10 Great Questions for Family Business Governance

Family Business Governance

10Q for the Modern Asian Family

Prof. Gregg Li, 10 Jul 2014

Chinese University, Center of Family Business


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?


3 QUESTIONS FROM EACHLet’s give this a try shall we!


From one to many…


Provenance1. How is everybody related and

what does each bring to the party?


Communication

2. What language are we speaking and how do we communicate with one another (or at all) ?


3. “What’s more important? The family or the family business…”

Prof. Roger King

Relevance


Connectivity

4. How well are we connected? Who’s on the family facebook? Where are the nodes of influence?


Tradition5. How does the family come together to solve family business problems?


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?

Learn to Adapt


SUCCESSFUL 4TH GENERATION FAMILY BUSINESSES

80% of family businesses do not last more than 50 years (usually governed by 3 rd 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 14 th generation Nyonya Meneer (founded in 1919). One of Indonesia’s largest

traditional medicine companies, now in the 3 rd generation


CHALLENGES OF FAMILY BUSINESSES

1. Succession2. 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. Unwill ing to trust non-family members and unable to keep professionals (glass ceiling)

6. Dispersed shareholdings and increasingly diff icult 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


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 vert ically integrated.

4. Pay attention to develop and rapidly grooming the next generation.

5. Change with the t imes. Business and practices change but values remain consistent. Business focused on markets, not relationship.

6. Focus. Niche, t ied 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).



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

17


Sample Entry Criteria

18

Entry Criteria

6

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


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

19


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

http://shanghaiexpatizen.blogspot.com/2012/01/shanghai-impressions-part-one-language.html



http://isacgoulart.deviantart.com/art/the-banyan-tree-245859159

http://isacgoulart.deviantart.com/art/the-banyan-tree-245859159

http://www.asdongroup.com/connectivity

http://www.asdongroup.com/connectivity

10 Great Questions for Family Business Governance

Business

Transcript of 10 Great Questions for Family Business Governance