Entrepreneur Series - Transparency is a Major Step to Family Legacy Succession

Passing on their achievements to future generations is a dream for many Asian entrepreneurs. Yet according to HSBC’s 2016 report The Essence of Enterprise, in Asia and Middle East, only one-third of second-generation entrepreneurs join the family business.

A snap poll conducted at the HSBC Private Banking’s Entrepreneur Series, titled ‘Building Futures—Turning Today’s Dreams into Tomorrow’s Legacy’, pinpointed a lack of communication as a major cause of why only one in three second-generation entrepreneurs join the family business 1. Younger generations say that ‘money and succession’ are the most difficult topics to discuss with parents.

Connie Ho, Head of Family Governance and Family Enterprise Succession, North Asia, at HSBC Private Banking highlighted that families usually wait until their plans have been finalised before discussing succession matters. But for the Cheng and Lo families — the respective founders of Polygroup and Crystal Group, Hong Kong-based manufacturing companies — open communication, which began years prior, enabled the patriarch and younger generations to find a common ground and implement their succession plans.

First generation: communicating their thoughts

Kenneth Lo, the founder of market-leading garment manufacturer Crystal Group, left the option open to his successors. “I made it clear early on that it was their decision to make,” he said. “If they were keen to join the family business, they needed to show their passion in the business, their ability to manage it, and their commitment to the corporate culture,” he added. To ensure the enterprise’s longevity, the family agreed that the enterprise should be managed by non-family members, with upcoming generations owning it, learning to be good shareholders and better yet, becoming the leaders.

According to Lewis Cheng, Polygroup’s third-generation leader, “High transparency is a crucial trait of my family.” This, he asserted, helps secure a family’s succession plan and a roadmap for the future.

Next generation: speaking their mind

Of his own accord, Lewis Cheng joined Polygroup after spending a few years working in the banking industry. “The family business is the best platform for me to achieve the most in the shortest amount of time,” he enthused. When he communicated his decision to his father, Paul Cheng, Lewis Cheng recalled, “He questioned and challenged it, making sure I knew I was serious and responsible for it. But in the end, I was the one that made the final decision.”

Andrew Lo, son of Kenneth Lo and current CEO of Crystal Group, was unfamiliar about garment manufacturing, as his interests lay in other areas. His father said to him, “No matter what you sell, all business is about strategic planning and people management.” This convinced Andrew Lo to join the family business, where he eventually identified his missions and goals, including a succession plan tailored for the company’s next leader.

For more insights on how to cultivate transparency and open communication in the family business, watch the Lo family and Cheng family share their thoughts.

1HSBC Private Banking 2016 Essence of Enterprise Report

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