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FAMILY BUSINESS: FAILURE &
SUCCESS IN ASIA
Kris Supavatanakul Ched Ramyarupa Independent Study Professor Yasuhiro Yamakawa
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TABLE OF CONTENTS Abstract
1. Introduction of Family Business
1.1. Defining Family Business
1.2. Defining Success
2. Objective of Study
2.1. Context
2.2. Key Issues and Questions to be Investigated
2.3. Methodology
3. Issue of Family Business
3.1. Three-Circle Model of Family Business
3.2. Three-Dimensional Developmental Model
3.2.1. Ownership Developmental Dimension
3.2.2. Family Development Dimension
3.2.3. Business Development Dimension
3.3. Casework
3.3.1. Yung Kee Restaurants
3.3.2. Thai Union Frozen
3.3.3. Hiap Hoe Holdings & Yeo Hiap Seng
4. Family Succession
4.1. Succession Planning
4.2. Introduction of Family Members into the Business
4.3. Incumbent's Exit Style
4.4. Evaluating Commitment for a Family Enterprise
4.5. Issued with Ownership Succession in Asia and Solutions
4.6. Casework
4.6.1. Otsuka Kagu Ltd.,
4.6.2. Shamsir Jasani on Bumiputera Company and Melewar
4.6.3. Mukesh and Anil Ambani
4.6.4. Anan Burman & Family
4.6.5. Richard Eu of Eu Yan Shang
5. Limitations of Study
6. Conclusion & Last Words
6.1 Ending Remarks
6.2 Future Directions
7. Appendix
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ABSTRACT The Asian economy is defined by family enterprise such that 50% of listed companies are family
owned producing 34% of nominal GDP. The family firm also dominates the market,
outperforming their local benchmark with the exception of India, Indonesia and the Philippines
(Suisse, October 2011). Yet, 80 – 90% of family business does not survive past the third
generation. As time passes, the businesses will need to evolve to overcome new challenges; thus,
the paper will explore the various dimensions which influence the intra-firm dynamics as well as
how each factor maintains the firm’s survivability. Our arguments are set on theories as a
framework to objectively analyze real world scenarios of family businesses based in Asia. Not all
firms and individuals realize the importance of each dimension and factor as they focus only on
the operation of the business. Consequently, neglecting the factors lead to a limitation of options
and an impact on their perspective. Especially on the globalizing stage of world businesses today,
a family business’s survivability is limited to how they can swiftly and effectively exploit each
opportunity.
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INTRODUCTION OF FAMILY BUSINESS
The importance of family businesses is integral to Asia’s overall regional and strategic
growth relative to the world. With most family businesses considered a first-generation among
the generally publicly-traded, Asia’s family business landscape is still a new component that is
fueling Asia’s local economy. Compared to European and North American Markets, these
emerging family businesses reviewed by Credit Suisse are new; family businesses with the highest
market capitalization outside Asia have matured over the past four and five generations.
A finding of Credit Suisse suggests that most Asian family businesses have just started
their business cycle and are less than 15 years old. Credit Suisse reports on 3,568 and 1,279
publicly-listed family businesses with an estimated market capitalization of USD 50 million and
USD 500 million, respectively, from ten different countries. Among the companies, about 38%
are within the first generation and are recently founded (Table 1). However, the family business
environment overall contributes to approximately 32% of market capitalization and 45% of all
job employment (Table 2). These businesses outperform local companies in seven out of ten
countries, as they conform to globalizing business practices and have economies of scale to
financially perform substantially more robust. The reports highly suggest that certain
characteristics of a family business have an advantage compared to professionally-managed,
profit driven companies, allowing it to utilize markets after a financial crisis more efficiently. Key
findings may pertain to how consistent investment strategies are and how professional
managements are more inclined to make short-term growth decisions. Asian family business is a
growing pinnacle not only within the Asian continent but also globally, becoming a more
prominent player.
Credit Suisse findings conclude that family businesses are more prevalent in specific
areas, with regional concentrations higher in South Asia’s 65% compared to North Asia’s 37%
(Table 2). This is distinguishable due to two countries that have unique business settings—China’s
family businesses amount to 13% of national market share while India retains a figure of 67%. As
China progressively transitions from a centrally-planned market economy to a demand-driven
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economy, the figures for family ventures will increase. In contrary, India and the Philippines large
figures are entirely due to less governmental interventions and favorable conditions from fiscal
policies.
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1. DEFINING FAMILY BUSINESS AND SUCCESS 1.1 DEFINING FAMILY BUSINESS
There is no universally accepted definition of family business hence, the term ‘family
business’ can be used in a variety of ways. Some governments and organizations have defined it
as “any business that regards itself as a family business” (Srisomburananont, 2004), regardless of
whether family members are involved or have ownership over the company. Family businesses
generally have strong interpersonal relationships made between the family and the business,
with a value system that places importance on respect, honesty, and credibility. (Mandi, 2008).
Long-term objectives and sustainability that transgress through generational changes in
ownership are the most challenging problems for all family businesses. The sustainability of a
company is heavily dependent on social, cultural, and financial capital and assets like any
company, but requires a consistent family character with a keen awareness in understanding
risks.
To provide a systematic and quantitative research, we used the following parameters to define a
family business:
1. Family members must control, have governance or have management in the company.
This can be reflected by their share in equity held by family members of all positions.
(Sciascia & Mazzola, 2008)
2. Listed companies that hold at least 20% of the decision-making rights mandated by their
share of capital and of cash flow, either directly or indirectly through holding the business.
(Suehiro, 1997) These decisions can be direct or indirectly influential to the strategy of
the firm. (European Commission, 2009 )
Different types of family business (Coutts & Co, 2013): Companies, Partnerships, and Limited
Liability Partners are the different types of families that are present within the Asian region and
worldwide.
● Sole Practitioner, Proprietor, and Trader: A small business starts with one single owner,
who can employ a family member to join the business. However, taxation and debts
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directly affect business profits due to not having a limited liability, since it is not
recognized as a legal entity.
● General and Associated Partnership: Two or more individuals are contracted to work
together in a business under a partnership agreement.
● Limited Liability Partnership: A partnership that exhibits the characteristics of a general
partnership and a limited company, but one partner is not responsible for another’s
misconduct.
● Limited Company: Liability of members depend on how much has been invested into the
company. Similar to the Limited Liability Company, ownership is recognized as a separate
legal entity from the company.
The key differences of each family business type are through its shareholder liability, taxation,
legal entities, and public disclosure.
1.2 DEFINING SUCCESS
The road to success has not been clearly defined, as there are various factors that improve
the family dynamics and creation of business opportunities. However, controllable factors, such
as family relationships, the structure of succession plans, and company equity are several
illustrations of how success and failure can be better anticipated. Each family member reacts
contingent on the amount of pressure the controllable factors have on their lives. Based on their
desired objectives, the member will take action respectively of their responsibility and share of
the business. A domino effect occurs when the members start to exert authority on the business
direction, increasing diverging opinions. The presence of a family member with or without
involvement is sufficient to ascertain the probabilities of success.
As the business grows, its complexity increases with more individuals sharing the portion
of the wealth. The complexity extends to organizational growth in ownership and business
dimension, which may not necessarily be family members. Success is then determined by the
comprehensive relationships between family members, owners, and professional management
team.
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Success, which has quite an abstract meaning, is commonly understood to be an act of
meeting objectives. Depending on the stakeholder’s interests, success can be subjective and have
different measurements, such as financial gains. For instance, when a company grows annually
along with its employees, the management is considered successful -- owners receive higher
dividend payments and family’s net worth grows with the shares it has. Success creates a ripple
effect on all parties and can be mutually inclusive, depending on how each individual perceives
success.
Failure is no exception, and one party’s mismanagement can have a detrimental effect on
the other parties. Failure is when all parties do not meet their objectives, which may be a financial
setback, underperformed growth, or perceived decline in personal value.
The family dynamics thus is most efficient in equilibrium, when all stake holders consent
to a uniformed direction and when objectives are aligned with individual perceptions of success.
Although there are countless elements that can change the course of the business, our paper will
focus on the controllable aspects of the family business using case studies.
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2. OBJECTIVE OF STUDY 2.1 CONTEXT
The primary objective of this research is to understand the role that family businesses
play in the success and failure of modern society, particularly in Asia. We seek to determine the
attributes that increase the likelihood of success, where cultural and societal values have been
increasingly significant to one’s performances. The report will focus on family dynamics and key
factors that contribute to family business growth. Henceforth, recommendations for long-term
survival and succession between familial generations will be suggested.
2.2 Key Issues and Questions to be Investigated
The questions we want to address pertain to how family businesses thrive in their
respective market environments, and also identify key failures within the firm. We will be
exploring a few narratives including:
● What aspects of the family, business, and ownership dimensions influence the overall
performance of the firm based on theory and casework?
● How can succession plans influence family businesses, particularly in Asia, to succeed and
fail?
2.3 METHODOLOGY
The methodology we used to explore this study is from various books, published articles,
and academic journals that are centered on family business growth and transformation. We then
used governmental statistics and reports to shape our understanding, using case studies and
news reports to reach our conclusion about business success and failure. We compiled various
secondary data from reputable companies worldwide to ensure that our arguments and points
of success and failure are consistent throughout all studies.
The models we will be using to interpret our information include the Three-Circle Model
of Family Business, and the Three-Dimensional Model of Family Business. Under the Three-
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Dimensional Model of Family Business, we will be utilizing the Business Dimension, the Family
Dimension, and the Ownership Dimension to explore the diverse perspectives of all stakeholders
involved. Each dimension offers compelling suggestions on how a firm should be managed, and
that companies must struggle to find the most appropriate style of their choice. Lastly, we include
foundation steps for succession planning in context to Asian business culture.
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3. ISSUE OF THE FAMILY BUSINESS
To best understand the context and survivability of the Family Business, we will be using the
following frameworks, aforementioned:
Family Business Cases and Context
Family Business Dynamics
● Three-Circle Model of Family Business ● Three-Dimensional Developmental Model
○ Ownership Developmental Dimension ○ Family Developmental Dimension ○ Business Developmental Dimension
Business Continuity ● Organization Ownership Structure ● Succession Planning
3.1 THREE-CIRCLE MODEL OF FAMILY BUSINESS
The Three-Circle Model is employed to better understand the intra-dynamics of a family
enterprise. The basis of the model is to differentiate the various involvements of family members
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thereby, gaining insights to where conflicts may arise. The model is divided into three distinct,
but overlapping, categories: family, ownership and business/management (refer to diagram
above). The simple diagram captures the whole picture of family business as it includes non-
family business members and family business members both active and passive in management.
The clear discectomy of the family business will be used to evaluate the members (family and
non-family) conflict of the family business.
The diagram represents the different parties within a business. The three main parties are
as follows: family members (areas 1, 4, 7, 6), ownership (areas 2, 4, 7, 5) and business (areas 3,
5, 6, 7). Family members represent any person related to the family for example, a relative, cousin
and sibling. The ownership section includes shareholders while the business section includes day-
to-day employees from associates to executives. Areas 3, 5, 2 are part of the business but not
family members.
The model is able to simplistically explain the different roles, thus, the perspectives and
insights to various individuals connected to the family business. Members who have only one
connection to the business are areas 1 to 3, whereas areas 4 to 6 have two connections and area
7 has three connections. The model is able to explain the asymmetric information within the
groups as different roles have its advantages and shortcomings. At the same time, the model
highlights the different forces at play as individuals in each sector will have to correspond to their
situated position within the family and business dynamic; for example, a person in sector 2, 5 or
3 may want the company to be professionally run via contracting an outsider CEO while family
members may have opposing outlooks. Another example could be members of ownership may
sacrifice short-term for long-term success whereas members of non-ownership will concentrate
heavily on short-term gains as there are no shareholders (Srisomburananont, 2004). Therefore,
problems can easily arise due to asymmetric information and conflicts of interest from various
members of the family business.
The 3-circle model has been developed further, notably by Hoy and Sharma, who argue
that operational groups and their functions can be determined after clarifying the three-circle
model. For instance, identification of family members can strive to create Family Meetings and
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Family Councils. These individuals will be responsible for the planning of estate successions with
the ownership team, while providing contingency and continuity plans with the management
team. Owners can retain their right within the company and exercise their shares retrospectively,
by creating a Shareholder’s Council, a Family Office, or a Family Foundation. They can be
responsible for Shareholder Meetings, forming the Board of Directors, and providing a strategic
plan with the business dimension that aligns with the value proposition initially designed. Non-
Family employees and businesses take on the management role through the Executive Council.
They can work to form management development plans and become involved with strategically
planning business direction and contingency (Poespoesoetjipto). Active Family members who
have both ownership and management stakes can emerge to become Board of Directors and
Advisors to the company. These governance options each have clearly defined roles,
responsibilities, and risks associated. Overlapping structures can be better improved through a
mutual agreement of all parties (Sharma, Blunden, Labaki, Michael-Tsabari, & Algarin, 2013).
Research and surveys conducted by PricewaterhouseCoopers have shown that most
family business conflicts are due to the lack of understanding between family members. As noted,
the various members have different insights and political forces which drive their individual
perspectives. Ergo, it is not surprising that results have shown over 50% of family businesses have
argued over the long term direction of the firm. Furthermore, around 40% of family businesses
have argued over the performance of family member(s) employed in the business which, more
often than not, tie to discussions to the overall level of involvement that family members should
have (Nasser, 2014). Other topics further highlight the different perspectives and asymmetric
information within family businesses including discussion of reinvestment of profit and who can
and cannot work, especially in-laws. Each dimension has their own relative interests and stake,
thus positioning themselves in alignment. However, a mutual interest that is dependent on all
segments of businesses is succession and wealth management risks (Poespoesoetjipto).
Succession planning and business transition are one of the most discussed and most vital
components in determining the successful functions in all segments, and business failures are
often attributed to this part (Miles, 2009). While it is hardly an easy task to solve these problems,
the three-circle model can help elaborate why and how members of the family business have
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their point of view. Additionally, with the core of the problem highlighted, it is considerably easier
to detangle the conflict.
3.2 THE THREE DIMENSIONAL DEVELOPMENTAL MODEL
The Three-dimensional Developmental Model provides a picture through passage of time
unlike the Three-Circle Model which provides a snapshot of family business. Understanding the
passage of time is especially important since key conflicts and opportunities arise as time passes.
The Three-dimensional Developmental Model has 3 different axis—ownership, family and
business (management). Each of the axis is independent of each other and can be in different
stages of development, yet, coexist at the same point of time to influence the overall
characteristic of the business. Each of the three dimensions is able to change as the business
changes over time to form a distinct set of characteristics (Srisomburananont, 2004).
Three Dimensional Developmental Model Source: Andrews M., Justin. Managing Growth: Best Practices of Family-Owned Businesses.
Ownership Axis Business Axis Family Axis
Controlling Ownership Start-Up Young Business Family
Sibling Partnership Expansion & Formalization Entering the Business
Cousin Consortium Maturity Working Together
Passing the Baton
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Figure 1: Three Dimensional Developmental Model
3.2.1 OWNERSHIP DEVELOPMENTAL DIMENSION
Ownership dimension can be categorized in countless ways as family businesses can be
held by a single individual, partnership or a consortium (Figure 1). Furthermore, the dynamics
within ownership vary from one business to another, even when they are controlled using a
similar methodology. These three groups of ownership development holistically reflect the key
challenges and opportunities faced in each stage of development. The three stages are
Controlling Ownership, Sibling Partnership and Cousin Consortium.
Typically, businesses in the Ownership Axis start from being a Controlling Ownership to
becoming a Cousin Consortium. During the early stages, one individual with the knowledge and
skillset can sustain the daily operations of the business. The early stages are driven by the limited
knowledge and the narrow market outreach one individual has but who is able to establish a
clear business model. The owner highlights the potential of an emerging demand for their
product and service, and the value proposition is feasible for short-term growth. As the business
seeks to expand, the business has to rely more on individuals besides the owner; thus, a close
family member helps navigate the organization through its objectives. It becomes a partnership,
Controlling Owner
Sibling Partnership
Cousin Consortium
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and inevitably becomes a Cousin Consortium as the business and the family grows further,
resulting in the extended family becoming more involved.
