Hong Kong’s family firms struggle to merge tradition with young ambition
Originally published at the South China Morning Post on October 15, 2016.
Traditional family businesses dominate Hong Kong and mainland China’s economy – but fewer members of the younger generation seem willing to take up the mantle, putting many firms’ futures in doubt.
Family controlled businesses now make up approximately 60 per cent of both Hong Kong and the mainland’s GDP, experts say. About 3 million private enterprises on the mainland are also facing succession, according to a 2014 report from the Chinese Academy of Social Sciences.
Yet a survey last year by Shanghai Jiao Tong University showed that more than 80 per cent of the next generation are unwilling to join the family business.
“Some tycoons are now using professional managers outside of the family to run their enterprises,” said Michael Chan Yue-kwong, honorary chairman of the Legacy Academy institution dedicated to studying family firms and succession. “Even many of the local property tycoons might not have their own children managing the business.”
Chan, whose institution provides consulting services to family firms, said that transgenerational differences are creating family conflicts and posing challenges towards family business succession.
“Families always put the emphasis on the successor, ignoring the interests of other siblings. You need to ensure that their interests are also looked after,” said Chan, who was the former chairman of Cafe de Coral Holdings Limited.
With many tycoons having made their fortunes in industrial manufacturing, first generation business owners are typically strong willed and prefer to hang onto power, he said. The second generation however tends to have been educated overseas, are more elitist and have their own ambitions and different ways of thinking.
The key elements of a functional family business are making sure that everyone’s interests are respected, and that each family member has a clearly defined role that they accept. Families should hold meetings and create charters, and the heads of families need to be transparent about their values, vision and expectations, he added.
Hong Kong’s high profile tycoon families have made the news over the years for heated squabbles over family business succession. In 2012, two families of the late rice-cooker tycoon William Mong Man-wai to the matter to court in a dispute over who should control HK$1.1 billion of his fortune.
Martin Ng Ting-hin, a 29-year-old second generation businessman who joined his family’s manufacturing business Luck Tissue about four years ago, said that at first he found it hard to find his place because he had a background in marketing, which did not exist in the company at the time.
Ng studied in the UK and often has different views from his parents not only on business but also on social issues, which he said can be tough to reconcile.
“I asked my father before why he doesn’t just hire someone to do what [he is] doing now. He said he would rather close it down because he would lose money,” said Ng, who is a client of Legacy Academy. “I always knew I would contribute to the family business ... but I did feel restricted.”
In recent years, Ng has helped innovate his family’s company by introducing marketing concepts as well as new projects like producing environmentally friendly tissue made from bamboo.
One of the biggest challenges of being part of a family business is switching between a professional and personal relationship, Ng said. There is a lot of pressure on him to prove himself, yet being part of the business has helped strengthen the trust and bond he has with his parents, he added.
“When I’m at home, I have to think - is mum asking me this question as my mum or as my boss?” Ng said. “I’m still practising.”
Ng said he is not worried about any conflicts because he has a good relationship with his siblings. As for marriage, he said he would have to consider how his partner would fit into the business, but he would prefer to keep the relationship separate because he has seen how it can create personal conflicts.
Roger King, director of Hong Kong University of Science and Technology’s Tanoto Centre for Asian Family Business and Entrepreneurship Studies, said individuals are now increasingly prioritising family over business. Many wealth creators care more about preserving wealth so that the next generations can have a better life, as well as maintaining social harmony within the family, rather than business succession, he said.
“There’s no sense in creating money if you have siblings fighting over the money and the family breaks apart,” King said, adding that ownership pruning and diversification are the key factors for sustaining family businesses. “The idea of having a family stick with the same basic business ... I would suggest that it might not be the right thing. There will always be businesses controlled by one person or more, but not the entire family will get involved.”