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  • Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 8/6/2013

Family Business in China 

Family Business in China
Following on from the previous article, Hiring Professionals into a Family Business, we look at the rest of Raphael (Raffi) Amit’s interview with qq.com about lessons for family businesses in China.

Obviously, we have a different business culture here in Asia than in America. What’s the difference between family businesses in the East and the West?

"In principle, the problems are the same: succession problems, growth problems and management problems. However, the culture is different.


I think that on average, it’s fair to say that Asian families are more reluctant to bring outsiders into the company; they won’t necessarily trust the person who is not blood related. Second, it is a new phenomenon in Asia that most of the family firms are first generation firms with a short tradition, so that the ways for the families to preserve their values, culture, heritage and legacy are not well established. We have done a lot of research and I think families are figuring this out, and you will see the beginning of that.”


As you know, most of the family businesses in China are very small. So maybe you could share with us some lessons from your experiences with family businesses in the US?

"Every country, every society has its own value, own culture. What works in the US may not work in China. But there are some common issues faced by these companies, no matter where they are. What I can say is that those companies that are successful or have the highest economic performance and are able to preserve that family’s value and culture, are those that have put in place a very strong governance early on.


What I mean by “strong governance” is that the family has developed its family constitution, a family charter, and has widely shared norms and a code of conduct. While different stakeholders have different motivations, a very strong family governance early on can preserve family unity, culture and values.”


What is the most urgent challenge for China’s family businesses and how should they address it?

"I think succession is the number-one issue in China. I am not saying succession is not a big challenge in the rest of the world, but it’s much more profound in China than anywhere else. Because in China, the vast majority of family business are first-generation firms; most mainland families have only one child, so there is only one potential heir to the business, and the cultural issue in China is that outsiders are usually not trusted. So, the vast majority of family businesses in China are likely to be sold because nobody takes care of the business after the first generation.


In Europe and the United States, it’s much more prevalent to have a professional manager to run the family business. The succession issue needs to be addressed constructively early on in the life of the family. I think putting in place the mechanism, through governance or succession planning, is very important.


Of course, none of us likes to face mortality and think about these things when we are alive and well, but maybe it’s the most prudent thing that we can do.”


Has your family business tackled the succession issue?


Dr Amit has published extensively his empirical and field research on a broad range of issues that relate to Families and their businesses and is frequently quoted in the press. For the full story, read The Cost of Control: Managing the Growth of Family Businesses.

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.
 

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