First stage: Controlling Ownership
The Controlling Ownership Stage Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 32
Characteristics ● Ownership control consolidated in one individual or couple ● Other owners, if any, have only token holdings and do not exercise significant
ownership authority
Key Challenges ● Capitalization ● Shareholder and control ● Choosing an ownership structure for next generation
Controlling ownership is the most rudimentary ownership style out of the three
categories. It is typically controlled by one person or a couple—a monocratic rule. This is most
common style with first generation family businesses as there are limited family members
involved within the business, while the owner also acts as an executive manager. The limited
amount of shares and legal rights given to family investors is insufficient for them to interfere
with business operations, but the owner can always consider advice given from family members.
In a Controlling Ownership, the board of directors in this case exists for appearance since the
members of the board of directors have no real influence within the company. They are only
there to meet the requirements and reaffirm what the owner-manager will exercise. Most of the
time, the boards of directors are relatives or close friends to the owner.
Capitalization: In a controlling ownership, the primary source of capital would be from the
owners’ or from the pockets of close friends and family. This methodology in acquiring capital is
typical to less developed countries as these countries lack financial institutions and structures to
promote entrepreneurship and small business ventures. However, when a family investor
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receives shares respectively for their investment, it can be hard to clarify the differences between
Controlling Ownership and Sibling Partnership.
Banks often deem these businesses to be risky as small businesses have a high tendency
to default on their loans. Many small businesses in less developed countries default on their loan
as there are little consequences due to a lack of proper judicial enforcement. This incentivizes
businesses to default purposely; consequently, banks high interests on loans reflect on this fact.
Shareholders and Control: Shareholders in controlling ownership have the benefit of a single
decision maker. The firm is able to take swift action thus, able to capitalize on opportunities with
minimal time unlike sluggish conglomerates. However, there are also shortcomings to the system
as decision makers lack pressure from outside forces, causing the firm to rely solely on the
decision maker’s insights and expertise. Expertise from the board of directors and family is also
available for the owner but the option is often reluctantly used as the owner dreads an over-loss
in control of the business. This causes the business to heavily rely on the owner’s knowledge and
expertise in the early stages. Not only that, the absence of a controlling owner can lead to a
crippling business. Since most owners feel increasingly significant to all business decisions and
are intensely involved, a business remains stagnant without the owner’s presence. A company’s
reliance on the owner’s indispensable time may be more vulnerable to failure, particularly if
situations are beyond the owner’s ability or if the owner is not able to contribute.
Choosing an Ownership Structure for the Next Generation: In the following case, the owner has
the right to choose whether or not to give full control to one heir, slip the shares or form a
pyramid holding. The succession planning’s effectiveness depends on how the owner is willing to
relinquish control and whether the heir shares the company’s vision and dedication. Parents of a
controlling owner generation can also hedge a succession planning of one controlling heir to
another, by directing and instructing a resolution. The parent’s decision and deeply-rooted
influence on succession planning can be unjustified which often leads to high failure rates,
particularly in Asia where gender and age are strong indicators of a potential heir (Fernandez-
Araoz, Iqbal, & Ritter, 2015). This is due to the ethnic cultural background where a generally
accepted “pecking order” exists in culturally-conservative families.
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Second stage: Sibling Partnership
The Sibling Partnership Stage Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 41
Characteristics ● Two or more siblings with ownership control ● Effective control in the hands of one sibling generation
Key Challenges ● Developing a process for shared control among owners ● Defining the role of non-employed owners ● Retaining capital ● Succession and family branches
Sibling partnerships typically have two or more siblings in the ownership of the company.
The management of the company is designated to one of the siblings. The controlling partner is,
statistically shown, the eldest male of the family. The family business in this case is usually
handed down to the second generation of the family. There are a few key issues of the Sibling
Partnership which stem from the difference in interests and trusts of the active partners and
passive partners (Steward, 2010).
Classic examples of the conflicts include: developing a process for shared control among
owners, defining roles of passive owners and retaining capital. One of the key successes of
establishing a successful sibling partnership stage is through formalizing the roles and
responsibilities of all active family members (Abouzaid, 2008). This enables the members to
communicate on a transparent level with fair agreements on family employment conditions.
Developing a Process for Shared Control Among Owners: As family dynamic differs from one
family to another, there are three ways to qualify control in a Sibling Partnership: quasi-parental
leadership, “first among equals” and equal ownership.
In a quasi-leadership one of the siblings will have controlling ownership. As noted earlier,
it is typical for the eldest son to have the controlling ownership of the company otherwise, the
eldest sibling has the right to control due to significant age difference. It is common among quasi-
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leaderships to see the leader eventually consolidating ownership of smaller minority shares of
other family members, to prevent tension in the subsequent generation. (Gersick, Davis,
Hampton, & Lansberg, 1997) This form of leadership becomes weaker as the family grows older
and a disparity in age does not necessarily correlate to disparity in power, where knowledge and
working credibility are more valued. “First among equals” is similar to quasi-leadership as there
is a designated leader in the business. However, minority partners have limited involvement in
ownership as they do not want the full responsibility of equal involvement. The leaders in this
scenario are usually proven leaders with strong performance and vision to what the business
should be. The leader in this case must have the approval, respect and trust of all the siblings.
The firm must operate with openness and transparency or else there are high tendencies of other
siblings (minority shareholders) revolting against the leader. The last form, equal ownership or
egalitarian arrangement, is where the ownership is divided in equal parts to all siblings. This form
also face problems as without one clear leader, resolution to conflicts will take time and a lot of
convincing. Among all forms of leadership, the egalitarian arrangement is most vulnerable for
mismanagement. Excessive leadership role and the siblings disagree on the presumed paternal
figure of the family, while lack of leadership leads to factionalism. An exception to a strong
egalitarian arrangement is when the family has a resolute and strong history of business
collaboration, where a balanced fairness and respect between siblings are observable.
Furthermore, the board of directors can help facilitate the distribution of wealth among siblings
fairly, creating a rotating presidency program or dividing up equal-opportunity driven objectives.
Defining Roles of Non-Employed Owners: Non-employed owners often want compensations for
more than merely just dividends for their input to the company. This problem stems from the
asymmetry of information as passive and active partners and managing partner and non-family
partners have different insights and opinions on what each partner deserves; thus, many families
will only give shares to siblings whom the company employs, depending on the family value.
In contrary to families that adopt the engagement benefit system, some controlling
owners perceive the company to be a legacy asset, distributing ownership to all offspring. Non-
employed siblings utilize various strategies to have a reasonable amount of input through
internal markets and opportunities, selling shares, family councils, and a clearly-defined
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governance structure. Any communication and role issue can be clarified once obligations and
responsibilities are exchanged among siblings.
Retaining Capital: As Sibling Ownerships are usually in a more mature stage than the Controlling
Owner stage, it is significantly easier for the firm to get loans from banks. This is due to the
increase in credibility, ownership liability insurance, and the firm’s assets. Even with the increase
in power to leverage, the firm cannot rely on debt alone because reinvestment can be an
important pool for the firm’s capital. Thereby, there will be debates between managing partners
and non-managing partners of the reasonable level of reinvestments.
Complementary to diverging business strategies, dividend payouts and business
development emerge to become an issue for families that have non-employed siblings as
stakeholders of the company. In rare circumstances, non-employed siblings have occasionally
withdrawn excessive funds from the company, limiting its growth opportunities. This leads the
banks to question the management of internal funds in the company, severing further ties of
lending and increasing interest rate prospects.
Succession and Family Branches: As a controlling partner passes on the responsibility of
management to the next generation, they are faced with an array of challenges. Siblings may
gradually assume the need to represent a smaller family branch rather than the company or the
shareholder’s group. Many sibling partners often pass on their responsibility to their children,
which causes major problems as they do not represent the company’s or shareholders’ interests
(Exhibit 7). Siblings with senior management roles often provide distinctive access to their
offspring to guarantee succession, and those in junior positions need to find the leveraging tools
to ensure fairness. The interests of the offspring becomes a priority in comparison to individual
stakes. Hence, major conflicts and tensions among siblings and the next generation may arise.
These challenges are occasionally resolved “as the partnership returns to the Controlling
Ownership stage” (Gersick, Davis, Hampton, & Lansberg, 1997), through misfortune—death of a
controlling family member, or a financial takeover of another sibling. Family governance can also
be shifted, as a partnership of the next generation is formed with concentration of ownership
moved from one large family to a smaller one.
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Third stage: Cousin Consortium
The Cousin Consortium Stage Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 48
Characteristics ● Many cousin shareholders ● Mixture of employed and non-employed owners
Key Challenges ● Managing the complexity of the family and shareholder group ● Family capital market
Cousin Consortium is the most complicated of the three ownership types. It usually takes at least
three generations before a family business becomes a cousin consortium. Prior to becoming a
Cousin Consortium, the family has successfully incorporated a Controlling Ownership structure
and Sibling Partnership into their system, which transitions into the consortium immediately
after family growth. In many circumstances, the succession plan is to provide each active family
member throughout the Ownership Axis phase with equal amounts of shares and rights. This
becomes a recurring problem when the amount of new generation offspring do not equate to
the fixed ratio of shares of the previous generation.
The company is owned by many cousins and their family branch. For smaller families, the
ownership style can have the characteristics of both Sibling Partnership and Cousin Consortium.
Problems facing cousin consortiums include managing expectations of individual members and
creation of a family capital market, which can intensify situations for family members that want
to sell their shares externally. In this stage, the percentage of family members who are involved
with the company have decreased dramatically due to limiting opportunities and diminishing
interests. Business interests, working philosophies and ethics have already been established, and
family members do not share these diverging values. Inactive family members are exposed to the
feeling that they are “paper rich, cash poor.” Active family members are torn between
professional loyalty and familial ties, and fear of the accumulation of insider trading. There is a
vague statement between the number of shares and the influence a family member can exert,
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which can then threaten external shareholders who have contrasting investment return
mentalities.
Managing Expectations: The cousin consortium ownership includes the highest number of family
shareholders relative to the other two styles and has high number of family members involved
in the day-to-day business. The number of active board members should be regulated to ensure
balance of all stakeholders (Exhibit 13). Therefore, with many family members involved, there is
a high degree of complexity as it is harder to manage individuals’ expectations, especially when
there is a higher degree of asymmetric information between members within the family (Exhibit
15). The personal connection between individuals within the family has also decreased as there
is a higher degree of separation between the members from different branches of the family.
Depending on which sibling took control of the company in the previous ownership stage, that
sibling’s family branch will be well represented in the company’s day-to-day management and is
more likely to be the active owners. Meantime, other members of the family tend to be passive
owners exploring options away from the family business.
Political aspects of the family are magnified in the cousin consortium causing divided
interests. This is partly due to the differences in age and experience, but more importantly in
position and stake within the family business. It can also be partly due to previous conflicts within
the family as it will drive members to different interest camps. One of the recurring trends are
conflicts over dividend payments as managing owners are more inclined towards reinvestments
while non-managing owners want high dividend payouts. Another prime example is the risk levels
since different individuals will have different opinions toward risks such that involvement within
the company and age comes into play.
One way to alleviate conflicts of interest includes creating stronger bonds within the
family and a clear distinction between family and business. While creating stronger bonds
between family members are more abstract, it could be done via family activities, gatherings and
improved communication transparency. The separation of business and family can be done
within the board of directors. Unlike most misconceptions, family business tends to be very
professional and have higher tendencies to expand globally relative to firms in the same category.
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Nevertheless, the board of directors of family businesses often mixes business with enhancement
of their own family branch. This causes the company to falter as the board of directors are more
focused on personal interests than deciding on the firm’s strategy. The Board of Directors often
insist that shareholder structures should be determined by family member status rather than
individual qualifications. They need to ensure that a responsible active ownership is placed in the
right leadership position with the unconditional support of a majority of family members.
With more emphasis on board of directors to create a fair and neutral ground for family
members, expenses are expected to be a topic of argument. The management team and the
board of directors are conflicted between acting on behalf of the interests of the family, external
shareholders, and the business expectations. Besides improving communication and
transparency, management can create financial options and an internal market for family
shareholders. The internal markets can hedge against family members who resort in costly ways
to exit the family business, by forming a controllable and contingent market managed by parties
in the family business. The internal market will have to establish a fair valuation of shares, as well
as determine legal and tax ramifications that best represent the interests of the family. These
markets can reach a win-win solution for all involved parties.
Family Capital Market: With expanding prominence of family members and higher involvement
in business from outside the family, family members will want exit strategies. This basic necessity
is often neglected causing family members to be stuck in the ownership group against their will.
Members who are forced to stay within the family business will eventually start costing the
company time and money as lawsuits and conflicts within the firm start to arise. Thus, the key is
to have clear exit strategies arranged before entering the cousin consortium stage.
One common option for businesses in this stage is to go public. By opening the company
to the public, family owners can easily maneuver out of ownership. Another advantage that
comes with going public is the ability to raise capital without incurring more debt. However, many
families like to keep their businesses private as they like to keep full control of the business.
Moreover, private companies have the ability to maneuver swiftly and more discreetly as there
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are less regulations and pressure from the public. No matter what solution the business takes
there should be a convenient way for family owners to exit.
However, when the shares in the company become financially diluted with external
investors, it becomes increasingly difficult to revert back to previous stages of the business cycle.
Even if one branch of the family was able to maintain a financial reserve to repurchase shares
from the public, only a small portion of the companies will be able to do so. It is more common
for family members to deviate from their main business strategy and embark on new
entrepreneurial opportunities. If the main business continues to successfully fund these new
ventures, it evolves to become the parent company of a network of businesses for the family
members. A wide range of opinions from each business leader can foster growth in many
directions. The cousin consortium’s business can turn into a group of either horizontally or
vertically integrated businesses, which can exploit opportunities that require a high threshold of
investment. In the situation that the parent company fails to spearhead family business growth,
the Cousin Consortium disassembles itself and each family branch adopts their own venture. The
smaller ventures form their own business cycles and start at the Controlling Ownership stage,
depending on the family’s involvement for each business.
Conclusion for Controlling Ownership, Sibling Partnership, and Cousin Consortium
Most families follow the trend of moving from a single owner to a sibling partnership to
then a cousin consortium. However, this is not necessarily the case as a sibling partnership and
cousin consortium can be created from the first inception of the business as capital can be hard
to acquire. Nonetheless, each stage of the ownership dimension has its own challenges which
need to be tackled. These tasks if not tackled correctly, with transparency to ensure fairness to
all stakeholders, could create long term, ongoing problems from stage to stage, with many of the
problems enlarged and heightened. For example, in the cousin consortium stage, the convoluted
process in selecting the new CEO would result in ongoing distrust among the siblings due to
suspicion of nepotism. This costs the company the time and opportunity in the latter stages as
family members concentrate on each decision-making task. As a result, to ensure the
effectiveness of the family and the business, the owner should have clear guidelines on
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responsibilities and limitations of each stakeholder’s rights. Many of these family businesses
resort to the creation of a board of directors and family council to establish a fair platform for
members to voice concerns and gain knowledge of current business and family affairs. The Board
of Directors also alleviate arising tensions of non-active family members who do not desire to
participate in latter stages of the business by providing a cost efficient method exit strategy to
family members.
3.2.2 FAMILY DEVELOPMENTAL DIMENSION
After looking at the ownership aspect of family businesses, the next section will
concentrate on family dimension. This dimension can be categorized through age of members
involved within the business. It is broken down to four different types: Young Business Family,
Entering the Business, Working Together, and Passing the Baton. Similar to the ownership
dimension, the family dimension can materialize in an erratic or sequential fashion (Gersick,
Davis, Hampton, & Lansberg, 1997). The Family Developmental Dimension is defined according
to the active age group of each generation, rather than the business cycle or the amount of family
involvement in the business.
Young Business Family
Entering the
Business
Working Together
Passing the Baton
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First stage: Young Business Family
A Young Business Family, generally, has members involved in the business under the age
of forty with or without children aged under eighteen. Members in this category have an
interesting time because many crucial decisions must be made on a personal level. These issues
can have a lifetime impact and can trickle down to affect professional behavior, passion, and
enthusiasm. A classic example is to have children, or not, as having a child can change one’s
attitude towards life and thus work.
