By officially putting family first – and having fun in the process – they have nurtured a hugely successful corporation that gives everyone a chance to exercise their influence with a significant level of freedom. Who said families just argue?
HSBC Private Bank’s Family Enterprise Forum in Shanghai brought together business owners and external experts to share experience and insight about managing the transition from one generation to the next.
At the Forum, Bernard Rennell, Regional Head of Global Private Banking, Asia Pacific and Global Head of Family Governance and Family Enterprise Succession explained why managing the family business is not enough to achieve success: “Managing the family itself is also critical if the family business is to succeed over the longer term.”
Hong Kong-based Lee Kum Kee represents the archetypal rise and rise of a successful Asian family business that has had to ensure that the dynamics between relatives work for the good of the business.
“You need to cure sickness before it happens!” says Sammy Lee, Chairman and Managing Director of LKK Health Products Group Limited, and author of two books on business management. His brother David Lee, Chairman of the Lee Kum Kee Family Foundation adds: “Before we had [set up] our Family Council, we were all stressed because we had to play so many different roles in the business. If we continued in this way, we’d be like the ship heading for the iceberg.”
“The reason wealth tends to dissipate around the third generation is that differences in opinion become inevitable as the family grows and, without an effective framework for family governance and collective decision making these differences of opinion can turn into intractable disputes” explains Bernard. “If a family business is to succeed over the longer term, it needs to bring the same level of strategic rigour to planning for family governance as it brings to business strategy and corporate governance.”
Lee Kum Kee’s strategy was to launch the Family Council – the trigger for a type of forum that every member of the family can be involved in at some level. There was a growing realisation that the approaches such as those they were using to develop the company’s core commercial objectives would apply just as well to the family.
Over time, these guiding commercial principles have blurred the family and corporate lines – in a positive way. “When we took on that philosophy,” says David, “we found out that it’s not just good for the company but also for how we run our family council. For me, it has helped simplify things a lot between family and business. Because it’s a common platform where we speak the same language, we can all play our role.”
Bernard agrees that families willing to have a frank conversation about the personal and emotional relationships as well as purely commercial issues are more likely to be able to sustain their business.
Brother Eddy Lee, Director of Lee Kum Kee Co Ltd and Chairman of the Lee Kum Kee Family Council, admitted to wondering if he was wasting valuable time when the siblings started meeting up – though he soon recognised the longer-term value in putting family first in this way.
“We all have one mission,” he says. “So when we have differences, we discuss things while showing respect for each other, and try to figure out a way to work through it. Once we have consensus, we uphold that decision.”
With this approach, Lee Kum Kee has achieved an enviable level of harmony that cuts right across the whole family tree.
But how does it work in practice when the family council is taking up to 16 days in a year out of the businesses?
“It has actually evolved to this level,” says David. “Once you explore one area of planning and start digging… you discover there are more and more things that need to be considered in the planning process.” So what was a simple agenda soon grew into a regular four-day event involving the extended family. Meetings are interspersed with fun activities like golf, which helps create the right pace and mood to deal with the issues. Other quirky innovations where family members will wear baseball caps labelled with their respective company ‘roles’, helps remind them when and how they can contribute while showing respect for others.
For Sammy in particular, the best way of bringing others along with you on the same journey as a family business is to practise ‘learn, do, coach’ – ensuring that those values you learn together, are practised and then coached to the new and up-coming generations.
Not that they view the next generation as a cause for concern. There may be those who prefer not to participate at all in Lee Kum Kee’s journey, but those showing an interest are actively encouraged to help shape the future – their core values and responsibilities come with a healthy freedom to contribute.
Charlie Lee, Chairman of Lee Kum Kee Co Ltd adds that even their parents are pragmatic enough to recognise the value in building a seamless connection between the younger family and future success: “This year, three members of our G5 raised their hand to join the council –but my mother said we didn’t have enough seats! So she suggested she step back to let them join. I think that was a very nice thing for her to have done.”
“We have a big family,” says David. “Of course we are excited that some family members in the next generation are interested in understanding how we work.” Sammy echoes the sentiment: “They are actually thinking really hard and with a long-term approach. To have them join in the conversation is pretty awesome, actually.”
On the surface, Lee Kum Kee has cracked a complex code that shows how a strong family business can operate successfully across several generations.
“No matter whether you are a company, a family or an individual,” says Sammy, “you need to find the ‘why’ in life. Because whatever you do, you have to find your mission or purpose. Our mission is to be a role model in the business, helping the family and sharing. And we are here to represent the Chinese in making history!”