For many family businesses, successful transition may depend on the senior generation’s ability to present a platform from which the next generation can express itself in an entrepreneurial way. In this recent article from the Family Firm Practitioner, Professor Kevin Au tells us of the challenge facing Chinese family firms. The lesson to be learned here requires a close look at our own next generation’s dreams, and desires. We already know that if they don’t love what they do, it’s rather likely they won’t be very successful. Providing our children with a platform is what differentiates a family business from a family enterprise and may well be the key to its survival.
Successful Successions in Chinese Family Businesses = Nurturing Entrepreneurship Spirit
Kevin Au, Chinese University of Hong Kong
Succession planning in Western cultures often focuses on business strategy, successors’ availability and suitability, mindset of the preceding generation, among other things. Nurturing entrepreneurship may be on the radar but it is infrequently the first discussion item when advisors meet with their clients on the topic of succession planning.
In the Chinese cultures, however, entrepreneurship and family businesses are arguably synonymous. Family entrepreneurial spirit fuels the engine of businesses in the mainland, just as it has done for other Chinese entrepreneurs in the Asia Tigers. A large part of the entrepreneurship spirit arises from the family, so successful succession is not just about enticing the incoming generation to take over the family business from the first generation. Instead it is about building a platform for the incoming generation.
From playing the role as a family business angel to nurturing the future entrepreneurs in multiple stages, so that they can thrive on the foundation and resources of the family and the family firm, Chinese families must look at successful trans-generational success as the goal.
In mainland China, the rapid growth and changes in the environment and the society mean that many of the businesses established by first-generation entrepreneurs after the Open Door Policy in the 80’s and 90’s have become outdated. Many of the private businesses started out as mom-and-pop or father-and-son shops. Some of them managed to expand rapidly and even gradually grow into multinational companies. Yet, if they intend to survive across generations, they need to renew their business by creating a brand, carrying unique functions, or coming up with new technology and creative features.
To do so, Chinese family business firms can work with their advisors to focus on identifying, educating and nurturing the second generation to become next-generation entrepreneurs. They must learn to take calculated risk, overcome fierce competition, act proactively on new markets, and innovate continuously, such that they can expand an already existing business to become a leader in the industry and other sectors in China and even across the globe.