Creating a Workable Marriage Enterprise: During this period, finding a long term, intimate
relationship is a topic of great importance for many individuals. Marriage enterprise, according
to Gersick, is defined as “the system that the couple builds to accomplish its dream of partnership
and family (Gersick, Davis, Hampton, & Lansberg, 1997).” Thereby, a successful relationship must
have ground rules covering all bases including work, money, social behavior and children. These
rules can extend to spending behavior and agreements which confine and produce certain
lifestyles that are applicable for daily business practices. The lack of rules, or unrealistic
expectations, can cost the relationship and indirectly cost the business as their reserved financials
can be depleted.
Young Business Family Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 62
Characteristics ● Adult Generation under forty ● Children under eighteen
Key Challenges ● Creating a marriage enterprise ● Decisions on work between work and family ● Managing relationships with extended family ● Raising children
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Family culture also has a substantial impact to the overlying structure of the business. For
instance, families in an enmeshed, disengaged environment with strict reinforcement of rules
can lead to a softening business structure, as the enterprise’s culture is inversely translated from
their home. Families perceive the business to be an opportunity to reunite and strengthen family
relationships and create an overall engaged group of blood-related entrepreneurs. Businesses
often identify their strengths and weaknesses through the characterization of a marriage. Family
theorists often associate marriage as an integrating force in shaping businesses and an
opportunity for shaping families to become closer.
Decision in Relationship: Work vs. Family: Distinction between work and family can be obscure
at this stage because the demands of both family and work have the potential to escalate. Work
life can occupy late nights, weekends, and social life, and topics of interest can sidetrack one’s
family and family time. To conquer these difficulties one must nurture family and work while
understanding the differences explicitly. The inability to balance work and family can also be
protected by employers that establish a family-friendly culture or policy in the office or by the
individual practicing these positive routines.
Work and family balance differs drastically for families in different social classes. The
middle class and above are confronted with issues concerning joint-balance earners, or both
couples earning an income. As families are lower on the income spectrum, the issue of single
parenting and limited income arises. The role of parenting can have a gradual effect on their
working energy, and all adults are exposed to this problem throughout their lifetime. (Boushey &
Williams, 2010)
Working Out Relationships with the Extended Family: With more family members getting
married and starting their own family, the complexity to create a neutral balance between all
sides of the family increases. The balance can be hard to manage as it is difficult to physically
avoid other working members of the family, especially when one is the subordinate working in
the same team. In this situation, flairs and frustration may arise and in doing so, creates
unmanageable distinctions between work and family.
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A problem intensifies if the extended family owns and manages the business and dislikes
the spouse. The approval and acceptance of a spouse can signify good communication and open-
mindedness within the business. A rejected spouse can lead to unjustified treatment for an entire
family, which can impede to succession assets, active managing and stakeholder rights, and
disarray between family relationships. With more involvement of close family members, the
situation can often entail daunting decisions, whether to side with the spouse’ family or take an
opposite stance.
Raising Children: The challenges here encompass all aspect of having a child. Without much
convincing, most would agree that having a child can change a person’s life which will directly or
indirectly affect work. One’s perspective will transform, giving importance to and creating value
to something new, but more importantly having a child will shape one’s goal and aspiration.
Aspiration of the owner is often his/her legacy (psychological legacy) hence his/her child’s. Thus,
having a child conditioned for the future can be wearisome. The importance of a parent’s attitude
towards the business can be vital as the child will learn from the values parents pass on.
The Young Business Family stage is also sensitive on this issue because it redefines the
professional attitude and home culture when children are born. Essentially, roles and objectives
have to be clarified between the home spouse and the business spouse, as both have newer
pressure and expectations. Alternately, if both spouses are active in the business, child rearing
will trigger possible replacement and training expenses, which can be costly. For co-
entrepreneurial ventures, the couples apprehend the possibility that they are creating a new
family business, having to overhaul new legal structures and succession formalization for their
new offspring. It can also delay various projects as the child is naturally given the highest priority,
stretching their operations and strategy into another year.
With raising a child, it is inevitable that the couples have to re-examine the roles in the
family, make new arrangements in the marriage enterprise, and agree on respective
responsibilities.
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Second stage: Entering the Business
Entering the Business Stage Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 72
Characteristics ● Senior generation between thirty-five and fifty-five ● Junior generation in teens and twenties
Key Challenges ● Managing Midlife transition ● Entering the adult world
Entering the Business stage is about the transition from student life to work life. Here,
young adults will have to decide on what is best for their careers while their parents’ generation
will have to figure out the requirements needed for the next generation to enter the family
business to ensure a smooth transition. At this stage of the family dimension there must be at
least one generation involved with the business and a younger generation transitioning into their
work life. The challenges posed are for both older and younger generation as they must transition
into a different role, parent to employer and son/ daughter to employee. They are at a crucial
stage in deciding whether they are qualified to take in a professional role at the company and if
they become future owners through shares or potential leaders via management.
In this stage, there are many significant factors that can change the direction of the
business but the most important stages are midlife transitioning, individuation, and the decision
to join the business. The first stage is midlife transition, which family members in senior positions
must transverse roles, responsibilities, and opportunities for the offspring generation. The
second is by encouraging the offspring to emerge maturely as adults by detaching them
psychologically from the household and by respecting their individual decisions. The third stage
reaffirms whether the offspring is to commit to the family business or not, which alters the
business direction.
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Midlife Transition: As parents get older they are faced with new obstacles and at the same time,
they reflect on the choices they have made. Levinson have coined the term ‘midlife transition,’
which traditionally meant for adults aged 40 – 45, for when they re-assessed their history and
the guidelines they abide to (Gersick, Davis, Hampton, & Lansberg, 1997). Two of the important
realizations are death and legacy, which can change an individual’s perspective. The second half
of their life is usually formed by the individual idea of legacy.
The midlife crisis is a time period that is critical in determining the values of professional
work and the remainder of one’s career. This time period is exceptionally powerful, as individuals
make dramatic changes to their competency and are most responsible for the creation of many
successful businesses worldwide (Kim, 2015). The crisis marks the beginning of a new
generational cycle, as parents of the adults are retiring and aging at a rapid rate, while the
offspring is departing from the adult household. The phase is also distinguished as a freedom
stage because parents of the midlife adults no longer intrude with business affairs, and familial
responsibility is significantly diminished. Offspring of midlife professionals also start to question
their career paths and their deliverable values to the family business. Parents are susceptible to
self-questioning and may struggle to accept their self-worth and their ideal image they have
constructed for themselves during their young adult years.
Entering the Adult World: Transition into the adult world changes the dynamic of many aspects
in life, including sibling dynamic. As children, siblings’ relationship can be largely controlled by
the parents since parents have the ability nurture their children in the way they seem fit.
However, in the adult life, the siblings must decide their own rules of engagements and must
sustain the relationship all on their own. This plays a critical part as their family business therefore
their work life will be affected by how they managed their relationship. Some siblings preferred
to be a part defining their own path while others are better equipped to work together. These
forces which push and pull the relationship must be properly evaluated before deciding their
family business work life.
Yet another obstacle which young adult face is their career decisions. The choice is not
simple as there are many factors to be considered. The single most important factor to consider
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arguably is the children’s willingness to join the business. Other factors which may affect the
business includes: the child level of involvement: Is it in the ownership of the company or both
management and ownership. The child may want to pursue a different career before join the
family business while other may want to join the business but are not ready to as they may not
have the knowledge or the personality. This career decision is crucial to understanding the basic
underlying of a succession and transitional planning between generations, as businesses
transform to best fit the offspring.
Third stage: Working Together
Working Together Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 82
Characteristics ● Senior generation between fifty and sixty-five ● Junior generation between twenty and forty-five
Key Challenges ● Cooperation and communication ● Conflict Management ● Three Generations Management
Working Together follows Entering the Business stage where multiple generations and
age groups are active in the business and the family network has expanded. The members
involved can be arrays of individuals from grandparents, parents, children, cousins and relatives
which makes the stage more diverse. The age differences are important at this stage as the senior
generations are at their peak in their business hierarchy in contrast to the junior generations as
they are just getting started. The essential instrument to provide success is communication and
more importantly conflicts management.
Cooperation and Communication: There are many need to in order to create a healthy family
business but one of the most critical needs is the advance level of communication as it will help
create a fluid and integrated organization. A company with transparent communication is
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compared to a well-oiled machine as communication is the basis for effective working
environment. An effective communication could be measured using three criteria: Honesty,
Openness and Consistency. This is vital in a family business as conflicts at home can carry over at
work respectively.
Conflict Management: As mention above, conflict happens all the time at home and at work and
thus there must be a rule of engagement. Conflict management is vital for the company at this
stage as without it the company could cost time, capital and energy -- which is exceptionally
costly compared to previous stages. It is important also to understand that there are personals
involved from different generations making it harder due to the age gap. Thus, by having effective
conflict management a company can flourish as insightful critique and new ideas can drive
business the next level while avoiding intra-company quarrels by finding objective resolutions. A
Conflict Management has to be constructive so that families can grow further in a complex
business.
Even with an agreed acceptance plan, conflicts will nevertheless arise (Exhibit 9). The
alteration from one unitary family to a network of smaller branches needs time and cohesion to
adapt properly. Cultural effects, work mentality dissimilarities, and day-to-day decisions can
affect an entire nuclear family network, which needs time to readjust accordingly. Moreover, the
senior generations have to be open to new family members - new spouses, and grandchildren,
which can lead to strong backlash as smaller family branches have shifting priorities in work.
Three Generations Management: While it is hard to have three generations in one room, it is
much harder to have three generations active in the business. Managing expectations,
understanding the generational difference and steadfast teamwork is need to for the success of
the company especially when the parent and the spouse is involved.
The landscape of the workforce has changed such that demographic proportions since
the global financial crisis has been influence. In some family businesses, recruitment strategies
are now focused on retaining old employees and postponing their retirement into their seventies
as a way to save costs (Murphy, 2007). The costs of replacing a skilled labor and asset of the
company has become costly, estimated to be worth around 150 percent of their respective
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annual salaries for training and orientation. In addition, a company should be prepared to have
a replacing candidate of high ranked positions, due to the time it takes to train and candidate
readiness (Exhibit 11 and Exhibit 12). By 2014, one-third of the Boom Generation in their 50s will
remain in the workforce, which means that productivity and culture will lead to intergenerational
conflict (Tolbize, 2008) The Three Generations Management becomes harder to manage with
family members when young members have contrasting work ethics compared to their parents,
which can lead to conflicts that transcend professional workplace.
Nevertheless, a multigenerational family business can be beneficial in many ways (Exhibit
2), and not many reach that stage. A diverse age group depicts a grasp of market understanding
and the wide-ranging demands of the product. This enables the business to attain more market
by fully optimizing their knowledge, connections, and resources. The team has readily secured
talent that can shift working mentalities and adjust to demand structures. Decisions are more
innovative and stronger because they represent various perspectives from more different
backgrounds (Murphy, 2007).
Fourth stage: Passing the Baton
Passing the baton Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 92
Characteristics ● Seniors aged sixty and above ● Various generations
Key Challenges ● Senior detachment from the family business ● Continuity and preparation of business
This is the most vulnerable stage of the family business as it transitions from one
generation to the next. Typically, senior members are at the end of their management career at
the age of sixty and above, while the junior generation can vary from late twenties to forties.
Successful transition in the company is essential for future success as statistically bad transition
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is one of the main causes to the family business failures. We qualify smooth transition as the
minimization of cost entail from succession, which can be done through training. Having a
successor who fully acknowledges the difficulties and responsibilities of the executive position
prior to the job can guarantee some degree of smooth transition.
The key challenge of this stage is to balance between the senior generation leaving the
business and the junior generation’s readiness and knowledge depth for the business (Table 5).
Continuity and succession enable a smooth transition without it being disruptive. According to
Deloitte’s research surveying CEOs, not all current leaders of the business perceive their
bloodline to be a suitable contender to lead the business. As the family business passes through
two or more generations, the leader wants to become more professional and has a more open
preference towards non-family members.
Senior’s Detachment from the Family Business: For a successful transition from the senior
generation to the junior generation, there must be two criteria: succession and continuity.
Succession entails the end of one generation which is replaced by the incumbent and Continuity
entails maintaining the current imperative as foundation to future growth. The two criteria are
vastly different. Yet, it is important for both to exist at the same time in order to provide a smooth
transition.
The start of a transition requires the family to recognize that the end of a generation has
arrived. This is a hard task, even though all members know the inevitable. For most cases, the
newer generation often neglects and denies the need for transition due to multiple reasons.
Lansberg identifies four major factors which includes (Lansberg, 1988):
Siblings’ fear of differentiation
Children’s fear of being branded as greedy
The spouse fears of decrease importance thus loss of identity
The leader’s fear of death
The factor affecting the succession plan can be escalated via cultural factor of each nation
especially family of Asian descent. This is because Asians tend to have strong family value and
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conservative approach towards self-expression. Therefore people tend to avoid voicing the ideas
which can cause friction and awkwardness to other family members (Exhibit 3). Family
disintegration and fear of changing relationships have discouraged a formalized succession plan
on various accounts. Hence, both generations will have reasons to be reserved over the subject
of succession.
The main difficulty of this stage is convincing the senior generation of their success,
contribution and integrity in the business. The senior generations will retain aggressive power if
they recognize their impact on the company to be inadequate and despair. The younger
generations have to help the seniors overcome their sense of power and grand accomplishment,
by convincing them of the junior generation’s readiness. Seniors may undermine the business
daily operations to remain in power, by berating the junior’s business decisions and questioning
their motives for the company. When a client discerns the internal affiliation of the family
members, it tarnishes the brand value of the company. The impression extends to non-family
managers, financial supporters, and stakeholders. This discourages the new members from
taking a management role and undermining the overall appearance of the company and family’s
competency.
Preparation for the transition tend not to cover all challenges those family members
actually face in reality. Thereby, there will always be unexpected difficulties for all family
members and the business, even with gradual or immediate, smooth or abrupt transition. Thus,
a family should have an explicit succession plan or guidelines ready and discussed among family
members. The guidelines to a successful succession will be explained in detail in the next section
of the paper.
Conclusion for Family Developmental Dimension
The junior generations start their own cycle after the senior members pass through the
Working Together and Passing the Baton stages. They become Young Family Businesses and
renew the cycle of Family Developmental Dimension. Subsequently, smaller branches of family
members may form different cycles in the dimension become more of a family tapestry. The
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dimension assures that the family continues to grow, but the cycles in the dimension are
constantly changing. The dimension can only focus on one smaller branch and is unable to
measure various branches of the family tapestry at the same moment. This dimension can be
combined with the ownership and business axes, which can analyze the relative positions more
accurately on their current conditions.
3.2.3 BUSINESS DEVELOPMENTAL DIMENSION
The Business Developmental Dimension emphasizes on the characteristics of the firm to
evaluate the family business more appropriately. By understanding the company’s financial
indicators, relative performance to size, age, and operating structure, this dimension accounts
for all stakeholder roles in the business comprising of family members. The organization’s
purpose changes relative to the stages of the business; for instance, a small business is captivated
with ensuring survivability, which forces them to seek families as financing sources. Established
companies that completed several business cycles pertain to other venues due to higher capital
demands, diminishing the need for family immersion. Large companies’ contrasting need for
family involvement thus cannot be fully comprehended by other dimensions. However, the
limitations of this dimension due to its critical emphasis on business aspects cannot grasp other
aspects of family influence. The third dimension will elucidate the family’s involvement with
ownership and management throughout a business life cycle and how it changes as the business
grows larger (Investopedia LLC, 2015).
The business development dimension follows the business cycle with three stages: start-
up, expansion and maturity. The dimensions adapt to various theories: one of internal and
external business growth, while the other perspective focuses on business cycle. The first process
rationalizes that the market environment is responsible for natural selection of companies of
Start-up Expansion Maturity
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various business cycles. Market conditions such as supplier costs, market preferences and
industry characteristics stresses the businesses with greater competition and that companies fail
due to the market. Businesses survive the conditions because of favorable environmental
circumstances, not because of internal management and leadership of the company. Some
theories argue otherwise and contend that growth was due to internal factors, as leaders made
decisive choices that allowed the company to survive. The leadership role and top management
executives are necessary figures of firm survivability, and succession plans should also be
assessed with importance (Exhibit 4). The second theory, that disregards both internal and
external factors, pertains to the belief that companies fail when they cannot transition beyond a
business cycle. Organizational life cycles can be disruptive, and all companies must go through
these foreseeable stages (Adnan, Akram, & Akram, 2013).
