In China, family outranks business

Published in The News & Observer January 16, 2011

China is clearly on a track to become a major superpower.

In 2010, China’s GDP surpassed Japan’s to become the second-largest in the world behind the U.S., and according to Goldman Sachs is projected to pass the U.S. in about 15 years. Closer to home, is there nothing that is not “Made in China?”

When I was 25, I accepted an internship offer from IBM to work in Hong Kong, making the conscious decision that I would not be pursuing a career at my family’s business. A remarkable confluence of events prompted me to revisit Hong Kong over the holidays: An old IBM intern friend of mine invited me to visit, two other intern friends would be in town, I had a mini business school reunion, and perhaps most important, my wife threatened to leave me if we didn’t go somewhere warm for the holidays.

However, I also had the unique opportunity to meet with a Chinese family business that is struggling through succession turmoil going from the second generation to the third.

Lucy, not her real name, is a very bright and young Chinese woman who originally contacted our firm in response to an article my brother and business partner wrote for Businessweek. While she has spent some time off and on working for her family business, her mother has been pressuring her to join the business full time. “I have tried to turn my mother down, but she gets resentful,” Lucy said. “Now she is saying I have no choice.”

When Lucy and I met, at Starbucks of all places, she was quite torn. She has now joined the business, but is not sure if she wants to make this her career. Her father is the majority shareholder, but the combination of age, business pressure, and internal issues have taken their toll on his enthusiasm. His brother, the other shareholder, is continually making decisions that get the company into hot water, forcing him to deal with these issues. His son, who is well-educated, has not stepped up to lead the company.

At the same time, the internal politics are rampant. Lucy said, “My father has given me his blessing to join the business and try to take on a leadership role, but I’m not sure if this is what I really want to do.”

With business growth slowing, poor communication, and the need to find new leadership, they could consider bringing in an external president. However, this is anathema to a Chinese family business.

‘Business families’

“For the Chinese, the term ‘business families’ may be more appropriate since the family comes first and the business comes second,” says Ming-Jer Chen, a business professor at the University of Virginia and author of “Inside Chinese Business.” “Rather than creating wealth, the Chinese tend to see their business duties more as responsibilities to the family.”

My suggestion to Lucy was to dive into the company, predicated on one thing: Get the commitment of her father to provide more than his blessing, but provide mentoring. Set up a regular time to meet for a meal once a week, with the sole purpose of imparting to Lucy his knowledge of not just the business, but ways their company does business that are not written down anywhere but reside in the many years of experience and knowledge in his head. With this support, try to gain a handle on the business.

Along the way, she might discover that she has a knack for the business, can take it to the next level and enjoy it. On the other hand, she might find out the opposite. If so, a few years of good experience at her family’s business cannot hurt and could be very beneficial to her future. Not to mention that she did her best for the family.

Reflecting on Lucy’s situation, it becomes apparent that this is a fairly common family business story. Maybe despite the many differences between China and the U.S., at least at a family business level, the divide is not so great after all.

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