The Dragon Network: Inside Stories of the Most Successful Chinese Family Businesses

Chapter 5

The Succession Conundrums

Succession is one of the most important issues in a family firm, since it will decide the company’s sustainability in the future. Some family firms thrive after the succession; unfortunately many more decline after the founder passes away or retires. Overseas Chinese family firms are no exception. Take Kam Lun Tai, for example. Once a successful trade, remittance, and tin mining firm, the company faded after the death of its founder, K.L. Lee, in June 1936. H.S. Lee, the son of K.L. Lee, was chosen by his father to lead Kam Lun Tai, but focused more on his political career in Malaysia. One younger brother did not want to take a leading role in the business, while the other younger brother knew little about the business.

Succession should not simply be viewed as replacing the older generation with the younger one as top management. Succession relates to the company’s strategic planning, career development, the role of the older generation after leaving his or her leadership post, and the commitment of the younger generation to the family and business. Succession can also affect the company’s relationship with external parties, such as suppliers, customers, and financial institutions. These parties want to see who will be in charge after the senior generation is no longer at the helm of the business and then decide whether they can maintain their cooperation and relationship with the company.

Succession Planning Conundrums

Because of its strategic ...