There are many methods to classify pivotal points of business failure, but the most
captivating measures are growth and complexity. Growth is defined as the ability to change a
company’s financial performances, whether it is from market share, revenue, or assets.
Complexity is a measurement of change over time, by associating with management control,
ownership structure, and communication systems. Entrepreneurs often assume a generalized
and identical structure that is simply and actively managed by the leader. As the company grows,
its structure begins to deviate with relevance to the industry and the business model, becoming
more complex. It forms unique systems and cultures of its own, expanding the complexity of the
family business.
The most successful businesses are the result of management team understanding the
various risks and characteristics associated with the Business Developmental stages. This
dimension, was specifically framed to reach an understanding with active management to the
family business and to the owners.
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First stage: Startups
Startups Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 108
Characteristics ● Informal organization structure, with owner-manager at center ● Singular Product
Key Challenges ● Market survival and competitiveness ● Dreams and business reality
Startup stage is the period of time where the business is founded. Often the business has
limited personals with the owner as the designated leader running the business. It is common
that the owner invest a lot of capital, time and energy into the business at this period with the
hope to find its foothold in the market. In order to minimize risks and capital, startup businesses
have limited number of products or services. As 70% of new businesses fail, the goal of the
business in the startup stage is to survive (Max, 2013).
Survival in a competitive market is especially difficult for startup, due to the limited
resources. Thus, it is important to keep the company afloat through well managed liquidity and
cash flow. With liquidity, a firm can keep operating while preparing for unanticipated events. The
other Achilles heel to new starts up is the dream vs. the reality.
Many entrepreneurs are emotionally tied to their dream business; thereby their decision
may not be thoroughly and objectively analyzed before implementation. It can be costly if the
decision backfires as it is easy for startups to drain their minimal resources. Most start-ups were
based on childhood aspirations, personal and family ambitions, which often ignore the aspects
of the profit-producing industry. Businesses may not always acknowledge the significant of
financial feasibility, which is why startups do not always retain funding (Exhibit 5). Unexpected
costs and unforeseen expenses are considered the most challenging aspects of family business
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in a short-time horizon. The projected reality of a start-ups that is emotionally tied cannot be
practically applied to fit market demands.
Second stage: Expansion
The Expansion Stage Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 114
Characteristics ● Increasing functional structure ● Multiple products or business lines
Key Challenges ● Evolving the owner-manager role and professionalizing the business ● Strategic planning ● Organizational system and policies ● Cash management
The next stage of the business cycle is the expansion or formalization stage. In this period, the
organization has captured and established its market and starts to grow rapidly before slowing
down and shifting to the mature stage. In expansion stage, most companies will seek to pursue
two distinct strategies. One of the methods is to expand to a potentially sizable market and target
new demographics. Market development and market positioning are more suitable for
companies that sell a generalized service or common commodity, as they have little
differentiation and compete on marginal variables. The second method is to identify more of
market demand, current consumer needs, and lean operations. The second technique
emphasizes on the current constraints of the business and attempts to improve it, by reshaping
the internal functions of the company. Both strategies utilize growth and complexity as
benchmarks of their growth.
As business gains client base and expands, there are more challenges than mere survival.
In the expansion stage, businesses face many key challenges including professionalizing the
business, planning strategically, creating organizational structure, and optimizing cash flow. This
is because the structure used in the Startup stage is no longer effective due the increase in scale.
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With more business, the owner-managers will have to delegate work as they will need to
prioritize their work and manage their time well as timing is limited and it is impossible to be
involved with every aspect of the business. To the dismay of some business owners (as they were
able to build the business without the need to hire experts or fear losing their importance within
the business), many businesses will be advised to hire professional experts who can fill in the
keys roles. These managers will help the business gain competitiveness as their size increases.
The important mentality for the business holder is to keep an open mind in order to adapt to the
new business environment.
Strategic Planning: The challenge in strategic planning happens after the plan is selected as the
business does not tackle opportunities and/or complications effectively. The business may limit
itself by doing inadequate market research or bias self-evaluations. These failures will lead to
underperformance and losing out to other businesses.
Organizational System and Policies: At this stage of business development, the business is
expanding rapidly. Therefore, the business will need to adapt its structure to accommodate its
new needs through organization structure and policies. The informal structure will be replaced
by formal professional structure since businesses are less founder-centered and are more
hierarchical with more distinct functions. The better structure enables the business with the
ability to tackle problems more effectively. The effective structure will also help decrease
complications in the strategic planning while providing more solutions opening the business to
more opportunities. For example, by creating an effective structure, the company will be able to
have proper check and balance. They can make sure all decisions made lead to the goal of the
company. Conflicts within the company will also be properly managed to create harmony among
peers.
Cash Management: Liquidity in the expansion stage must be carefully manage even though it is
a lesser concern as the company is able to finance using debt. It is important for entrepreneurs
to reevaluate the importance of each developing arm, as the business will continuously demand
for an always increasing budget.
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Third stage: Mature Business
The Mature Business Stage Source: Kelin E. Gersnick, John A. Davis, Marion McCollom Hampton and Ivan Lansberg “Generation to Generation Life Cycles of the Family Business,” Harvard Business School Press 1997, pp. 122
Characteristics ● Organizational structure supporting stability ● Stable (or declining) customers base with modest growth ● Divisional structure run by senior management team ● well-established organizational routines
Key Challenges ● Strategic refocus with new generation ● Management and Board of Directors ● Capital reinvestment
The mature business starts to have declining cells and diminishing margins. A mature
market, or a fully utilized market, is when the company and other competitors have established
reputations and a limited amount of customers are available. The product is identical to those on
the market, with similarly developed features and customization. Companies that are able to
early contend for market shares at a sustainable volume can stay in the industry for a longer
duration. Companies that are late in the market and cannot expand relatively faster than its
competitors, will have to exit the industry. With protected market shares, businesses must
protect itself by retaining their current customers to continuously use their product or service,
and not switching to their competitors.
At this stage, companies will have very complex organizational structures and functional
differentiation. However, the objective of all companies is to ensure that its structures and
operations provide stability; the companies would want to make sure that growth and financial
returns meet the expectations of all stakeholders while responsibilities and power are clear
between active management and ownership.
As a family ownership, having clear visibility tied towards the brand of the Mature
Business can be tremendously rewarding. Businesses that engage heavily in philanthropic events
and community outreach can reflect the family’s positive branding. In complementary to the
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financial stability and recognition in their market, a Mature Business can enhance board
members to pursue other businesses that offer individuals with mentorship role. Businesses that
reach this stage convey the image of a strong reputation and build credibility for all involved
family members.
The misconception about Maturity Business is that it is the final stage of the business
cycle. It is true that a Mature Business will not seek out for new business opportunities, but its
smaller subsidiaries within a conglomerate or group will pursue newer opportunities. A Mature
Business will have stagnant growth while continuing to modernize their operations. It will rely on
its smaller departments to captivate new growth and feature characteristics of the start-up and
expansion phases.
Key Challenges: More family generations are involved in the Mature Business and old traditional
markets have to adapt to new innovative markets. Younger generations in the family and active
management struggle to preserve old traditions and methods of the old generation. In this multi-
generational business and complex structure, a board of advisers can help alleviate any
disagreements between owners, family members, and management (Handler, 1994).
Board advisors help maintain a complex organizational structure and preserve continuity
across generations. Advisors also introduce a strategy to re-focus through new generations, as
new sources of revenue are needed to maintain the immobile part of the Mature Business.
Unlike other stages of the Business dimension, Mature Businesses offer the opportunity for close
family members and staff with career choices. This stage is more accessible for non-family
managers, as organizational influence is shifted. The management team can become an
indispensable asset where family members lack the knowledge and expertise. They serve as a
counter-balance against family member that misconducts, and train newer generations of family
members to fulfill their roles.
Capital Reinvestment and Re-strategize: When the company seeks to re-strategize, capital
reinvestment is most necessary. Products, staff, and equipment, need to be refurbished to keep
up with continuous market change, but old family members are often convinced that traditional
norms can maintain the business stature. As such, reinvestment and capital expenditure is not
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the most important criteria. The challenging part of the business is when the maturity stage
clashes with the family’s dimension of Passing the Baton. The old generations are inclined to
increase debt levels during their last years in management as they have previously encountered
a similar situation of the company during its earlier years. A strong focus on reinvestment will
psychologically compromise with the senior’s mentality to a positive finishing, as it negates the
hard work they deserve. Furthermore, senior members place their significance in retirement
funds, pension fees, and a continuous cash flow after they leave the business. They are concerned
with how the business may not be able to purchase their rights to leave the businesses, despite
their desire to rightfully leave the business.
Conclusion for Business Developmental Dimension
Family business and non-family business faces identical challenge as all firms run through
the business life cycle: the Start-up stage firms’ objective is to survive, the Expansion stage firms’
objective is to build structure for growth, and the Matured firms’ objective is to maintain
competitiveness in a saturated market. Although all firms face the same challenges at each stage,
they each have different solutions which reflect their company structure and culture. Each
decision will determine whether it succeeds or fails. For instance, The Yung Kee Restaurant does
not have a professional structure since they utilize family virtue as their corporate identity. The
system works well as founder treats the employee as family. After the founder died, the strategy
was not sustainable as the successor did resume the founder’s role. The successor’s inability to
take on their father’s role led to deteriorating relationship between the employees and the family
members.
Among all the dimensions, the Business Dimension is most sensitive to changes in the
Ownership Dimension and the Family Dimension. For example: Thai Frozen Food (TUF) has a well
configured plan in ownership and family dimension causing TUF to propel to the top of their
industry due to company synergy. TUF also managed to have smooth transition with three
generations involved in the business.
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3.3 CASEWORK:
The casework segment will reflect on the effectiveness of the family business using the
three circles model and three dimensional model of business family as basis of analysis. The
business family picked out includes Yung Kee Holdings Ltd., a famous restaurant group in Hong
Kong, Thai Union Frozen, seafood exporter conglomerate, Hiap Hoe Holdings, a Singaporean real
estate developer, and Yeo Hiap Seng, a Singaporean based sauce manufacturer,. The cases
presented represent a small sample size but all cases are able to highlight the essential aspects
which lead to the long term success of family business.
3.3.1 YUNG KEE RESTAURANT; HONG KONG
Introduction: The Yung Kee Holding Ltd. is a private holding company of multiple restaurants
including the world famous Yung Kee Restaurant. The restaurant group was founded by Kam
Shui-fai, ‘Kam Senior’. The well regarded restaurant earned one star from the Michelin Guide in
2008 and three consecutive years after (Apple Daily, 2012 November). At its prime, the Yung Kee
flagship restaurant entertained local and international celebrities, business people and
politicians. Regrettably, the restaurant fell into decline after the founder passed away. This study
will use analysis of the two models introduced in the previous segment to explain the structural
failure of the Yung Kee family.
Company History: Kam Senior (Kam Shui-fai), the founder of Yung Kee Holdings Ltd. and Yung
Kee Restaurant, had a humble beginning. He started working as the chef’s apprentice with limited
education. During his apprenticeship, Kam Senior learnt the secret to the perfecting roast goose.
He worked seven years before opening Yung Kee Restaurant (Yu & Kwan, 2013) Yung Kee
restaurant started as a food stall near a ferry pier in Central, Hong Kong Island. In 1942, Kam
Senior with $500 dollars in savings moved to a proper restaurant before moving twice more until
he landed at Wellington Street, Central where it is currently located (Roast Goose Family Fights
as Asia Estate Battles Increase, 2012). The restaurant earned a place Fortune Top Fifteen Best
Restaurants in the World in 1968 and Top 20 Asia’s Finest Restaurant by Miele Guide from 2008-
2011 and one star from the Michelin Guide from 2008 - 2010.
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Kam Senior had a big family similar to many Chinese families during his time. He had four
wives and eighteen children (11 sons and 7 daughters) yet only the selected few children had the
opportunity to work with Kam Senior. Only three sons were involved with the day-to-day
business in Yung Kee. This includes Kam eldest son, Kinsing Kam (Kinsen), his second son, Ronald
Kam and his third son, Kwan-Ki Kam. Each of the sons was assigned with different tasks. Kinsen
was in charge of operation of the firm which includes merchandising, shop keeping and
restaurant design. Ronald is in charge of accounting and finance while Kwan-Ki Kam helped his
father in the kitchen. During the time, Kam Senior owned 70% of the business while the three
sons splits the remaining 30% equally. While the founder is alive, the business ran smoothly which
reflect the accolades the restaurant received. Arguments among the siblings were kept to a
minimum.
Business Strategy: The restaurant values discipline of product leadership. The restaurant is able
to produce world class flavorful roast geese using well sourced ingredients. The geese are
specially raised for the restaurant to maximize tenderness and taste. The geese received no
exercise to increase fat and were never fed by synthetic forage. As a result, the geese sold were
20-30% more expensive than market price. Additionally, the restaurant used extensive rare herbs
in their recipe for example 10 – 15 year-old dried tangerine peel from Guangdong and ‘kitten ear’
fungus. These first class ingredients are cooked in one of kind charcoal briquettes. Yung Kee is
the only restaurant in Hong Kong to utilized charcoal briquettes, due to its meticulous storage
method. The charcoal when heated produce zero black smoke which does not distort the taste
of the geese. Finally, the restaurant used the secret recipe and Kam Senior’s culinary skills to
create the final product.
Management (Yu & Kwan, 2013): Yung Kee uses strong filial piety as cohesion and enforcement
for his employees. Kam Senior understands the value instilled within the Hong Kong and Chinese
family, thus he is able to utilize to his advantage. The Chinese Confucianism value of keeping good
face or reputation highly thereby Kam Senior uses traditional family values to orchestrate his
staffs including his sons. The employees look up to Kam Senior for his impressive work ethics,
talent and his leadership.
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Succession: After Kams Senior death, the Yung Kee changed from a Sole Ownership to a Sibling
Partnership. Yung Kee Holding restaurants were given away to different family. Although Kam
Senior has four wives, the first wife passed away with no children and his fourth wife has no legal
status. Consequently, the restaurants were split between two branches of the family. The second
family receives the Diamond Restaurant while the third family receives the world famous Yung
Kee restaurant.
For this purpose, the case will only concentrate on the feud surrounding the Yung Kee
restaurant. Yung Kee restaurant in 2004 is worth HK$1.5 billion and had HK$880 million in liquid
asset (Yu & Kwan, 2013). Kam Senior acted according the Chinese tradition to give the eldest son
highest stake in their business. As a result, the two eldest son of the third family, Kinsen and
Ronald, were given 35% each while the rest were split the remaining 30% equally between his
third wife (Mak Siu-chun), third son (Kwan-ki Kam) and daughter (Kelly Kam). In 2007, Kwan-ki
passed away and gave Ronald his 10% stake while their mother gave Kinsen her 10% stake. Later
in 2010, Ronald bought out Kelly’s shares (Yan, 2011). In doing so, Kinsen the older son has 45%
of the firm while Ronald had 55%.
Post Succession: After the death of Kams Senior, Ronald and Kinsen had a power struggle. As
Ronald had the majority of the shares, he was able to squeeze out Kinsen. Ronald overtook all of
Kinsen day-to-day work, which includes personal arrangement and is able to control the board
of directors (Pao, 2012). Both Kinsen and Ronald introduce their children into the business both
of which have minimal experience in the running a restaurant. Ronald’s children, however,
receive significantly higher wage of HK$ 45,000 per month while Kinsen’s children got HK$17,500
per month (Pao, Ming, 2012).
According to the Ming Pao, a Chinese news outlet, Ronald had allegedly embezzled money
from the firm. He used the restaurant’s warehouse for CTE-Ease’s (Ronald’s sausage company)
use without notifying the board of directors. In addition, millions of dollars, set aside by Ronald,
were used in renovation. The contractor, Design and Decoration Ltd., which Ronald hired was
held in his secretary name (Pao, 2012).
