CEIBS Kaifeng Family Heritage Centre Featured on BTV Programme about Family Business Succession

Professor Jean Lee, Academic Director of the CEIBS Kaifeng Family Heritage Centre, was joined by several CEIBS alumni on the BTV Finance Channel’s “Financial Community” programme for a discussion of the unique challenges faced by family businesses during the leadership succession process.

CEIBS Kaifeng Family Heritage Centre Featured on BTV Programme about Family Business Succession

During the show, which was broadcast on March 8, 2014, the alumni shared their first-hand experiences of working in their family’s business. They included:

-Xinjiang Xiangdu Winery Chairman Ms. Li Ruiqin and her son, CEO Mr. Zou Jiyun, who are both participants in the CEIBS China Entrepreneurial Leadership Camp. Ms. Li believes that for second-generation business successors to be successful in leading the business forward, they must possess strong management know-how and talent, and a deep sense of responsibility for the business. Her son agrees with her business philosophy and after developing his expertise in both wine and business management stands ready to take up the reins of the family business.

-Gaiqi (China) KDG Co. General Manager Ms. Huang Shali, a CEIBS EMBA alumnus, is part of the second generation involved in her family’s business. During the programme, she explained how her father helped her learn about business and brought her into the management fold of the company.

-Beijing Tiandi Jinghua Education & Technology Co. Chairman Mr. Liao Zhongyang, a CEIBS EMBA alumnus, spoke about why an enterprise’s development stage should determine whether a second-generation family member can take over leadership of the company when the founder steps down. He explained why new start-ups and listed companies tend to follow a different succession path.

-The younger generation’s point-of-view was represented by Mr. Han Yu, a member of the CEIBS Kaifeng Family Heritage Centre’s Pando Association and General Manager of San Meng Home Textile Co., and Mr. Wang Tianxiang, CEO of Shanghai Yuanzhongtang Rosewood Furniture Co. Both were born after 1985.

CEIBS Kaifeng Family Heritage Centre Featured on BTV Programme about Family Business Succession

During the programme Prof. Lee also shared some of her research findings on family businesses. Her research shows that 40% of Chinese family businesses are now being run by the second generation. She believes that it is important to instill the founder’s entrepreneurial spirit into the second generation before the succession process can begin. Her research also shows that professional managers today run 30% of the Chinese family businesses. She said that when a business is handed over to the founder’s partner or a trusted senior aide, the enterprise stands a fair chance for survival.

Most Chinese family businesses today are still run by their founders, who began the enterprise as China’s Reform and Opening Up policies took hold. Well into middle age, these entrepreneurs are now focused on succession to ensure that their company will survive well into the future. Prof. Lee said that a survey on finance.qq.com showed that 90% of Chinese business founders expect their children will take over their companies. However it remains to be seen whether this wealthy second-generation rich will be up to the task, or whether professional managers might be better suited for the job. For private companies, three factors should be considered when choosing a successor: the type of enterprise and its stage of development, the offspring’s capability, and the wishes of the founder and the successor.

Those born into the family business have an acute sense of mission and responsibility which makes the second generation uniquely positioned to hold on to the founders’ entrepreneurial spirit; this kind of emotional investment in a company is hard to find among professional managers.

A family enterprise requires a different management model at each development stage, and each demands different management skills. The first generation in the enterprise regards family relationships as the major driving force behind their companies; many founders began their business as a means of providing for their family. When the second generation picks up the baton they typically begin to shift their focus towards sound management practices which nurture corporate growth. Whether a family business can last over three generations depends on the behavior of the family and whether established corporate governance practices are followed in running the business.