what should be the last stage of the COVID fight.

And finally, what are the most important lessons you’ve both learnt that you’d like to share with other family businesses?
AT: On the business side, a lesson I’d like to share is to know what serves your customers best. Our different companies operate under one common principle. We are there to provide a product or a service to make our customers happy. Nothing is better than having happy customers. When I think about five million Filipinos drinking our brandy every night, or if every day there are close to one million people enjoying food from McDonald’s stores—that to me is the biggest reward.

On a more personal note, it’s important that within a family, a strong work ethic and sense of integrity is inculcated. Strong values are a good foundation in any family business.

KT: Every family is different. The way a family is structured differs from one to the other such as the number of siblings and cousins, age gaps, educational background, culture, religion and type of business. These factors make up the unique DNA that makes each and every family different.

While each one is different, there exists a unique combination of rules and guidelines that is best suited for every family. These include having the right mindset, respecting seniority and hierarchy, avoiding conflict of interest, upholding integrity at all times, establishing a code of governance, and last but not the least, developing a higher purpose.

The Tan Legacy

One of the Philippines' largest conglomerates, Alliance Global Group Inc. consolidates the Tans' business interests in various industries: real estate through Megaworld Corp.; distilled spirits manufacturing through Emperador Inc.; quick service restaurant through Golden Arches Development Corp., or McDonald’s Philippines, a strategic partnership between Alliance Global and the George Yang Group; integrated tourism through Travellers International Hotel Group Inc.; and infrastructure development through Infracorp Development Inc.