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Ownership Dimension: Controlling Ownership → Entering the Business Sibling Partnership
(quasi-parental leadership)
From establishment in 1942, Kam Senior was both active in management and ownership.
He later retired in 1979 but continued to informally overseeing operations and quality control to
maintain Yung Kee’s reputation. Between 1970s and 1980s, Kam Senior had 70 percent of Yung
Kee, with the remainder of shares to his sons, 10% each, making him the sole proprietor to the
business. The key challenges of this stage was:
● Yung Kee relied on one single person to control all tasks, which leads to vulnerability.
● Kam Senior had to carefully plan the strategies for the succession to circumvent any
unexpected heir behavior which could rescind all family value.
● Kam Senior also viewed the restaurants as his legacy assets to his older sons and the
engagement benefit system to his wife, daughter, and youngest son.
● Initially struggled with limited capital but managed to overcome through hard work
After his retirement, Kam Senior gave Kinsen and Ronald 35% each while the remaining
30% was given to his wife, his third son and youngest daughter. As time and greed transgressed,
Kinsen retained 45% stake while Ronald retained 55% stake of Yung Kee through inheritance from
family members. Thereby the ownership dimension shift to a Sibling Partnership. The key
challenges they had to overcome were:
● Imbalance of Shares. Initially designed to be an Egalitarian Arrangement / First Among
Equal role between two eldest brothers after receiving identical amount of shares.
Unfortunate events caused the unfairly distribution of shares from other family members,
which broke the system. Ronald bought his sister’s share, which allowed him to represent
the larger majority. Thereby shifting the partnership from First Among Equals to Quasi-
parental Leadership where Ronald is able to take the lead role.
● Succession planning and asymmetric opportunity of younger generations; Ronald did not
objectively base his decision on Yung Kee’s interest but for his own family branch benefits.
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● Excessive withdrawal of money that bypass Board of Director’s jurisdiction and other
stakeholder rights, main concern of retaining capital.
The conflict between the two siblings affected the business heavily as both siblings
concentrated on each other’s actions rather than the business. As a result, the restaurant is no
longer the world class culinary it once was. This was epitomized by Yung Kee lost of the one star
received by the Michelin Guide in 2011.
Family Dimension: Working Together → Entering the Business
With two generations working together, the family is in the Working Together stage. As
Kam Senior wanted to incorporate his sons into Yung Kee to continue his legacy, he assigned
different position for each son. Kinsen managed the firm’s operation, Ronald managed the firm’s
finance while Kwan-Ki cooked.
● Lack of communication between roles and responsibilities, prohibited access through
financial transparency. Disagreements since Kam Senior accumulated to abysmal
cooperation after his departure.
● The lack of conflict management presented at all stage although Kam Senior kept it behind
closed doors in the Working Together stage. Kam Senior’s authority was the only force
keeping the two brothers together.
After the passing of Kam Senior, the family business evolved back to Entering the Business
stage where the two siblings were the head of the restaurants. The two siblings involved their
offspring to be part of the business and encouraged them to be actively managing the company,
despite the lack of experience. Senior family members abused their positions to cause disparity
in treatment between the family branches. This caused further disarray in business direction.
● As Kam Senior is no longer present, the lack of conflict management clearly shows as
Ronald and Kinsen discord became public via lawsuits over ownership of the restaurant.
● Both Ronald and Kinsen involved their children with the family business. Although there
is a lack of information, Kinsen’s children were introduced to the family business despite
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being uninterested and unmotivated. This was a bad decision, as the parent should
support their child to benefit the company and not only their self-interest. More
importantly, the family business should have standards and protocol in hiring
qualification from non-family members and family members alike.
Business Dimension: Mature
Kam Senior started the business as a start-up, but quickly became a Mature Business from
external media support and acclaimed reviews. It had a strong customer base who appealed for
its distinct taste, and did not have any apparent competitor. Moreover, Kam Senior designed the
company to have a complex structure with clear tasks and differentiation. Yet, Kam Senior’s
authority and reverence were the glue for the employees and family members; he passed away
later and they did not strictly abide by his rules. The firm’s authority/ hierarchy became
ambiguous as the restaurant did not have explicit protocol as Kam Senior employs family value
as enforcement.
Personal Discussion & Alternative Solution:
There were many failure points throughout all axis that led to the downfall of the
company and the devaluation of their restaurant. In the ownership dimension, Kam Senior as a
Controlling Owner was a strong phase, but the transition to Sibling Partnership did not display
the same qualities. Through the Family Dimension, the prolonging conflict resolution and clarity
in responsible encouraged both brothers to fight during their father’s absence. As in the Mature
Business cycle, the business only retained its stature with Kam Senior, and quickly dwindled down
afterwards.
To resolve structural failures within the business, Kam Senior’s priority was to empower
the Board of Directors and external stakeholders to be more controlling of the brothers’
influences. The Board of Directors should be more resistant to Ronald’s actions as it led to poor
publicity and tarnished quality of the signature dishes. The entity should have voiced their
concerns when the brothers introduced their heirs into the business, without prior qualifications
or any justification to become a high rank staff. The Board’s candidacy should be re-evaluated to
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remain in neutral position, such that the valuation of the share price is reasonable or that no
family members can display malicious activities. The family’s overwhelming presence in the
business without any external force causes an imbalance in professional behavior, which should
be counterbalanced.
Exit strategies for owners of the business is yet another aspect where the group can
improve upon. Although Kam Senior wanted the family to work cohesively, it is naive to neglect
building an exit strategy for the owners (Exhibit 10). Forcing stakeholders to remain in the
business against their wishes will statistically cost the company time and capital as the
stakeholder will resolve his/ her issue in court. Although most business leaders surveyed will
agree with Kam Senior, they should conduct a more comprehensive evaluation before finalizing
their decision.
3.3.2 THAI UNION FROZEN; THAILAND
Introduction: Thai Union Frozen (TUF) is a publicly traded company since 1994. It is one of the
largest seafood exporter products in the world and is vertically integrated through its 28
subsidiaries which control supply chain, distribution, and packaging. As of 2015, its annual
revenues exceed $70 billion and it has approximately 32,000 employees worldwide. It also has a
diversified brand portfolio internationally, which is established throughout North America and
Europe.
The company is segmented into five parts: (1) Production and Export of Frozen and
Canned Food products (2) Production and Distribution of Packaging Products (3) Production and
Distribution of Animal Feeds and Agriculture Products (4) Food Business in Domestic Market (5)
Overseas Investment.
Company History: The Company was initially established as Asian Pacific Thai Tuna Co, Ltd. In 17
March 1988 with an initial capital of 25 million baht. In October, it was retitled as Thai Union
Frozen Products Co, Ltd,. In 1992, the company joined renowned food producers, Hagomoro
Foods Company and Mitsubishi Corporation Company to re-strategize its exported products to
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meet global standards and quality. Its international expansion reached instant success, and the
company became publicly listed in 1994 to grow further (Thai Union Group, n.d.).
TUF’s largest acquisition in its earlier years was through Chicken of the Sea, which was
based in California, United States. It later invested in Empress International Limited, which
identically functioned in the U.S. but covered a larger geographic scope in North America. It
continued its international expansions in other parts of Asia, by acquiring businesses related to
seafood production, packaged and canned goods, processor, distribution and logistics companies
(Table 4).
Business Strategy: The company’s core competency is structured around operational excellence
(Table 6). TUF is a company that prides itself on outcome-based strategies, which help the
company to align the interests of profit-driven families as well as professionalism from
management. TUF’s management with both family members and external individuals have
resulted in Disclosure awards from the Stock Exchange Commission in various years for their
transparent governance practices. They have a clear management and information system, which
enable them to efficiently communicate with their stakeholders much stronger. This is reflected
by their consecutive awards of leadership and policies from both the securities exchange
commission, and the regional organizations in the food industry.
Due to their clear policy, they always insist that corporate planning and business
expansion plans are compatible with the organization’s mission. Their investments are within the
food and food-related industry, while valuing each acquisition by the returns they can make: at
least 20% return on equity annually and 10% return on assets (Thai Union Frozen PCL, 22012).
The investments of the main company are primarily operated by professional managers to
counter the traditions of family management, in order to meet their philosophy of diversified
risks and asset allocation.
Management: TUF is a public company but the majority of its shares are largely owned by the
Chansiri Family at 21.6% in 2015, compared to its shares of 27.15% in September 2003. Other
family branches are involved as well, with the Niruttinanon having 6.9% and Boonmechote having
1.8% shares respectively (Thai Union Frozen PCL, 2015). The family’s influence also extends to
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the governance team, with five from the controlling families. Kraisorn Chansiri, the Chairman and
Founder, has placed his son as the company’s President (Table 3). The other Independent
Directors also hold shares in TUF’s subsidiaries, and are distantly related to the controlling
Chansiri, Niruttinanon and Boonmechote family. Within subsidiaries, the controlling family
leaders still exert influence and make sure that all strategies are aligned with the main company.
On strategic decisions, board members are not allowed to vote on an issue if internal
compliance as audit suspects that a personal benefit is involved (Thai Union Frozen PCL, 2015).
This is contracted under their Corporate Governance Policy whereby all management leaders are
required to report on a particular interest in the company’s subsidiaries, field, or personnel.
Ownership Dimension: Cousin Consortium
TUF is a publically traded company with 60.33% public traded in the Stock Exchange of
Thailand (SET) of which 21.6% are held by members of the family of various branches and non-
family members, thus aligning with the cousin consortium ownership dimension. The
conglomerate comprises of various subsidiary businesses diversified in various industries.
However, the core business of the group is the production of frozen seafood, mainly canned and
frozen tuna. Thereby, there are numerous active owners present in various subsidiaries, which
create complexity in analysis (Table 5). For this reason, the analysis of the business will primarily
concentrate on corporate vision and identify as a whole as well as the core business of the
conglomerate (frozen tuna).
The extended family is more involved with its subsidiaries and must comply with the
expectations and strategic guidelines of TUF. By imposing a common operational standard and
their six value pillars [Table 6], the family values are instilled within the overall direction. The
family approaches the complexities of asymmetric information by continuously ensuring about
their transparent practices and where their assets are allocated. The family branch is well-
represented by the number of subsidiaries and controlling ownership each of the subsidiaries
have. This generates new ventures for newer generation to foster, without having a significant
impact to the operations of TUF (Table 5). In addition, the family manages all conflicts through a
professionally trained team of non-family members. They also have a strong portfolio of Board
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of Directors. The main company places compelling support on the Board of Directors to ensure
that all active family members are objectively evaluated prior to employment and that the
relationships between subsidiaries do not generate personal benefits.
Through finding capital for the company, the company decided to go public. Although the
shares have been diluted, the growth of business subsidiaries has compensated for each family
branch’s loss. By publicizing the shares of parent company, the cousin consortium created a
convenient option for family members to exit from the ownership of the company. Hence, the
firm is able alleviate the courtroom conflict which could potentially stunned TUF’s investment
power and therefore growth opportunities.
With clear corporate identity and goals, TUF is able to support other family businesses
which aligned with the firms values. This can be seen in the deep array of subsidiaries most of
which are predominantly operated and owned by family members of different branches. The
clear guidelines are able to distinct family or personal interest from the firm’s interests. This will
ensure family shareholders and non-family shareholders that firm’s interest is at heart. In this
situation, the parent company has successfully spearheaded its other subsidiaries such that
investments and revenue have a trickle effect to all family branches.
Family Dimension: Working Together
The family operates with a three-generation management. There are some issues arising,
but they are largely solved through the creation of subsidiaries. TUF’s extensive network in the
industry allows the younger generations to explore their diverse mentalities and work ethic
through various subsidiaries tied to the parent company. Their network can optimize
intergenerational differences and clashes by distributing the risks of unprofessional family
members. This leaves the TUF parent company to be operated by senior members of the family
that have a broad background in the business, and can embrace the presence of a professional
team. To highlight the effective of the managing family members, prior to the Working Together
stage, all family members must pass through specific qualifications to obtain a senior
management in the parent company.
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TUF’s strengths are also in its ability to communicate symmetrical information to all of its
shareholders and family members. This helps resolves any disparity in knowledge. Additionally,
this resolves any conflicts to arise, as family members are consciously aware of their
responsibilities in the company while being able to operate in their self-interests as long as it fits
TUF’s main guideline. Moreover, the clear guideline also reassures non-family that all business
undertaken is in the interest of the firm.
Business Dimension: Maturity
TUF is able to maintain its complex organizational structure and functional differentiation
through clear policies, objectives, and family value. TUF operates in a mature business, as its
products are identical but are managed through different geographical locations. Its structures
provide clear growth opportunities for family members while its Board of Directors grant non-
family member’s chances to participate in senior positions. Although they do have a few key
family leaders in senior positions, the cooperation between them and the non-family members
are smooth and abide to the strict policies determined by the firm. Board members help enforce
key strategies and visibility, which negates any confusion from internal family members.
Although TUF is reaching its final stage in the business, it continuously expands to other
vertical aspects of the industry. Its ambition to find new business opportunities while sustaining
its parent company with operational excellence is key to its success in the maturing business.
Younger family generations and distant relatives are more involved in the subsidiaries (Table 5),
which helps the main family and leader, Kraisorn Chansiri, maintains a strong reputation and
credibility.
Personal Discussion & Alternative Solution
TUF is a primary example of how a professional run firm can cooperate efficiently with the
family. The firm is able to make informed decisions with the consent of the family when family
owners and shareholders share the same objective, hence prioritizing the firm before self-
interests. The family also maintains a strict protocol while opening discussion regarding the
processes of growth for TUF’s subsidiary ventures. The key successes of the company pertain to:
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The clear succession plan, transparent family involvement, and good communication
leads to proper management by professionals and family members
Family owners and non-family owners interests are aligned thus the company
management, ownership and family have high synergy
3.3.3 TEO GUAN SENG & HIAP HOE HOLDINGS; SINGAPORE Sibling Partnership; Passing the Baton; Expansion
Hiap Hoe Holdings from Singapore has approximately 70% shares respectively of Hiap Hoe
Limited and Superbowl Holdings. Hiap Hoe Ltd is worth approximately $SG 249 million while
Superbowl holdings is about $SG101 million.
Teo Guan Seng, founder of companies, wanted to dissolve the family company (Table 7)
and donate all his shares to public investors. Guan Seng claimed that the companies will no longer
be running as a family business after Ho Beng and Roland was filed a lawsuit against their brother
in Loh Kwai Lin’s family. During the Sibling Partnership phase, Teo Ho San was discovered to abuse
his power by withdrawing excessive funds from the company for personal leisure (Raharso & Eng,
2013).
In this situation, the controlling brothers who were working as senior positions in the
company had a Quasi-leadership role due to age differences. Teo Ho Beng became CEO and
Roland Teo Ho Kang became Managing Director, which were agreed between both brothers.
However, when Teo Ho San from Guan Seng’s third wife was about to join the family businesses,
it threatened their family-business structure by expanding into another branch. In addition to
abusing the rights as a family-employee, Guan Seng was slowly shifting family central governance
to the third wife’s family, who lacked experience in the field. Both Ho Beng and Ho Kang as senior
positions, were able to reject distinctive access to the third family limiting it to only one family
branch. Terminating Teo Ho San’s contract ensured no family access from the third family, which
would have jeopardized the company’s credibility and reputation for mismanagement. Upon
termination, the succession planning resolved itself and the company was refuted from becoming
a disastrous cousin consortium, if more family members of the third wife were to join the
business.
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With Teo Guan Seng formally retiring as an active board member, he was looking to leave
the business to his sons in Passing the Baton stage. However, the third family’s successor did not
have the readiness, knowledge depth, and work ethic that complemented the needs of the
company. Teo Guan Seng’s succession to the first family would have been smooth but his
impulsive reconsideration for the third family proved to be disruptive, but luckily abrupt.
The company is undergoing an Expansion phase, with Cash flow management at its most
sensitive point. Proper investigation to withdrawal of funds meant that Hiap Hoe was becoming
more effective with dealing internal affairs and misuse of cash flow. It became more formalized
in the Expansion phase. Moreover, Hiap Hoe Holdings was more structured when Teo Ho San’s
contract was terminated due to his qualifications and did not remain in position due to family
authority.
