The challenges that were met and conquered by such globally renowned family businesses as Peugeot, Kikkoman, Tata Group, and others.
There has been a resurgence of interest in family business in China thanks to the influence of Chinese family-owned businesses. Despite the dramatic shifts occurring at the heart of Chinese family companies, five universal obstacles persist for their founders. Owner-managers may move the succession process forward in their companies by considering the following fundamental concepts and avoiding the disruption that frequently accompanies poorly managed transitions.
Businesses that have been passed down through generations and have weathered the five big succession problems have often thrived for hundreds of years, if not longer. The following are some instances of successful family-owned businesses from different parts of the world that have achieved a seamless transfer from one generation to the next and continue to prosper today.
- Peugeot – The renowned French automaker was run by the same family from 1810 until 2014, when they ceded majority ownership to a Chinese automaker and the French government.
- Jardine Matheson – Throughout its 185 years of existence, Jardine Matheson Holdings—one of the city’s founding trading houses, or “Hongs”—has remained under the direction of the Keswick family.
- Groupe Tata – The company has been owned and operated by the Tata family since 1868, and their efforts have helped make India one of the world’s most rapidly developing nations.
- Ford Motor Company – One of the most recognisable names in the United States, the automaker dates back to 1903 when Henry Ford introduced mass manufacturing of cars.
Several lessons may be gleaned for success by Chinese entrepreneurs from these established businesses. Mastering the following five obstacles is crucial to ensuring their own longevity.
1. Recognizing the significance of succession in the larger culture
In the end, every succession is a reflection of the prevailing cultural norms in the country or area. The official and informal norms of the community in which families live and conduct business have a significant impact on the nature of succession. Chinese culture, shaped by Confucianism, Taoism, and Buddhism, values group or communal efforts above those focused on the individual. In this social context, potential family company employees may feel as though their opinions aren’t being heard by the founders. It is possible that the anticipated generational transition of ownership and management of their family-run businesses will not occur if these crucial people are disregarded in favor of group recognition. As a result, owner-managers should take on a unifying role to ensure the following generation doesn’t seek outside the family business for validation.
2.The practice of passing down financial resources among families
The assets of a family are its name, reputation, heritage, networks, cultural traditions, and ideals, all of which have the potential to bring in significant financial returns. While it is clear that successful founders may make valuable contributions to their companies, it remains a major issue to institutionalize entrepreneurial spirit and pass on the benefits of their contributions to future generations. Owner-managers may serve as excellent examples by devoting more time and energy to the next generation of business leaders, accompanying them to business meetings and including them in the establishment of governance frameworks. If a company’s momentum is to be maintained as it passes from one generation to the next, its founders will need to implement effective knowledge-transfer methods.
3.Building Capable Children
Members of two or even three generations of the same family commonly operate side by side in modern Chinese firms. Founders in this circumstance must work to bridge the gap in education that exists between them. Younger generations are focused on building their resumes, while the older generation is proud of the wisdom it has amassed over the years. Founders should exhibit tolerance and respect for future generations while also pushing them to pursue further education by enrolling in business schools overseas. They should also push the following generation to gain relevant managerial experience outside the family business. With strong management and business expertise under their belts, the following generation has a stronger chance of being promoted to leadership roles within their family businesses.
4.Having a conversation across the generations
First-born children in traditional Chinese society view themselves as junior to their parents and other seniors, but as senior to their younger siblings. If ideas from below are seen as less significant than those from above, this dual identity might impede personal and professional development. It’s easy for routines to become ingrained and for resistance to change to spread. It’s possible that some of the knowledge Chinese families send their children abroad to study will be “lost in translation” when those students return home. Hence, communication methods between the family and the enterprise must be established to manage heir expectations while protecting the dignity of the elder generation. The founders’ desire to instill in their offspring an entrepreneurial spirit indicates a counterintuitive mode of communication that values taking calculated risks in an environment that encourages creative thinking.
5. Taking part in any sort of long-term planning
There is often not enough time in the day for founders and owner-managers to take care of their immediate requirements, much less the needs of their descendants. Many organizations will not even think about succession planning until it is too late. What if, though, a founder is hit with a health crisis? As a result, the family is forced into a succession crisis without any long-term preparation to lead them. Just 22% of Chinese founders, according to the study’s authors. Next-gens can’t make the move smoothly without a road map. Without a clear vision for the company’s future, founders might come seem as incompetent and unprofessional in the perspective of their successors. When heirs are disillusioned by mixed messages from on high, they might commit to careers outside the family business. This leaves the company with no viable candidates to take over.
Founders have a much better chance of ensuring that their families and businesses thrive for future generations if they address these five straightforward succession problems. They can ensure their companies last for generations by laying a strong groundwork for future growth and success.