Integrating the Chinese Culture and the Western Culture

The Exploration of Overseas Chinese Family Businesses in Southeast Asia

Southeast Asia is the main gathering area for overseas Chinese enterprises among which the vast majority was established upon the accumulated wealth by generations of laborers’ family who started from nothing and sailed south from China to seek for fortune. Compared with their European and American counterparts, Southeast Asia enterprises, heavily affected by the Confucian culture, tend to select successor from within the family for maintaining the family’s control over the business. Theoretically, an outstanding successor should demonstrate high caliber in many aspects, such as personal traits, leadership, talent, managerial skills and communicating ability. However, it is an unrealistic expectation that the heir could be so perfect, and the elder generation has to give a second thought to the composition and organizational structure of the management team.

The three most representative Southeast Asia family enterprises, the Café de Coral Group in Hong Kong, Santeh Co. Ltd. in Singapore and HCG in Taiwan, typify the similarities and differences in operation and succession of many overseas Chinese businesses. Bearing the similar track of development, they were once confronted with difficulties and frustrations alike. Being originated from different institutional environments, they are holding varied plans for succession. But after all, they share the common point of keeping learning from both eastern and western culture, groping their way of family business succession with the characteristics of ethnic Chinese in Southeast Asia.

Café de Coral: Pursuing the Harmony among Individual, Business and Family

The Café de Coral Group was registered for establishment in October, 1968 and went public in Hong Kong Stock Exchange in July 1986, and thus became the first local listed group company in catering. In October 2001, the group officially jumped to be one of the 200 constituent stocks of Hang Seng Composite Index Series. With unremitting efforts for nearly half a century, it has grown from a small-sized local company to the present multinational group, now steadily leading the fast food market in Hong Kong and having been ranked the largest Chinese fast food brand in Canada. Its business footprint is striding over two continents, holding not only 330 business units and 120 branches in Hong Kong and Mainland China, but also about 140 operating units in North America.

CHEN Yuguang, chairman of the group, will be sixty years old in three years. In addition to the business operation, he has been concerned more about the family heritage. “In three years, I will retire from the position of CEO and go behind the scenes. Handing over my company to the second generation is like giving my life to him. It’s very difficult to let go, but I have to face it,” He said frankly, “Business succession is a thorny issue, and as a family business, we should start as early as possible. This is especially true in China where you can observe the influence of Confucianism here and there. For example, the priority is often given to the seniority rather than capabilities, and the importance of blood ties and the superiority of male decide the social pecking order. All these make succession a more complex issue.”

In the eyes of the first generation like CHEN Yuguang, what values more is the inheritance of family tradition rather than of wealth, which could provide more opportunities and platforms for the growth of the next generation as well as better maintain the relations among family members. Meanwhile, they hope the second generation could give more consideration on how to increase the value of the family business. “For the second generation, they first need to establish that they are of real worth to the company as they can create value for it while maintaining the family philosophy or spirit. They cannot lose the DNA and should give full consideration to the tradition, history and responsibilities of the family. Ideally, I think the second or third generation should become a leader of a family or the mentor for the future alternation of generations rather than merely an heir of fortune.”

The first generation is also aware of the pressure and puzzlement the second generation has to deal with when receiving the public attention as well as balancing the family responsibilities and personal ambition. CHEN Yuguang believes that the children should not completely sacrifice their own will and achievements for the family business since the most ideal succession of a family business is to realize a perfect balance among company development, familial harmony and personal accomplishment. “I think a sound family business succession plan should take the three factors, namely, the business, family and personal development into consideration. Meanwhile, the family members need to work closely with a clear division of responsibilities, especially in some intangible aspects such as intellectual property, the cultivation of a qualified successor in the next generation, and etc. Family members could play a more important role in these aspects.”

Santeh: Inheriting the Intangible Assets

As the second generation inheriting the Santeh family business, GAO Quanzhi is now the person in charge of the China Sandexing Group, the subsidiary of Singapore Santeh. The Santeh Group in Singapore was founded in 1979 with a registered capital of 256 million Singapore dollars. It began to enter the Chinese market in 1985, and invest in construction materials, rubber, plastic pipes, real estate and other fields, with projects covering many provinces and municipalities including Fujian, Shanghai, Jiangsu and Shandong. As the second-generation successor, GAO believes that the biggest challenge in family business succession is the inheritance of intangible assets.

The heritage of family business can be divided into two parts – inheriting tangible assets and intangible ones. The former refers to the transference and handing-over of wealth and power, which could be simply realized via the notification or declaration of the elder generation. But it is not the same case with the intangible assets. For example, those enterprise veterans who fought side by side with the elder generation are the crucial intangible assets. Their attitude could exert great influence over the execution ability of the second generation who takes the helm and also the development of the company. They grew together with the first generation to be the mainstay of the enterprise, but their attitude will change a lot when the second generation assumes power. If they do not agree with the new successor, they may resist or overtly agree but covertly oppose. Then it would be difficult for them to support the new successor wholeheartedly, thus bringing about the resistance and obstruction. GAO Quanzhi believes that the key to solve the problem lies in how to respect those business veterans and try to reach a consensus with them by adopting a modest attitude: “I have established an executive team for decision-making which gets them fully involved and lets them feel fully respected. All the team members can propose their own opinions or ideas. Team discussion and consensus are important before making any decision for the company. When those enterprise veterans get to know my working style and approaches as well as feel my respect to them, they will spontaneously trust and support me.”