Personal Discussion & Alternative Solution
The failure of Hiap Hoe holdings stems from mismanagement of extension family and
wrongful decision in the inclusion of family members as the company should have a formal
structure and standardized procedure in hiring family candidates. At the same time, the company
should have clear roles and limitation of power defined for the ownership and the management.
This ensures that ownership cannot intervene with management decisions and jeopardize the
company hierarchy. With clearly defined roles, the Teo Guan Seng of the company will not have
authority to reprehend Ho Beng’s and Ho Kang’s justified dismissal of Teo Ho San.
3.3.3 YEO HIAP SENG; SINGAPORE Cousin Consortium, Working Together, Expansion
Yeo Hiap Seng Limited is a company that manufactures and distributes food and
beverages, particularly sauces. Since 1969, it has become publicly-listed and began to grow
beyond the grasps of the controlling family after three generations. With an international
outreach and diversification, the family was unable to keep up with the competitive landscapes
and global demands.
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Alan Yeo succeeded the family business in 1969 as Chairman and went on to outperform
its competitors through a stronger distribution network and more loyal customers. Head of the
family, Alan Yeo was leading 46 family members to overtake Singapore’s market. However, by
1991, Alan’s decision to acquire the overvalued Chun King marked the beginning of Yeo Hiap
Seng’s losses. The family began to distrust Alan for his inability to select a successor, his autocratic
leadership, and poor management. By 1991, the majority of the family group planned to oust
Alan Yeo -- while Alan fought back by garnering support from external shareholders. Alan then
dissolved Yeo Hiap Seng Holdings, so his loyal supporters of the family and external shareholders
could outnumber another rival Yeo group that planned to take control (NYU Stern Finance, 2000).
Unfortunately, after the splitting of the family holdings business, Yeo Hiap Seng was gradually
taken over by two billionaire contenders, who amassed shares while the Yeo family was in chaos.
Yeo family members had been selling shares to Malaysian tycoon Quek Leng Chen, which further
caused disarray in ownership to Robert Ng, who wanted Far East Organization to lead the
company. Robert Ng later took over the company, as he collected the shares through an open
market (Tripathi, 1994). Alan Yeo was overtaken by the Ng family, who was initially brought on
by Alan to become his external support. The other Yeo family that opposed Alan later took on
executive roles, but eventually lost control of the business and was fully superseded by the Ng
family.
Yeo Hiap Seng is an autocratic Cousin Consortium with multi-generational family
members actively running each part of the company. However, Alan Yeo’s influence depicts the
characteristics of a Controlling Ownership, where the company has relied on his decisions to
deliver success, and faced consequences from his single decision to acquire an overvalued
company. As an autocratic leader, Alan switched from becoming a family centered individual to
become more consciously discerning of other shareholder’s influences. He struggles between his
responsibilities those all involved stakeholders and his family members, which are the challenges
of managing a Cousin Consortium. He is continuously hindered by family members that prohibit
him from expanding the company in his vision and family members are further disappointed by
the expectations they have of him (Tripathi, 1991).
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With Working Together, Alan continuously had to balance his loyalty between
shareholders and family. Alan’s failure to empower management and non-employees within the
company resulted in lawsuit disputes and conflicts. A neutral third party like a Board would have
alleviated any conflict management issues, while separating ownership from management
(Gomez). This could potentially help solve multi-generational disagreements as well with
contrasting policies and leadership preferences.
As Yeo Hiap Seng was operating at its limit, Alan was continuously seeking ways to grow
the business by acquiring foreign companies. His main objective was to appeal to new sizable
markets and new demographics scope, which failed when he confidently acquired the Chinese
firm. His risks accumulated with tension among the nephew generation, a younger perspective
that determined it was time for him to resign. Eventually, Alan had to withdraw from the
company, which was expected due to poor corporate structuring and little family regulation.
“A listed company’s priority lies with its shareholders and employees, not the family’s --
no matter how painful this might be” - Alan Yeo (Tripathi, 1994)
Personal Discussion & Alternative Solution:
Alan Yeo leaded Yeo Hiap Seng to initial success as the leader heavily focused on the
Business and Ownership dimension. His autocratic leadership style overlooked the importance
of the family dimension. He also prolonged his reign as the leader and refused to name or create
a succession plan for the future of the family firm which irate family owners. The conflict between
Alan Yeo and his family caused them to lose the family firm to the Robert Ng. Alan Yeo was
arrogant to neglect the value of family shareholders and family succession therefore Yeo Hiap
Seng is no longer controlled by the Yeo family.
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4. FAMILY SUCCESSION
Although, most people agree that it is important to see the transfer of power from one
family business owner to the strongest candidate, very little have taken action to ensure a strong
succession plan. It is estimated that 70% of family business will not survive the second generation
and 90% will not pass through the third generation (Max, 2013). With more than two-thirds of
Asian’s countries dominated by family business and one generational cycle lasting a few decades,
succession planning will certify continuity for the family members. With only 80% of family
business response suggesting that they have no robust succession plans, a high failure rate is
correlated (Moody, 2014). The PwC Global Family Business survey’s sample size of 2,800 released
staggering studies of how poorly CEOs of all ages are not concerned with formal succession
planning. This same result is represented in the research done by Stavrou and Winslow as finding
from surveying over 100 family business showed that 97% of the business believe succession is
only a part-time job. For all business with succession plan, only 36% have formal writing and are
strongly structured, thus immediate improvement is needed in this area (Exhibit 4) (Stavrou &
Winslow, 1996). Even the wealthiest businesses have overlooked the importance of this stage,
have amassed family lawsuits, and have stirred intense competition between family branches
(O'Keefe & Oster, 2011). Business leaders are more concerned with daily operations and fail to
foresee how detrimental a succession plan can be for the company’s future. Within the Asia-
Pacific region, avoiding planning for unexpected failure is vital, as these businesses are
responsible for a significant percentage of employment and regional growth (Fernandez-Araoz,
Claudio; Iqbal, Sonny; Ritter, Jorg, 2015)
Family Business succession is the transfer of management, ownership, and family
authority to another candidate that is best suited to lead the company, in the interests of all
family members. It is also a strong indicator of future performances, a balance between function
of selection and development. Failure rates of family businesses remain high because all
stakeholders cannot fully acknowledge how integral each individual can affect the firm’s
performance in the future. Succession planning may also stir controversy as overlapping and
coinciding issues between stakeholders clash. Unforeseen consequences due to lack of
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commitment from executives in succession planning is common, and all stakeholders must be
involved and consented before the plan is finalized.
According to Deegan, on average, a succession plan can take a long time between five to
seven years to implement due to the changing culture of the company. Even most of the
succession plan cannot be carried out fully, most business cannot uphold those agreements.
Most companies overlook the benefits of having a succession plan, which can improve
competitive edge, reshuffle talented pool of employees, and reduce risks of losing key personnel.
4.1 SUCCESSION PLANNING: (Note: Partial context of ownership succession had been covered in the three-dimensional model)
Chrisman, Chua, Sharma analyzed steps in succession planning and had suggested these
six steps as foundation to a carefully plan transition (Sharma, Blunden, Labaki, Michael-Tsabari,
& Algarin, 2013)
1. Defining the broad ownership, governance and management goals: The leader of the
family business along with the board member must decide the overall direction of firm.
They should thinking about aligning goals of the family and the business to create a win-
win scenario ensuring family ambitions to meet business goals.
2. Organize a succession task group: The family firm should assign individuals or a
committee to manage the succession. This is contrary to the current family business
where most family firm considers succession planning a part-time job even though
succession is family business’ archeries’ heel. The committee or set of individual should
represent all three dimensions from the 3-circles model including business, family and
ownership to weigh in all opinions. The group should open a transparent line of
communication to the family, ownership and business to ensure smooth transition.
3. Set qualification of successor: Protocol and qualification to become the successor must
be created to ensure fair and transparent selection. This is similar to the guidelines for
entering the business. Qualification must incorporate, again, all three aspects of the 3-
circle model. For example:
a. Family dimension criteria: members eligible (bloodline, in-laws, divorcee)
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b. Business dimension: minimum position, years of experience, years in family
business, age limit, employment conditions, salary type, amount and duration
c. Ownership dimension: minimum investment vested
4. Time of event: There must me a clear duration, minimum and maximum, to how long the
individual can lead the firm before reassessment of their qualification and suitability.
5. Development of successor: A plan to development successor(s) must be in placed to
create a well prepared leader on a case-by-base basis. This plan must fits each member
style. This further elaborates Introduction of Family Members into the Business and
evaluates commitment for a family enterprise segment below.
6. Re-orientation of roles: The roles of the ex-leader and contenders must be redefined to
suit the firm and the individual ambition. This is vital as it relief tension among the
contenders, ex-leader and the new incumbent at work and especially at home. The same
condition should also apply to non-family members contending.
4.2 INTRODUCTION OF FAMILY MEMBERS INTO THE BUSINESS: Source: (Barach, Jeffrey A.; Ganitsky, Joseph B.;, 1995)
There are two general categories in introducing family members into the business: 1) low-
level entry and 2) delayed entry. Both methods have different advantages and disadvantages
which come as the nature of the entry style. Hence, researches show that there is no one better
way than the other as it all depends on the individual’s character and preference, and how the
companies react to their statures. Nonetheless, the individual must understand that these two
options are not absolute but rather is a scale based on time and experience formed internally
and externally from the family firm.
Low-level Entry: Low level entry is where the family members seeded in from the low-level
position or internship at the company to learn the ropes from business. This is the more common
form as 80-90 percent family members enter the business via low-entry employment. There are
strategic advantages in this methodology as the individual will get to know the business
thoroughly. He or she will comprehend the firm’s culture and the vision of the company.
Consequently, he or she will comprehend the company structure and get along with other
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employees with high synergy. Through working in the family business, he or she will build
credibility and earn trust from all employees.
There are also disadvantages from being in the family business; one of which is the limited
exposure to outside knowledge and personality. In addition, the individual intra-firm
achievement may perceive as less rewarding as they are working with the family while normal
mistakes made by the family members can be wrongly scrutinized or viewed as incompetency.
Lastly, as mention in the three-dimensional model, conflict between the founder/ the leader and
the individual may arise due to generational differences or difficulty in teaching.
Younger generations have been increasingly delaying their entry into Family Business.
According to 102 family firm samples, most suited successors collected a few years of experience
prior to joining the company. A large majority then join as low-level entries or a low-level
management position, which proved to be vital in family succession (Tatoglu, Kula, & Glaister,
2008). The Asian families have heavily weighted the experience of Young generation’s exposure
to similar businesses outside the firm, when compared to other variables such as decision making
or communication level.
Delayed Entry: Delayed entry is where the individual works at an outside firm before joining the
business in a high-level position. By working in an outside firm, the individual’s credential and
achievements can be judge objectively. He/ she will gain broad exposure and knowledge.
Additionally, by working in an outside firm, he/ she will gain high self-confidence for his/her trait.
What the individual with delay entry lacks would be the exposure to the family business.
The lack of exposure will create a discord between individual and the firm’s vision and culture
which may take time for the individual to pivot. The firm’s employees, especially the long-term
employees, may question/ dislike the individual as the individual does not work within the
framework of the business and have taken an advance position within the firm. Finally, the
individual position or action in other firm may not align with the family business position which
could create conflict once individual is hired. Yet, these problems can be potentially resolved with
time.
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4.3 INCUMBENT’S EXIT STYLE Source: (Spence & Sonnenfeld, 1989)
The article The Parting Patriarch of a Family Firm by Sonnenfeld and Spence remarks that
most leaders most often than not coincide in these categories: monarch, general, governor or
ambassador. Each style has different characteristic and thus each leader’s transition should be
handled on a case-by-case basis:
Monarchs are highly respected long term leader of the firm, achieving tall success during
their time. They like to keep close reign on strategic decision of the firm. At the end of their reign,
they receive small success and are unable to delegate their work effectively. The monarch will
want to linger on the firm as they want to experience the success again. It is a hard task to force
a monarch off his/her throne as they are well respected individual with power.
Generals are similar to the monarchs as they, too, have some success in the firm. Their
victories are not as well regarded as the monarchs therefore receive less reputation and respect
-- yet they embrace the firm as part of them. Their dream is to come back from retirement as the
leader.
Governors are unlike generals and monarchs; they have little success during their reign
and will comply with vacating from their position. Their reign is the shortest while subsequent to
their leadership, and will not remain involved with the business after they leave.
Ambassadors have passable success during their time as the leader, at the same time they
are not obsessed with their vision or level in the firm. They recognize when to step down and are
willing to become the advisors.
4.4 EVALUATING COMMITMENT FOR A FAMILY ENTERPRISE
For a family business, commitment is one of the most desirable attributes that can
leverage success in years to come. With commitment, occurrences of disagreements can be much
less as individuals are more embraced with the collective goal of the organization and
demonstrate willingness to change for the firm. Commitment and communication depict a
positive correlation, resulting in high conformity in family business transitions (Sharma, Blunden,
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Labaki, Michael-Tsabari, & Algarin, 2013). The right level of commitment is truly desired; those
that are motivated by personal ambition and obligation to the company. These individuals are
widely sought for, as they are self-motivated and know the needs and directions of the company.
However, commitment can be driven by four distinct sources, which can result in very different
directions for the company. In contrary to positive ambition from emotional ties or responsibility,
negative growth can be obtained when successors view the enterprise as an investment and a
final option, which forces them to join the group. The four types of commitment are Affective
commitment, Normative commitment, Calculative commitment, and Imperative commitment
(Sharma, Blunden, Labaki, Michael-Tsabari, & Algarin, 2013).
Affective commitment is a distinguishable characteristic that embodies the ideal
successor of a firm. With Affective commitment, the successor prides himself and herself on the
work. He/she is determined to reach organizational goals, has a strong conviction to perform
well, and wants this job. These individuals have strong emotional attachments and identify
themselves as the part of the firm. In regards to their work ethic, they are comprehended to be
the most responsive and know how to make the best out of their career in the company. They
construct positive working environments with their passion, and contribute to the growing
culture (Mind tools, n.d.).
Normative commitment is more based on responsibility towards the family business
rather than the affectionate feeling for the company. Individuals with normative commitment
prioritize their family’s history and contribution embedded in the company. They realize they
have a role to maintain and have the capabilities to meet those expectations. Although not as
strongly concerned with the company, these individuals have a sense of loyalty and may care for
those who center the company on their lives (Sloan Network Archive, n.d.) These individuals have
also more optimistic outcome with the family enterprise than those who pursue the career due
to perceived loss or entering as last resort (Dawson & Sharma, 2008).
Calculative commitment are for those who evaluate their opportunities based on the
returns. Certain criterion are reflected, including opportunity costs of abandoning the job and
loss in substantial investments if distant from the position. With this commitment type,
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successors feel they are obliged to continue the family business as they will be missing substantial
wealth. They are driven by business, economic, and social costs and consequently want to
preserve those values.
Imperative commitment occurs when individuals feel they are unable to attain a career
outside their work. These individuals have significantly lower self-confidence in their abilities and
acknowledge themselves as incapable, and incompetent. They resort to the family business as
their last opportunity, and have nowhere else to go. Those with this commitment should be trying
to understand what fulfills their career experience and attempt to find their niche abilities for a
purpose. Family members should encourage them to try alternate occupations, which could
avoid the adverse influence on a family enterprise.
4.5 ISSUES WITH OWNERSHIP SUCCESSION IN ASIA AND SOLUTIONS:
Advisors: Unlike the Western society, Asian families do not have professional consultants hired
to evaluate and advise on their decisions. This is primary due to the Asian culture as they are
highly distrustful of outsiders and value privacy. Most Asian families therefore only expose their
personal finance to family members, trusted long time employees or friends. Yet, professional
advisors can play a vital role in family business as their expertise can expand and explore options
for owners.
