family business - supavatanakul, ramyarupa - final draft

FAMILY BUSINESS: FAILURE &

SUCCESS IN ASIA

Kris Supavatanakul Ched Ramyarupa Independent Study Professor Yasuhiro Yamakawa

1 | S u p a v a t a n a k u l & R a m y a r u p a

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


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.


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


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.


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


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.


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.


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-


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.


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


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


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


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


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


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


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.


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-


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


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.


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,


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.


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


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


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


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


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.


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.


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.


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


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


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


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


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


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


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


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.


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


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.


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.


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


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


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.


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.


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.


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).


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.


● 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


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


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


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


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


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.


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:


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.


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.


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).


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.


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


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)


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


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.


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,


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,


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


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


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,


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.


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


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


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,


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


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.


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.


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,


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.


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


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.


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%


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


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


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)


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


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,



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,


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


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"


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 %


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


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


0%

5%

10%

15%

20%

25%

30%

Board SizeSource: Deloitte, Singaporea Management University, & Business Family Institute. Professor Annie Kohn,


Small Cap Mid Cap Large Cap


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


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Tatoglu, E., Kula, V., & Glaister, K. W. (2008). Succession Planning in Family-owned Business. Turkey:

International Small Business Journal 2008; 26, pp 155.

Thai Union Frozen PCL. (2012). Annual Report . Bangkok.


Thai Union Frozen PCL. (2015). TUF 56-1 Form. Bangkok.

Thai Union Group. (n.d.). Thai Union Group Corporate History . Retrieved from Thai Union Frozen Products

PCL: http://www.thaiuniongroup.com/en/profile.ashx

Tolbize, A. (2008). Generational differences in the workplace. Minnesota : University of Minnesota.

Treanor, J. (2014, October 14). Richest 1% of people own nearly half of global wealth, says report . Retrieved

from The Guardian: http://www.theguardian.com/business/2014/oct/14/richest-1percent-half-

global-wealth-credit-suisse-report

Tripathi, S. (1994, October). Business: Yeo Hiap Seng Feud. Retrieved from

http://saliltripathi.com/articlesAsiaInc/Oct94AsiaInc2.html

Yan, C. (2011, January 27). Hong Kong's Feuding Families. Retrieved from The Wall Street Journal:

http://blogs.wsj.com/hong-kong/2011/01/27/hong-kongs-feuding-families/

Yu, F.-L., & Kwan, D. S. (2013). Family Business Succession in Hong Kong: The Case of Yung Kee. Hong Kong:

Hong Kong Shue Yan University and Chinese University of Hong Kong .

family business - supavatanakul, ramyarupa - final draft

Documents

family succession

family enterprise

family firm

issue of family business

new family businesses

asian family businesses

emerging family businesses

family development dimension