The Critical Generations – Out of the Succession Dilemma of Chinese Family Businesses
By Professor Joseph Fan, CUHK
The Critical Generations – Out of the Succession Dilemma of Chinese Family Businesses (关键世代：走出华人家族企业传承之困) is the latest book by Professor Joseph P.H. Fan (范博宏), a dedicated researcher and educator of family business governance at CUHK. Motivated by his widely quoted research of extreme poor succession performance of almost 250 Chinese family businesses, the book is a serious inquiry into the causes and remedies of Chinese families’ succession struggles.
The Critical Generations includes Professor Fan’s 23 column articles that diagnose the root causes of the succession problems and introduce a system of governance to overcome these challenges. Many materials in the book are outcomes of Prof. Fan’s research on thousands of Chinese businesses in China and East Asia. To illustrate important concepts, the book also offers many case studies and examples of Chinese and Western families.
The book has four parts. Part I identifies that successions are challenging because it is difficult to transfer intangible family assets such as values, networks, and relationships. Chinese families also face various family, industry, and institutional obstacles such as family brain drain, regulatory changes, and political uncertainty. Business owners should have a clear understanding of their family assets and obstacles, and plan for their ownership and management successions early on.
Part II covers family governance and ownership design. The focus is whether and how Chinese families, influenced by their owned national and family cultures, should employ and modify Western tools to harmonize family relationships and improve business efficiency. For example, whether and how the dual-planning process can be modified so that it can be enforced in a family influenced by the Confucius’ teaching? How legal tools such as family trusts and foundations can be improved to help sustain a family business? How do business owners balance external capital needs and ownership control in their emerging financial markets? And so on.
Part III explores how Chinese families could successfully establish and transfer critical assets such as family values, entrepreneurship, and innovative cultures. Long-term efforts in education and family governance are important. Family members are in turn key intermediaries of the assets so that they can be passed on to other corporate stakeholders. A family’s multi-generational effort in brand building is a good example of such transfers.
Part IV of the book discusses how Chinese family businesses should design its corporate governance so as to balance the interests of owners, managers, and other key stakeholders. What are the roles of family managers and how should they work with non-family managers? How family and non-family mangers’ promotion and compensation packages should be different? How to design a board of directors to recruit talent and reputation, and signaling corporate culture?
The Critical Generations provides a wealth of knowledge for Chinese family business succession planning. The book would be interested by business school students, business owners, their families, professional managers, and service providers.
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