Talent should decide business successor

Most entrepreneurs across the world expect their children to take over the reins of their businesses. Among Chinese, Confucianism heightens this desire because leaving family property in the control of offspring "brings honor to their ancestors".

But times have changed. Most of the sons and daughters of such entrepreneurs have grown up in luxury, and hence are not eager to carry on the hard work of their elders. It seems the saying "from shirtsleeves to shirtsleeves in only three generations" applies aptly to Chinese entrepreneurs.

Statistics show there are more than 140,000 private enterprises in Suzhou alone, and most of their founders are over 60. But as the thousands of these founders try desperately to cultivate their children as successors, comes the shocking news from neighboring Wujiang in Jiangsu province: A 23-year-old graduate chopped the four fingers of his left hand for being forced to take up the reins of his family business.

The incident reflects the problem that social transition has brought about. The Wujiang youth is reportedly addicted to comics and animated films and has little time or interest in his family business, which was started by his grandfather. He may be a spoiled brat, but should he be expected to give up his real interest to run the family business? And even if he had succumbed to pressure could he have run his family business successfully?

Many youths of the "second affluent generation" have little interest in business or planning for their future. Most of them have studied abroad, with their parents paying exorbitant amounts for their education, lodging and other expenses, and have majored mainly in business administration, finance or management. But they still dislike doing business, which has created problems especially for small- and medium-sized enterprises run by families.

Family business, it seems, has become a "double-edged sword" for enterprises. Their founders have to work not only to keep their businesses running smoothly, but also to make their children take up the reins after them.

But this does not mean the family business system is outdated on the Chinese mainland. In developed countries, family businesses provide 50-60 percent of the total employment. One-third of the world's 500 largest companies are run by families. But these family companies employ excellent management personnel as decision-makers and believe in the principle of standardizing enterprises through "institutions", which attracts talented people to contribute to their growth and profit.

In the US, for instance, the concept of competitiveness and equal opportunity for all is prevalent, and non-kinsmen have equal opportunity to compete with family members for leadership. Henry Ford once said that any of his family members who sought to lead the auto-making giant has to be evaluated by the board of directors on the basis of his/her contribution to the company. The company needs no Ford offspring as successor, he said. And true to his wishes, the post-Henry Ford period has almost always seen a non-Ford holding the highest post in the company.

Western thought and culture has had a greater impact on the Hong Kong Special Administrative Region than the mainland. Hence, family businesses there emphasize professional managers. For example, Li Ka-shing, chairman of Cheung Kong (Holdings), once promoted several managers to leadership positions. Plus, he has reiterated the importance of "institution" in the long-term development of an enterprise and awarded managers with company shares.

The above two examples show that rather than the family business it's the way they are managed that needs to be reformed. The relative isolation of family managements from society and the paternalistic "dictatorial" model of their businesses make them totally dependent on their founders and successors.

The entrepreneurs' rigidity in having only their children as successors has kept away management professionals from their companies and even resulted in family discords. Instead of insisting on having their offspring as successors, the founders should induct professional managers in their companies so that they can be run smoothly and serve their families.

Certainly, changing the old mindset and upgrading the management system cannot be achieved overnight. After all, family business began anew on the mainland only 20-odd years ago, and it is still in its initial stages of development.

Moreover, given the immaturity of the capital and professional managers' markets, and the social credit system, the cost family companies have to pay to introduce professional managers is still high. Therefore, they can achieve rapid development only after passing the rigors of fierce market competition.

The Wujiang youth should remind us that family businesses should not cut themselves off from the professional manager system. And only after they change their mentality of having nobody but their offspring as successors can family entrepreneurs maintain the momentum of sustainable development.

The author is a TV program host in Shanghai.

(China Daily 11/24/2009 page9)