Having no third-party professional advisors can be a real disadvantage as advisors can
give objective recommendation for the family. Beside from the obvious, advisors can be utilized
as a medium to connect different generations or resolve conflict especially for businesses in the
cousin consortium stage where there are high number of members involved (Exhibit 15). At the
same time, advisors can act as check and balance or auditors for the family as Asians have high
tendencies to keep secret about the true state of the family or personal finance. Nevertheless,
advisors must be chosen carefully because the advisors must understand the context of each
country and business culture.
Exit Strategy: An exit strategy is a stage in an entrepreneurs’ life cycle where they can minimize
losses and eliminate any remaining liabilities tied to their business entity, while retaining tangible
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returns. In an exit strategy, “how much” has to be determined, “when” has to be perfectly timed,
and “how” needs to be addressed (Kuratko, 2009).
It is more common in Asian countries than in Western countries for family business not
to have exit strategy in place. The problem stems from the Asian culture where the founders
usually envision their progenies to work hand in hand to continue the founder’s legacy. The
unrealistic ideal cannot be counter since the founder or the leader has high tendencies to act
without consulting the successors’ wishes. Even if the idea was consulted, the filial offspring will
not dare to go against their parents’ verdict. Nonetheless, it is vital for a business to have an exit
strategy and various options are available (Exhibit 10). An easy exit strategy is to have the
company be publically listed. Consequently, stakeholders can go in and out of the business easily.
While this method could cause owners to potentially lose control, it can be easily countered by
issuing different class shares where the second class share available to the public has no voting
rights. This would create a win-win situation for all owners. Surprisingly, Asian families do not
utilize this strategy.
Trusts: Trusts are very common in succession tool in Asia. They are utilized differently in Asia
than in the west as trusts in the west are created for tax purposes. Trusts in Asia also have
different characteristic as trustees in Asia are typically financial institution whom have no power
to exercise voting rights as it is given to ‘management committee’ or ‘protectors committee’
(Sharma, Blunden, Labaki, Michael-Tsabari, & Algarin, 2013). Essentially, specific members have
the rights to all stakeholders’ voting power. Stakeholder in the trusts will be suspicious of the
decision makers as they may have personal interest in each decision made. Moreover, due to the
natural structure of the trust, the stakeholder will be suppressed by the decision makers thus
conflict may end at the courtroom. As mentioned in the exit strategy segment above, it is best
for the company to go public; in addition, issuing two different class of shares where the family
members class A shares with voting rights, in contrast to the public whom receive class B shares
with no voting right.
Firing the Founder: One of the concerning aspects of the Asian business culture is the inability to
fire the founder or forcing the founder out. This is unlike the Western approach and could cost
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the business if the founder stays past the business intended needs. Founders typically have very
strong roots in the interdependent family, and thus have many jurisdiction over family affairs and
inheritance. Due to the founder’s influence, the family members will not contradict the founder’s
will to remain in their good grace to secure highest benefits (Sharma, Blunden, Labaki, Michael-
Tsabari, & Algarin, 2013).
4.6 CASEWORK 4.6.1 OTSUKA KAGU LTD.; JAPAN
Introduction: Otsuka Kagu Ltd is large scale furniture store that sells middle to luxurious items
in Japan. The company founder, Katsuhisa Otsuka (father), and the current president, Kumiko
Otsuka (daughter), fought over the presidency of the firm. Mr. Katsuhisa Otsuka believes that the
company should stick with the old strategy where the firm offers “consulting services to
customers on selling sets of premium furniture.” In contrast to the founder’s direction, his
daughter’s strategy focuses on concentrating sales of mid-priced products to expand the
customer base (Nagata, 2015). The family feud is heavily publicized by media, where both father
and daughter have publicly criticized one another. The feud was settled at the company annual
shareholder meeting with Kumiko Otsuka victorious (Fukase, 2015).
Company History: Otsuka Kagu was founded in 1969 by Katsuhisa Otsuka. He was the president
from 1969 – 2009, where he then passed his reign to his daughter. The founder received massive
success from 1990 to early 2000 with sales soaring over 73 billion yen and operating profit of 6
billion yen (Exhibit 1). Yet, during 2008 financial crisis, the company went through rough period
with diminished operating income. According to the Minoru Fukada, a consultant at Roland
Burger, the consumer sentiments have shifted and “consumers’ value have become more
diverse” as they choose furniture fits their lifestyle (Nagata, 2015).
The shareholder meeting played out in favor of Kumiko Otsuka with the 61% of the
stakeholder supported her. It was revealed that Ms. Otsuka side would have won 80% of the vote
if family members were excluded (Nikkei, 2015). Even though Ms. Otsuka won the presidency,
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her father will remain close to the company as he is still the single largest shareholder holding
18% of the voting rights.
Defining Incumbent’s Exit Style: The conflict between the founder and the daughter is based on
their fundamental belief in the differences strategy that the firm should take. The founder is
categorized as a monarch as he had grand success in his 40-years career. Yet, his performance
was lackluster in his last two years. The founder also has deep respect from the employee as it is
reported many employees voiced concern directly to him opposed to his daughter (Nagata,
2015). Like all monarchs, the founder lingered at the firm long after his retirement and at the
same time eager to comeback as the leader.
In contrast with her father, the daughter is categorized as a General. She was not as
successful but she had led the firm pass the 2008 financial crisis. Furthermore, she closely
identifies herself with the firm’s vision and mission. The general strong attachments to the firm
caused her not to vacate her position without a real push, which resulted in a clash between her
and her father.
Potential Solution and Suggestions: The ownership decided against the founder with
transparency showed strength of the company structure as the stakeholder and board of
directors were able to decide objectively to maximize the firm’s benefit. The founder and the
president respected the stakeholder judgment further reflects clear guidelines between
management and ownership.
The firm now should look to the future to avoid history from repeating itself. First, the
firm should re-tool the founder’s role to give him new purpose. As the founder is categorized as
the monarch, it is likely for him to remain close to the firm. To create detachment from the day-
to-day business, the founder should become the firm advisor or join the board of directors. Lastly,
it is important for the business to define the presidency duration in order to reevaluate the
president’s performance from period to period, while grooming the contenders in case the
current president steps down.
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4.6.2 SHAMSIR JASANI ON BUMIPUTERA COMPANY AND MELEWAR GROUP; MALAYSIA
In a relatively new economy such as Malaysia, founders still persist to have ongoing
enthusiasm in everyday operations. These firms personify their founders and resist change, much
to business environments. In 2002, a survey by Shamsir Jasani revealed that the majority of
Malaysian founders do not force their family relatives to join the company (Amran, 2012).
Corresponding to forced succession and commitment, Malaysian family companies have a
formidable succession plan compared to Singapore and Hong Kong. For instance, the Bumiputera
companies and the Melewar Group captivates a small market and small expansion plan, and
internally train their successors. After three generations in each respective business, they
acknowledge that successors that descend directly from the founder seem to have more
consistent vision compared to external executives. These individuals help enhance “the value of
the company”, and has contributed to positive growth (Amran, 2012).
The descendants share uniformed characteristics of Monarchs and Generals, and have an
Affective commitment. In this study, Amran argues that training programs and open resources
are often attributed to the interpersonal growth of the CEO successor. Perhaps, descendants that
have these characteristics who are exposed to business at a young age, are nurtured to become
Monarchs, and Generals with an Affective commitment. But most certainly, these successors in
the Bumiputera and Melewar Group reaffirm that they choose to be here, and are not forced,
obligated, like Governors or Ambassadors.
Potential Solution and Suggestions: Jasani’s understanding of forced-succession was what
propelled Malaysian small family enterprises to succeed. Motivation depicted by Affective
commitment, was necessary to drive growth and ensure that family and company values
remained the same. This understanding can be applied to families of richer heritage, which would
help them attain greater wealth through professional management rather than forced-
succession. The enterprise focus may have switched to Business Dimension, but it can still retain
significant amount of profitability. Rather than risk with the Family Dimension and an incapable
69 | S u p a v a t a n a k u l & R a m y a r u p a
successor, many families would have benefit from the resources they possess relying on
individuals with Affirmative commitment.
4.6.3 SUCCESSION PLANNING FOR MUKESH AND ANIL AMBANI; INDIA
Only a few companies have succession plans ready for the next generation, including key
executive positions (Exhibit 8). The Reliance Empire in India has drifted two strong-willed
brothers apart, who were pillars of the company. Both wealth tycoons Mukesh and Anil Ambani
have conflicting Affective commitment to their father’s business, and their business philosophies
were tied to him. When their father passed away in 2004, without a succession plan, the brothers
struggled to retain all legal rights over the primary ownership of the business against each other.
One strong resolution they mutually agreed upon was the split of their father’s empire, which
allowed them to passionately pursue their interests more expediently, without legal affairs
trailing (Dealbook, 2010).
This permitted them to become a controlling ownership with their designated industries.
Instead, they could focus on their interests without the troubles of a sibling partnership, deciding
job qualifications for board members, and future successors between two equally-capable family
branches. Without their father’s involvement and both striving for his position, they swiftly
embarked on the reorientation of roles in the group.
Potential Solution and Suggestions: With succession planning and revision of roles and
responsibilities, both brothers could have still maintained deeper family ties and could have
saved years of lawsuit costs. However, both brothers are still regarded as the richest businessman
in India (Nelson, 2009). In this instance, the Ambani brothers depict a small group of successful
entrepreneurs who were able to recover from a succession plan and family cohesion failure.
4.6.4 DABUR CHAIRMAN ANAND BURMAN ON FAMILY COUNCIL; INDIA
Not all families have to rely on a succession plan, since a family council can help facilitate
any asymmetric information and misunderstanding between close family members. Dabur
Chairman Anand Burman insists that most objective results are reached when family council
70 | S u p a v a t a n a k u l & R a m y a r u p a
members remain in close contact and maintain an open-minded tradition. Through this family
business, even inactive members have to comply with family principles: compulsory attendance
with quarterly meetings and each person tasked with personnel recruitment (Burman, 2012).
The company has a proven track-record of internally recruiting and training senior
executives to manage the company. Current Wholetime Directors PD Narang and CEO Sunil
Duggal are part of the family council’s succession plan, which is the development of a successor
phase. This allows the company to hedge against any unforeseen senior transitions in the future.
The family also has strong conviction in executed decisions by management team; when a
disagreement between Chairman Anand Burman and CEO Sunil Duggal about mint-flavored
Hajmola candies arose, the chairman quickly insisted that his opinions did not matter (Pande,
2011). As Sunil Duggal stated “The cornerstone of our growth is in the empowerment of
employees,” the family council has successfully instilled an Affective commitment to the leader.
Having been with the company for 28 years, Sunil Duggal is a product of a strong succession plan
for external managers (Burman, 2012).
Potential Solution and Suggestions: A succession plan is not always necessary if the family
council is supportive and is informed of every company movement. In Anand Burman’s scenario,
his trust in his internal employees transformed a family enterprise to become more advanced in
the Business Development Dimension.
Based on our cases that have the same family size as Burman’s, Burman’s successful
transition without formal structure can be considered an anomaly. Burman’s succeeding
generation may not comprise of like-minded individuals and/ or have interwoven relationships.
Moreover, external factors can easily sway each family member to have emerging individual
interests for stake, thus the family should hedge these risks by having a succession plan
4.6.5 RICHARD EU ON DELAYED ENTRY AND RISING MONARCH; SINGAPORE
Singapore’s richest pharmaceutical company owner, Richard Eu had a prolonging time
frame prior to joining the family business. From a traditional Chinese family, Richard was
consciously aware that the career was beyond his reach. He pursued his career in stockbroking,
71 | S u p a v a t a n a k u l & R a m y a r u p a
merchant banking, computer distribution, and Venture Capital. When Eu Yan Sang, his family
business, was on the edge of bankruptcy in 1989, Richard abandoned his career to become Group
Genera of Eu Yan Sang.
Richard Eu’s delayed entry helped him realize how modern the markets function and how
obsolete the company’s business model was becoming (Ernst & Young, n.d.). Extensively
observing the business function from the demand perspective, Richard Eu realized he had to
cultivate his customers to be more knowledgeable about alternative medicine and to reaffirm
medical verification for his products. As a spectator, Richard was able to simplify the business
model’s problems and re-evaluate the positioning of his product more clearly to customers.
However, Richard’s case also made him a rare and successful demonstration of individuals
with Calculative commitment. It is generally perceived that individuals in this position are unlikely
to succeed, but he managed to find passion in his family’s work (AsiaBioTech, 2007). With more
than 72 grandchildren, Richard slowly purchased their ownership shares to regain control of the
business. By 1993, he was able to accumulate all his distribution rights from his cousins in
different countries (Jetley, 2013). This led the Eu Yan Sang to become an international group,
expanding to most countries in Asia. Gradually over time, Richard’s growing passion proved to
be more of an Affective commitment. While successfully dissolving the cousin consortium,
Richard slowly took helm as the Monarch of the company, and the best Controlling Ownership
the company has seen in years.
Potential Solution and Suggestions: Richard Eu’s delayed entry has been beneficial for the
company as it took on a diverging perspective. The company’s inability to perceive the shifting
demands has gradually led to its downfall, but Richard was able to distinguish the characteristics
of market demand accurately. Delayed entry, has enabled Richard to redefine the business scope
to become more effective at anticipating customer needs.
Forced succession does not necessarily indicate failure since Richard’s case proved that
commitment can always be changing. Initially as a Calculative commitment, Richard rediscovered
his passion and reformed his commitment to be Affirmative, thus leading to immediate success
72 | S u p a v a t a n a k u l & R a m y a r u p a
of the company. This can be a rare case as not all individual can change his/ her commitment
style and/ or adapt to the company as seamless as Richard Eu has.
73 | S u p a v a t a n a k u l & R a m y a r u p a
5. LIMITATIONS OF STUDY The study has a fixed framework and resource that cannot fully grasp the concept of
family businesses.
● Confirmation bias on type of family bias. We were working with information on specific
types of successful family businesses, which could not generalize all traits of the family
business industry.
● Analysis and written style of resources that can be misleading and misrepresent a sample
size. All of our resources came through secondary sources, which span from academic
studies to newspaper publications; all of which have different opinions. The written style
of the author, their cultural knowledge, and understanding of theoretical studies can have
an influence on our understanding of the subject.
● Limited number of resources due to language barrier. We gradually realized that our
limited amount of information was due to each media and governmental report was in
different languages. We could not find a standardized resource that grouped all
information together from one perspective.
● Limited number of family business examples. We had difficulty searching for family
business examples, therefore the business used represents a narrowed or specific sample
size. We are also uncertain about how each survey and information(s) were conducted in
the primary research, which can lead to accumulating flaws in our paper. Their
methodologies are relatively inconsistent, which concern the way they ask problems,
record answers, and reflect on the information.
● Limited use of frameworks for analysis. We only utilized two frameworks for this study,
while research studies used a wider array of tools. We adopted these frameworks due to
the repetition of its use in most of our researches. Future research’s detail can be found
in the “Remarks” section of this report.
74 | S u p a v a t a n a k u l & R a m y a r u p a
6. CONCLUSION & REMARKS
Family enterprise success relies on all three dimensions: family, business and ownership,
to function effectively. All three dimensions are valued equally as each dimension supports
different pillars of the family enterprise, such that the family dimension reflects the creation of
the highly functional family. The business dimension highlights management need and ownership
dimension reflects the diverging interests of all stakeholders. Each dimension has diverging levels
of commitment, and priorities as well, ranging from profit-driven mentalities to organizational
culture and history maintenance. At each stage of the three dimension, the business will tackle
the challenges which will build the foundations of the family firm. The basis of the firm will shape
its culture, vision and values, thereby a solid foundation will maximize the probability of success.
The caseworks we analyzed exemplifies the importance of the various dimensions. The
Yung Kee case provide insights to the importance of explicit structure and professionalism within
the firm. As the founder did not utilize a professional structure as the business expands, it caused
the business to implode as the brothers fought for dominance. Without professional structure,
nepotism, embezzlement and on-going tension will not subside. This is unlike the TUF case where
the firm is able to maintain formal structure in all dimension, making it one of the most successful
companies in Southeast Asia. Their professionalism is reflective to their performance as it steps
into the cousin consortium stage while creating opportunities and ventures for their growing
family. Nonetheless, the three dimension alone cannot guarantee success. The three dimensions
and the three-circle model of family business both demonstrate how much depth and
explanation can be accounted for in family success. However, both the models has its limitations,
and its accountability of unanticipated factors can be neglected especially external factors.
