Succession often a taboo topic: Report

Younger generation needs to find ways to discuss sensitive but pertinent issues with head of family. -ST

May 01, 2009
The Straits Times

By Gabriel Chen

TALKING about sensitive matters such as death, inheritance and related matters is difficult for most business families, no matter what the culture.

But for Chinese business families, a frank discussion about who takes over at the helm often poses a particularly formidable challenge, says a new study on succession planning commissioned by HSBC Private Bank.

Part of the problem is the prevailing paternalistic culture in Asia, which could lead to cases where children might not discuss plans on how to keep the family business running as they are afraid of raising sensitive topics such as death with the older generation.

‘It’s not so much that Chinese fathers are autocratic, although of course, some can be,’ said Dr Kelin Gersick, co-author of the 32-page report. He was in Singapore yesterday to talk to HSBC clients.

‘It’s more that the hierarchical structure of the family reinforces the deeply held sense of life’s essential orderliness.’

He said that for the patriarch’s children to raise the continuity issue directly would violate their own sense of proper familial process and decorum.

Such a discussion might well offend their father, threaten the harmony of the family and raise the possibility of triggering an embarrassing loss of face, he said.

Specifically, Dr Gersick lists three critical challenges that Chinese family enterprises will have to meet and solve.

First is to manage the retirement of founding patriarchs – an issue that has come to the fore as many of them have established their business and are getting older.

Second is to harmoniously integrate the next generation of family shareholders and managers.

The final challenge is to create governance structures and family collaboration that are ‘responsive’ to global standards of accountability while, at the same time, maintaining family commitment, he said.

Dr Gersick delved deeper into the challenge of integrating the next generation.

He said that cultural tension emerges when the patriarchs and their offspring do not agree on the style of leadership.

‘For example, many Chinese entrepreneurs adhere rigorously to the Confucian value of frugality,’ he said.

‘For them, keeping production costs down is an imperative, and unnecessary elaboration is seen as wasteful and even shameful.

‘Their offices and factories are modest relative to those of their foreign competitors of comparable size.’

It is different among their offspring, who have been exposed to a ‘world of more economic comfort’, he explained.

‘They are more relaxed about publicly enjoying the benefits and even luxuries they can afford, and they are eager to take risks and use capital to invest in opportunities with significant upside potential.’

Dr Gersick suggested that in major business families around the world, it is not uncommon to have a family assembly – a meeting of all adult members of a family, usually once a year.

But one problem is that it is hard for many senior-generation Chinese family leaders to get the entire family together to discuss a matter of general family concern.

‘It would be like expecting a military group made up of representatives from all ranks…too many layers of status, risking a violation of appropriate rituals, and ultimately chaos,’ he said.

What to do then? It all lies in the implementation, Dr Gersick said. He suggested that the family council – the ‘executive committee’ of the family assembly – could build agendas gradually, and tackle the more threatening and potentially divisive topics later.

The earlier meetings could be used to review and codify the family history or statement of values, he said.

At the same time, timing is also important.

‘If discussions about critical dilemmas are put off for too long, the younger generations will lose any faith that the council is anything different from their typical family conversations,’ he added.

Link

Back to Articles menu