Another example of intangible assets is the social network the elder generation has created outside the company. Although the external contacts are not involved in the business decision-making, a good resource of social networking could further promote the business development. Through years of pioneering work, the elder generation has maintained good relationship with governmental organizations, social groups and entrepreneurs from various industries, which are crucial to the sound and sustainable development of the enterprise. However, the inheritance of social connections cannot be realized through a simple gesture of giving. To cite an example, when making contacts with relevant departments for business development purpose, the elder generation could, with their good relations for years, easily get the department leader personally lend a helping hand, and thus yield twice the result with half the effort. But when you, the new successor, have something for consultation, even if the department leader knows who you are, it would be difficult for him to open his heart or directly tell you how to solve the problem since you two are merely strangers. As a result, the problem is often shoved around, wasting time and energy. “In this respect, I suggest pursuing mutually beneficial relations with a sincere and friendly attitude, and I’m still conducting relevant researches.”

GAO Quanzhi finally talked about the inheritance of intangible assets such as business philosophies, corporate culture and values. “In junior high school, I often worked as an intern during vacations, but the western education I began to receive since senior high school made me feel being unable, or even reluctant, to adapt myself to the family business when starting my career. It took me many years to learn and adjust myself to identify with the corporate culture and values.” GAO Quanzhi said, “There are huge differences between eastern and western culture. It took decades for the elder generation to establish the business, during which the corporate culture, business philosophies and values have been developed and ingrained in the organization. To make any change would be irrational. I have thought if I brought what I have learnt in western countries into practice, the company would have developed faster and achieved an even better result. But I was wrong. Copying foreign things blindly will result in many problems, so I changed my mind and began to take a new look at Chinese traditional morality, Confucianism and my father’s instruction. Integrating all those into the family business, I have obtained an in-depth understanding of our own family philosophy, culture and values. This was a more conducive way to speed up the development of the family business.” Every family business has its own culture, which has been developed over decades. It would be unwise to make cultural changes or blindly implant new cultural elements when you are still not ready to do so. You should bear in mind that the best culture is the one that suits your company.

HCG: Breaking the Spell of “Fortune Cannot Last for Three Generations”

HCG was founded by CHIU Hocheng in Taoyuan, Taiwan in 1931. The present president CHIU Shikai is the third generation inheriting the business. He said that when founding this company in the forties, his grandfather did not expect it to last for 83 years and become such a widely-known brand. The CHIU family is breaking the “magic spell” that “fortune cannot last for three generations”.

The case of HCG also demonstrates that the succession between the first and second generation is prominently different from that between the second and the third one. “My father has a large family of 7 brothers and 4 sisters. When handing over the business to the next generation, my grandfather definitely selected the eldest son simply because of the traditional Confucianism in Chinese people’s mind. Meanwhile, the remnant Japanese culture left from the period when Japan invaded and occupied Taiwan also suggests the eldest son be the successor.” CHIU Shikai said, “But when my uncles retired and handed down the business to the third generation, they were considering breaking the traditional way of thinking in business succession. They drove the company to go public and established the board of directors, working out the rules and regulations for a modernized company. ” The elder generation had no choice but to work in the company when they were young, but they gave more options to their descendants. This also means higher requirements because the children could say no to take the helm, but if they said yes, they should shoulder the due responsibility for the business development.

CHIU said when the third generation took charge, the family members began to fade out of the business operation and played the role of board directors only, and left the company to the team of professional managers. But as the chairman of the company, he is still involved in some managerial work, which makes his role fall in between CEO and chairman in western businesses. He said that as the third generation successor, he can feel the ordeal and pressure, but he does not want the spell of “Fortune cannot last for three generations” to be fulfilled in himself.

“My grandfather’s name is CHIU Hocheng. What does Hocheng stand for? It means that harmony could lead to success. The concept of harmony does not equal to making compromises. Instead, it means we need to work out ways to realize the harmony with family members, professional managers and clients. That’s what we need to put efforts on and we are now striving for it.” CHIU Shikai believes that what values most to a family business is not the company itself, but the spirit and value of the whole family, and the words and deeds from several generations. “From my grandparents to the generation of my father, they have been consistently instilling a concept into our mind, that is, what comes from the society should be returned to the society. That is why my grandfather sponsored to build temples and schools in Taiwan from time to time. The time is now for our generation to pay much attention to the social responsibilities.” It is the entrepreneurship and the philosophy of life transmitted through successive generations that help this company go through the time of turbulence and war, respond flexibly to the market changes and develop steadily and surely to the current scale.