Improving family business governance in Asia

2. 2014 Prof. Gregg Li, All Rights Reserved. 26/27/2014

3. A Healthy Family’s Apple Tree
• How would you begin to heal the divide in
a family business and how are you able to
enhance sustainability?
• What 10 questions would define your
solution space?
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4. 3 QUESTIONS FROM EACH
Let’s give this a try shall we!
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5. From one to many…
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6. Provenance
1. How is everybody related and
what does each bring to the
party?
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7. Communication
2. What language are we speaking
and how do we communicate
with one another (or at all) ?
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8. 3. “What’s more important? The family or the
family business…”
Prof. Roger King
Relevance
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9. Connectivity
4. How well are we connected?
Who’s on the family facebook?
Where are the nodes of influence?
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10. Tradition
5. How does the family come
together to solve family business
problems?
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11. 6. What business information do we provide equally
to all members?
7. What is the extent of the members’ voting rights?
8. How are family members introduced into the
company? How do we bring in high-flyers?
9. How do we invest in every family member?
10. What nutrients do we provide to the roots and
what do we expect in return? How are the
members rewarded?
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12. Learn to Adapt
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13. SUCCESSFUL 4TH GENERATION FAMILY
BUSINESSES
 80% of family businesses do not last more than 50 years
(usually governed by 3rd Generation). But so do many
businesses.
 On average however, family businesses last longer.
Some examples of those successfully extended beyond
this twilight zone:
 Hoshi Ryokan (founded 717). The world’s oldest hotel still in
operation. Operated by the same family for 46 generations.
 Chateau de Goulaine (founded 1000). Vineyard, museum,
butterfly collection.
 Nestle (founded 1866). The world’s leading nutrition, health
and wellness company.
 Kikkoman (founded in 1917). Predecessor company founded
in 1630 by Mogi family, now in the 14th generation
 Nyonya Meneer (founded in 1919). One of Indonesia’s largest
traditional medicine companies, now in the 3rd generation
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14. CHALLENGES OF FAMILY BUSINESSES
1. Succession
2. Perception of unfair expropriation, insider’s
dealing, or excessive compensation to family
members
3. Diversity in members: Each is different in
terms of education, communication style, social
network, and management competency
4. Entrenchment of members…can’t fire
incompetent ones
5. Unwilling to trust non-family members and
unable to keep professionals (glass ceiling)
6. Dispersed shareholdings and increasingly
difficult to command a majority for change
7. Too many cousins, each wanting something
different (demand for more equal rights)
8. Entitlement: Expectations that the family is an
ATM, for withdrawing whenever money is needed
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15. ENDURING FAMILY BUSINESSES…
1. Know how to preserve family’s unique assets and
value. The family story. There must be a reason for
existence!
2. Believe in open communications. Strong family learn
to talk to one another, openly and have fun doing it.
3. Break down walls. No fiefdoms. Usually vertically
integrated.
4. Pay attention to develop and rapidly grooming the
next generation.
5. Change with the times. Business and practices
change but values remain consistent. Business
focused on markets, not relationship.
6. Focus. Niche, tied to an enduring business
(construction of temples).
7. Link business back to the society where they operate
(CSR)
8. Separate family from ownership is key.
9. Employ outside professionals and able to merge
corporatization with family values (e.g. Lee Kum Kee).
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16. HOW SOME FAMILIES DO IT?
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Talent Development

17. Management Trainee Program
• Develop a team of talented managers as future leaders
• Multi-national enterprises invest heavily in future leaders
– Swire Group
– Hong Kong Broadband
– Li and Fung Group
– General Electric
• Identifying the High Flyers
– Achieved project success
– Managing consequences
– Bringing the troops along
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18. Sample Entry Criteria
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Entry Criteria
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4
4
4
4
3
3
3
Exellent English
Proficient Chinese
Up till 3-year working experience
Interpersonal and communication skills
Eager to learn and have strong initiative
Willing to be relocated to other areas
Right of abode
Recognized university degree
Proficient local language
6/27/2014 2014 Prof. Gregg Li, All Rights Reserved.

19. Program Structure for Internal
Change Agents
• Stage 1 – Introduction / orientation
– Seeing the “Problem Situation”
• Stage 2 – Learning and performing
– Improving practical problem solving skills such as Six Sigma
– Learning basic professional knowledge
– Learning to innovate and collaborate
• Stage 3 – Persuading
– Writing up the findings
– Presenting the alternatives
– Applying the solution and elements of execution
• Stage 4 - Scaling
– Solving cross departmental problems
– Identifying business impact
• Stage 5 – Leadership through mentoring
– Mentoring others
– Finding a great coach
196/27/2014 2014 Prof. Gregg Li, All Rights Reserved.

20. Picture References
• http://www.ceptara.com/blog/How_To_Problem_Definition
• http://shanghaiexpatizen.blogspot.com/2012/01/shanghai-impressions-part-one-
language.html
• http://isacgoulart.deviantart.com/art/the-banyan-tree-245859159
• http://www.asdongroup.com/connectivity
• http://theowlskull.blogspot.com/2013/12/family-tradition.html
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