How to Overcome the Third Generation Curse

Family businesses need to get over the “succession curse”; otherwise there is no legacy to speak of beyond two or three generations.

In my previous articles, I highlighted the remarkable 129 year run of the Lee Kum Kee (LKK) Group, a Hong Kong-based Chinese family enterprise that started in 1888. At present, it continues to dominate the condiments and sauces industry and has presence in over 100 countries.

But there is a bit of irony here. When you search for Asian family-owned businesses that are more than a century old, you rarely find Chinese enterprises in the list. When you scroll up, you will find Japanese businesses dominate the global list for longevity with the oldest one, Kongo Gumi, a construction company established in 578 A.D. extending its run to 1,428 years!

So why are there only a handful of Chinese owned enterprises surviving the third-generation curse?

The answer lies mainly on the changing norms and new generation expectations.  The younger generation of Chinese businessmen are increasingly exposed to Western values and the gap between them and the older generation is becoming a source of conflict in the succession planning of family businesses.

In my coaching work in Asia, I have seen an alarming rate of family business disputes with poor succession planning as a root cause of the problem. The impact of poorly managed succession and family infighting are detrimental to both the family business and the owner/managers.

The Lee Kum Kee (LKK) Formula    

The LKK Group is an exception. It is more than a century-old, presently managed by the fifth generation and has weathered two major break-ups. There is clearly no doubt that the enterprise has proven to be resilient and their longevity points to the family leader’s desire to carry out and implement the best formula without compromising the values of its founder.

Their secret? The Lee family redefined the concept of family business management by positioning the family as the core, and treating business as part of the family, not the other way around. They also blended family dynamics and incorporated the business structure as part of the family ecosystem.

The experiment worked and now they are on their way to pursuing more milestones clearly making them one of the few Chinese family owned businesses in the world that is expected to last for many generations.

Practical Advice

In one of his celebrated talks in Thailand and documented by writer Pichaya Changsorn, Eddy Lee, the fourth-generation leader of Lee Kum Kee highlighted in his own words a handful of practical and powerful insights that every family business leader must embrace regardless of the size of the family business:

a. Problems begin small and then the ‘virus’ grows. Prevention is better than cure. In family businesses, before the family business gets sick, do something about it.

b. Family-run enterprises are essentially different from general business enterprises in that the former have not only business issues to deal with, but also the obligation to take care of “family values”, which sometimes can be a personal thing and have nothing to do with business.

c. Sometimes the problems stems from the fact that the role of each family member is not clearly defined.

d. The driving force for business systems is to move the business forward. But sometimes, family is not looking at the driving forces but is concerned about relationships.

e. Needs may be different. For example, in business, you need to deliver results and show returns to your shareholders; family businesses may be looking for love, care or financial security.

f. Families talk about harmony… we stay together. Business don’t talk about harmony, we talk about rules, KPIs or key performance indicators

g. You don’t get to choose your parents. But in business you can choose your boss or where to work

To be continued…

(esoriano@wongadvisory.com)

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