Succession is the other vital aspect, which dictates the long term success as the company
transitions to a new generation.
Although most executive leaders have a vision to transfer their leadership to their family
members, most of them do not formalize and draft a comprehensive succession plan. Most
individuals overlook the importance of one, and emphasize their efforts into daily operations,
75 | S u p a v a t a n a k u l & R a m y a r u p a
which is more perceptible everyday. With succession planning and its outcome, its results are
observable over a lengthy period of time. With a prolonging comprehension of its effects,
business leaders are quick to determine that its priorities are not as important as everyday
management decisions. The succession plan is overlooked even in the wealthiest of families, for
instance -- Mukesh and Anil Ambani of the Reliance Group continuously battled over the most
senior position of their father’s business. Although being equally capable candidates and having
worked together for decades, a fallout between the brothers still occurred. Without a succession
plan to provide fundamental guidelines on roles, and responsibilities, family members can turn
against each other and neglect all blood-ties. Even succession plans can be imperfectly translated
into business practices; for instance, the Bumiputera and Melewar Group tried to keep their
family size small, the Otsuka Kagu led to brief re-installment and reconsideration of previous
founder, and the Eu family diluted too many shares to all its cousins from different countries.
These successful entrepreneurs learned to adapt to the circumstances of the succession plan,
and know how to manage the pressure of all surrounding family members exceptionally.
As a long-term commitment, succession planning requires precise timing and
understanding of all family dynamics into play. The plan will force family gatherings, successor
discussions, and allow discomforting arguments about individual worthiness and legal rights. The
plan will have to cover an extensive range of topics that pertain to the family, the business, and
the ownership of the business. It is imperative that all family members and owners consent to
the change, even if they personally disagree. In an instance that family members do not want to
participate or is adversely disturbing the business, an exit strategy that is fairly justified has to be
introduced to all members. The complete understanding of how a family member can contribute,
through liquidating their shares to another family member or by selling their shares in the
market, can deeply topple an existing structure that all families uphold. Exit strategies must
confirm that all stakeholders involved must result in a greater net benefit, otherwise it is
ineffective. In contrary to exiting, an introduction to a family member based on low-level entry
or delayed entry is likewise important. The Ambani brother’s longstanding position with the
company helps them attain understanding of all focal points of the organizational structure.
76 | S u p a v a t a n a k u l & R a m y a r u p a
Richard Eu’s third person standpoint helped him recognize the market drivers and the shifting
perception of his business’ product.
One crucial detail that families continuously misunderstand is the difference between
family characteristics and ownership qualities. Shares do not always reflect ownership and they
do not reflect the management aptitude in a person. The succession plan intends to clarify any
confusion between these overlapping roles to avoid unnecessary conflict. At least, the plan has
to address all these issues such that limitations and rights are apprehended. This will affect the
way a family member, successor, and management team behaves in the company. Levels of
commitment and mindset for succession can greatly determine whether a business will make it
pass consecutive business cycles or not.
6.1 ENDING REMARKS
During the course of the independent study, we first explored the overview impact of the
intra-firm mechanics and theory of family enterprise. Then we went into details using our
caseworks to restructure arguments in Asian business context resulting in a more comprehensive
perspective. We discovered that many factors along with external business environment shapes
the success and failure of companies. Yet, the succession period and intra-family dynamic are the
key highlights and controllable factors which reduce systemic risks for family firm.
The details of the intra-firm challenges faced in different phases explain most of the
problems, which occur within the family enterprise. In retrospect, the knowledge gained from
the research has explained a lot which had happen to Thai family and the Thai business history.
In addition, we both benefit from the knowledge as we were able to understand our personal
family business. With what we learn, we can apply the suitable solution to our personal family
business and able to understand why each individual in the family constructs one’s opinion using
the three-circles and the three dimensional development model. Moreover, the succession
segment of the paper enables us to create a framework to handle the incumbent and the
contender transition. The retooling/ reinventing the individual is particularly interesting as it
77 | S u p a v a t a n a k u l & R a m y a r u p a
sheds light to the importance of recreating purpose for every individual to match their experience
and ambitions even after the transition.
Initially, we wanted to understand the framework to success but we realized the
complexity and numerous moving variables which can influence the family business direction.
Although we did not achieve our goal, we were able to identify the major controllable factors
which can capitalize on the opportunities with the resources given.
6.2 FUTURE DIRECTIONS
From looking briefly at the cases in Asia, we recognized that Asian family feud tends to be
heavily publicized by the media as it often misinterpreted the different dimensions of family
business and interpersonal relationships. For example, the media often cannot distinct between
the management and the ownership of the business creating confusion while exaggerating the
truth. We hypothesized that this is the case due to the dominance family firm exert in Asia, the
interwoven society, and the Asian culture. While this would be a high degree of difficulty to
analyze as there are no absolute measurement of culture and relationships.
Another interesting aspect for future research is performance of outside professional
manager versus the family breed manager in Asian (or country specific). As many family member
would argue that, although the pool for family member is shallow, family breed manager are
considered higher quality human resource as they have the financial advantage to build highly
intelligent and experience personal. For example, family members are able to have better
education as they are able to send their children abroad for education. We hypothesize that it is
true in country where income inequality is high but the talent variation decreases as income
inequality decreases.
78 | S u p a v a t a n a k u l & R a m y a r u p a
7. APPENDIX
Table 1: Trends of Asian Family Businesses Post 2000
Source: Bloomberg, Credit Suisse. Market Capitalization as of 31/12/2010
Market Number of all listed family business in sample size
Number of family business in sample size with market capitalization USD >50M
As of 2000 As of 2010 % listed after 2000
As at end 2000
% end of 2000
% end of 2010
China 107 107 61% 106 99% 39%
Singapore 135 135 49% 71 53% 27%
Hong Kong 354 354 49% 167 47% 24%
Indonesia 92 92 39% 36 39% 24%
Taiwan 256 256 37% 126 49% 31%
South Korea
367 367 37% 95 26% 16%
Thailand 118 118 36% 29 25% 16%
Malaysia 262 187 29% 86 46% 33%
India 663 507 24% 91 18% 14%
Philippines 86 74 14% 33 45% 38%
Total 3,568 2,197 38% 840 38% 24%
79 | S u p a v a t a n a k u l & R a m y a r u p a
Table 2: Asian Family Businesses Estimates of % Market Capitalization
Source: Bloomberg, Credit Suisse (Market Capitalization as of 2010)
FB market cap (USD M) % of Total Market Cap
Philippines 131,609 83.2%
Singapore 311,564 54.0%
South Korea 555,318 51.5%
Taiwan 453,552 49.3%
Indonesia 175,155 49.1%
Thailand 133,128 48.4%
India 165,279 46.8%
Malaysia 158,428 39.0%
Hong Kong 652,178 26.2%
China 416,524 11.1%
Total 3,749,733 32.3%
Table 3: TUF Board of Directors Source: Annual Report 2012
Kraisorn Chansiri Chairman
Thirapong Chansiri President
Cheng Niruttinanon Executive Chairman
Chuan Tangchansiri Executive Director
Rittirong Boonmechote Managing Director
Kakiuchi Takehiko Director
Chan Shue Chung Executive Director
Ravinder Singh Grewal Sarbjit S Director
Sakdi Kiewkhankha Independent Director
Thamnoon Anonthothai Independent Director
Kirati Assakul Independent Director
Nart Liucharoen Independent Director
80 | S u p a v a t a n a k u l & R a m y a r u p a
Table 4 Brands Under TUF Source: TUF Annual Report 2012
America Chicken of the Sea
Europe ● John West [#1 brand in UK, Netherlands, and Ireland] ● Petit Navire [#1 brand in France] ● Hyacinthe Parmentier [#3 brand in France] ● Mareblu [#3 brand in Italy]
Asia ● Century [#1 brand in China] ● Sealect [#1 brand of Tuna and ASEAN] ● Fisho [Thailand] ● Bellotta [Thailand]
Table 5 Sample Businesses Involved with Listed Company of total 21 Source: TUF Annual Report 2012
Related Company Family Personnel and Respective Shares
Position in TUF Shares in Respected Company
Thai Union Feedmill Company Limited
● Rittirong Boonmechote (11.9%) ● Prasert Boonmechote (5.0%) ● Wattana Boonmechote (3.5%) ● Rungtiwa Boonmechote (3.5%)
Siblings Rittirong Boonmechote, Current Managing Director
Chansiri Real Estate Company Limited
● Thirapong Chansiri (32.8%) ● Dejphon Chansiri (25.4%) ● Disaphol Chansiri (25.4%) ● Kraison Chansiri (13.0%) ● Bussakorn Chansiri (3.4%) ● Chuang Tangchansiri (-%)
President of TUF, and siblings of founding chairman
Thai Union Securities ● Kraisorn Chansiri (22%) ● Cheng Niruttinanon (20%) ● Chuang Tanchansiri (10%)
Directors and Executive Chairman of TUF
Waithai Company Limited
● Cheng Niruttinanon (31.3%) ● Kraisorn Chansii (18.5%) ● Chuang Tanchansiri (6.3%) ● Thiraphong Chansiri (6.3%)
Directors and Executive Chairman of TUF
81 | S u p a v a t a n a k u l & R a m y a r u p a
Table 6: Six Core Pillars of Development Source: TUF Annual Report 2012
● Innovation ● Sustainability ● Operational Excellence ● Mergers and Acquisitions ● Global Talent Development ● Strategic Sourcing
Table 7: Teo Family Breakdown Source: (Raharso & Eng, 2013) and Hiephoe Company Website
Family 1: Tian Ah Poon; 51 years of marriage and divorce; 4 grown children ● Teo Ho Beng (CEO) & Roland Teo Ho Kang (Managing Director): Sons from first
marriage, did not approve of Teo Ho San’s management ● Teo Poh Sim (Administrative Manager of Hiap Hoe Limited)
Family 2: Tan Ah Soi (Madam Tan); Inactive
Family 3: Loh Kwai Lin (Madam Loh) ● Was about to receive all shares from Teo Guan Seng after the 2002 divorce with Tian
Ah Poon ● Teo Ho San: Eldest Son (Ex-Staff)
82 | S u p a v a t a n a k u l & R a m y a r u p a
Exhibit 1
Exhibit 2
77%
35% 24%50%
23%
65%65%
40%
0% 0% 12% 10%
0%
50%
100%
Generation 1 Generation 2 Generarion 3 Generation 4
Who should succeed management and ownership of business?
Source: Deloitte, Singaporea Management University, & Business Family Institute. Professor Annie Kohn, Academic Director. November 2013 "Going the distance with the next generation"
Family Member Either Family or Non-Family Non-Family member
83 | S u p a v a t a n a k u l & R a m y a r u p a
Exhibit 3
Exhibit 4
46%
57%
46%
66%
4%
0% 10% 20% 30% 40% 50% 60% 70%
Fear of discussing the business' future beyond lifetimeof current generation
Fear of sibling favoritism, rivalry, and lack of commonagreement between succession planning
Fear of change and a disruption in the continuity of thebusiness
Lack of talent in the business family and understandingof talent
Others
Challenges of business family from creating a succession planSource: Deloitte, Singaporea Management University, & Business Family Institute. Professor Annie Kohn,
Academic Director. November 2013 "Going the distance with the next generation"
84%
75%79%
44%
75%
48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Rising Costs andExpenses
EconomicUncertainty
Stiffercompetition for
products andservices
Saturated marketsand limited
growth potential
Attracting andretaining talent
Successionplanning
Challenging aspects of family business (3-5 years)Source: Deloitte, Singaporea Management University, & Business Family Institute. Professor Annie Kohn,
Academic Director. November 2013 "Going the distance with the next generation"
84 | S u p a v a t a n a k u l & R a m y a r u p a
Exhibit 5
Exhibit 6
80%
70%
51%
26%
28%
51%
61%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Expand into new markets
Grow new lines of business
Increase capital expenditure
Merges and acquisitions
Divestments and consolidations
Require increased financing and funding
Research, Development, and Innovation
Priorities for businesses in medium term (3-5 years) Source: Deloitte, Singaporea Management University, & Business Family Institute. Professor Annie Kohn,
Academic Director. November 2013 "Going the distance with the next generation"
Yes54%
No46%
Company training and mentoring candidate for CEO position?Source: 2014 Report on Senior Executive Succession Planning and Talent Development. IED Institute of
Executive Development, Graduate School of Stanford Business
85 | S u p a v a t a n a k u l & R a m y a r u p a
Exhibit 7
Exhibit 8
41%
25%
17%
11%
5%
40%
32%
20%
8%
1%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Pass on management to next generation
Pass on ownership and bring professional…
Sell / float business
Unsure
Others
Future plans for management and ownership of family business
Source: PWC Global Family Business Survey 2014. "Up close and professional: the family factor"
2014 2012
16%
18%
20%
44%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
All senior roles
Most senior roles
Small number of Senior roles
None
Succession plan in place for key senior rolesSource: PWC Global Family Business Survey 2014. "Up close and professional: the family factor"
86 | S u p a v a t a n a k u l & R a m y a r u p a
Exhibit 9
Exhibit 10
66%
73%
74%
77%
78%
79%
79%
81%
83%
85%
25%
19%
19%
16%
15%
14%
14%
13%
12%
10%
9%
8%
7%
7%
7%
7%
7%
6%
5%
5%
0% 20% 40% 60% 80% 100% 120%
Discussions about future strategy
Performance of family members actively involved
Decisions about candidacy quality and selection
Failure of extended family involvement and…
Decisions about reinvestment of profits versus…
Remuneration levels for active family members
Roles and payments of "in-laws"
Decisions about share rights
Decissions about valuation of shares
Rejection of successor by family members
Major conflicts in family businessSource: PricewaterhouseCoopers Family Business Survey 2007/08. "Making a difference"
No Tension Some Tension A lot of tension
0%10%20%30%40%50%60%70%80%
Consideration of Exit StrategiesSource:2013 KPMG. Zellweger, T. M., Nason, R, S & Nordqvist, M. (2012), From Longevity of Firms to
Transgenerational Entrepreneurship of Families: Introducing Family Entrepreneurial Orientation, Family Business Review, (25(
2013 All firms Yes % 1st Generation % 2nd+ Generation %
87 | S u p a v a t a n a k u l & R a m y a r u p a
Exhibit 11
Exhibit 12
Exhibit 13
39%
32%
24%
5%
1%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
1
2
3
4
5
Candidate readiness for CEO positionSource: 2014 Report on Senior Executive Succession Planning and Talent Development. IED Institute of
Executive Development, Graduate School of Stanford Business
Number of Candidates
88.890
88.2 88.4 88.6 88.8 89 89.2 89.4 89.6 89.8 90 90.2
Mean
Duration (days) to replace CEO by Board DecisionSource: 2014 Report on Senior Executive Succession Planning and Talent Development. IED Institute of
Executive Development, Graduate School of Stanford Business
0%
5%
10%
15%
20%
25%
30%
Board SizeSource: Deloitte, Singaporea Management University, & Business Family Institute. Professor Annie Kohn,
Academic Director. November 2013 "Going the distance with the next generation"
Small Cap Mid Cap Large Cap
88 | S u p a v a t a n a k u l & R a m y a r u p a
Exhibit 14
Exhibit 15
48%
32%
25%
23%
22%
17%
17%
17%
13%
10%
10%
9%
0% 10% 20% 30% 40% 50% 60%
Industry (Similar to respective company)
C-Level (CEO, CFO, COO, etc)
Internaitional business exposure
Risk Management
Technology and IT
Board committee Role
Financial Services
Operations
Merges and Acquisitions
Corporate Governance
Cyber Security
Other (Please specify)
Desired skills and experience to board members (n = 211)Source: Deloitte 2014 Board Practices Report.
1%2%
67%
17%
13%
Number of family members in key senior rolesSource: PricewaterhouseCoopers Family Business Survey 2007/08. "Making a difference"
10 and above 6 to 10 1 to 5 None Refused / Don't Know
89 | S u p a v a t a n a k u l & R a m y a r u p a
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