Tag Archives: Family Charter

Family Charter and Succession Planning

I will now continue my Family Business Longevity Series using Royal Selangor as a gold standard for Family and Business Governance. Family owned businesses reaching a milestone of more than 100 years are indeed extraordinary and Royal Selangor, a Malaysian company that started in the 1880’s and with Chinese descent has proven that with a well-crafted Family Charter (constitution) and a timely succession process, the family business can continue to survive and grow amidst a complex and competitive marketplace.

Allow me to continue Royal Selangor’s amazing 132-year story.

The Yong brothers started out as tinsmiths making everyday items catering to the growing mining community at that time. Gradually, they started a side business crafting pewter to make Chinese ancestral worship items.  In time, Yong Kong veered off and established Malayan Pewter Works. The company — jointly run by Yong Kong’s four sons — expanded into making cigarette boxes and tea sets in the 1900s, which got the attention of European clientele.

After World War II, family feuds tore the business apart and the brothers set up rival companies Tiger Pewter, Selangor Pewter and Lion Pewter. However, only  Selangor Pewter, which was renamed Royal Selangor in 1992, survived. Right after the Malayan independence, it began making souvenirs and corporate gifts.

What were the lessons learned that led to the break up?

“My father told me to beware of family feuds. If you have family members contesting over the pot, then nobody looks after enlarging the pot,”says Yong Poh Kon, the Managing director of Royal Selangor International and third-generation leader of the family business. Although in one interview he concedes that for this type of business to survive, product innovation is the key to stay in the game, however he also emphatically asserts that succession planning should be given utmost attention.

While he wouldn’t say whether his son or his nephew would eventually be chosen to lead the business, the third-generation patriarch stated criteria and gave advice for his successor.

“It will be based upon the track record of the person and the support he will be able to derive to bring his idea into action.  Maintain the family harmony so that everybody feels that they are part of the business… continue this, then you are able to have the passion to drive the business forward,” Yong said.

In the PwC Family Business Survey 2016 — the Malaysian chapter points out that although 69% of local family businesses have members of the next generation working in the company, but only 15% have a robust, documented and communicated succession plan. That survey reflects a looming universal trend among family businesses that tend to overlook the dire consequences when senior business leaders set aside or completely neglect succession planning.

Another source of major conflict and possibly one of the biggest dangers faced by family businesses today is the risk of the younger generation taking it as a free ride and feeling a sense of entitlement to a position in the company purely because of his or her surname. To avoid this, Royal Selangor employs a policy wherein every family member has to work in another company for a period of time before joining the business.

“The rationale behind working in another organization and the reason why that rule is in place is because you have to have something to contribute and bring to the table if you want to work for the company”.

(esoriano@wongadvisory.com)

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Royal Selangor’s Amazing 132 Year Success Story

I am back in the country after a grueling 7 days of uninterrupted Family and Corporate Governance campaign covering major business groups in two of East Africa’s biggest economies, Kenya and Ethiopia.

This campaign is an initiative of the World Bank’s private sector arm, International Finance Corporation or IFC in making sure the investment they placed in these family owned enterprises adhere to Corporate governance protocols. 

Family-owned and controlled businesses loom large not only in Asia but also in Africa. Some are grappling with awkward succession battles, while others have shown innovation as younger members rise through the ranks. The issue is why do some family businesses go on for centuries. What is their secret?

To address this phenomenon, I have embarked on a new set of articles that will focus mainly on family business longevity series. The first two companies I shared  last month was that of the almost 500 year old/18th Generation Toraya Confectionery Group from Japan and the Hongkong based Lee Kum Kee Condiments Group. Toraya has been recognized as one of the world’s top 25 oldest family owned business.

Next in our longevity success stories is Royal Selangor, a 132-year old Malaysian pewter manufacturer and retailer and considered the largest of its type in the world. 

Founded in 1885 by Yong Chin Seong, Yong Wai Seong and Yong Koon, it is a successful family business that has weathered global recessions, survived two world wars as well as the boom and bust of the tin industry, including a bitter family feud.

The company started out making Chinese ancestral worship items in the 1880s and later expanded to cigarette boxes and vases that appealed to European colonials. In the 1950s it began making souvenirs and corporate gifts after the Malaysian independence sparked a tourism boom.

Royal Selangor opened its first store abroad in the 1970s and now has 50 stores around the world in countries including Singapore, Japan and Australia.  The brand is also found in stores such as Harrods and John Lewis in the UK.

For all these fame and fortune,  “Thanks to proper succession planning and a family charter in place,” notes Yoon Li, who runs the business with cousin Chen Tien Yue, making them the fourth generation to do so.  Apart from the two, the company is run by a team of professional managers. “We rely on the heads of various departments to come up with strategies and execution plans,” says Yoon Li.

For the fourth generation family members, formulating a Family Charter was the best thing that ever happened to Royal Selangor. And to prevent a repeat of a damaging family feud, a six-member family council along with a family charter, were established in 2002 with guidelines to handle potential disputes. 

Yoon Li says his family’s charter has gone through at least 30 iterations since it was implemented. It was put in place to ensure that the family business “was not considered a place of occupation for family members or an employer of last resort.”

This policy simply means that anyone interested in joining the family business is required to have worked outside the scope of the company for at least two years. The charter basically sets the ground rules and is the constitution for how the family engages with the business. For instance, things like who gets to have a physical office and who is allowed to use the resources of the business are specified in the charter. 

“It is this foundation that has kept the family run entity in business all these years,” he adds.

(esoriano@wongadvisory.com)