According to a 2014 study by Tharawat Magazine, family-owned businesses represent over 70% of global GDP. In the U.S., 80% to 90% of businesses in the private sector are family businesses, and in Hong Kong, where my company is headquartered, that percentage is 60% to 66%. However, studies have also shown that most family businesses end after the first generation, less than half are passed down to the second and only 13% are passed down successfully to the third.
Considering that such a large portion of the economy comprises family businesses, and most of them don’t survive for long, it’s important to take a closer look at legacy businesses. This topic is particularly close to my heart since my father passed the helm of his now 46-year-old company to me in 2015. Having led the business for six years, there are a few things specific to family businesses that stood out to me, particularly since they could make or break the business.
Never be satisfied with the status quo.
Many family businesses fall into the trap of thinking, “If it ain’t broke, don’t fix it.” Yet, in an era when technology and consumer trends can turn industries upside down within a matter of years, all businesses —especially family ones — must be prepared to pivot.
The key lies in determining a set of value propositions that your target customers would need and developing strengths, possibly in advance, in those regards. For my business, it’s about accepting the rapid rise of smart devices and equipping the company with the resources to cater to this new market segment. To remain a family business, in the long run, is definitely not to be comfortable with the status quo.
Embrace technological advancements.
Another factor of longevity in family businesses is their relevance to current times and adaptability to the latest technological developments. With technology dominating both professional and private lives, proper investment in technology is essential to a business.
For my company, an electronics manufacturing company with years of industry experience, it isn’t only about being able to help manufacture the latest smart devices with the addition of relevant industrial equipment, it’s also about making use of technology to improve internal operations to ensure we are operating at our best.
For instance, we established and digitalized our reporting structure to ensure there’s a consistent flow of information to and from our headquarters and global sites. This structure proved to be vital during Covid-19 when normal operational procedures became affected by abrupt changes, and many businesses — large and small — fell under the crushing wave of the pandemic.
Look toward a united and evergreen future.
As inspirational speaker Simon Sinek has said on multiple occasions, the “why” matters in business. For my company, we’re driven by our mission to improve world living standards, to make a difference and to work with clients and products that are essential to human life. Our mission not only gives employees a sense of purpose behind their work but also long-term direction that’s multi-generational, meaningful and sustainable.
Focus on job rotation and recruitment.
In family businesses with many long-service employees, it’s important to introduce new dynamics within the company to encourage growth. This can be done either by encouraging long-service staff to rotate to different roles so they can develop cross-functional expertise for executive leadership roles or by recruiting fresh talent who can bring in the most recent and learned industry best practices.
In our case, these two strategies will be most relevant to our mainland China site — our oldest facility with many long-service staff members. We will push for internal rotations and the recruitment of mid-career managers with sustained experience in several companies. It’s exactly as Patrick Lencioni describes in his book, “The Ideal Team Player” — we aim to work with and look for individuals who are hungry, humble and smart. With a growth-seeking and open culture, the company is more likely to experience sustained growth in the long run.
Consider the shareholder structure.
As with any type of business, it’s important to consider the shareholder structure, which can affect business priorities and the basis of its sustainability. Family businesses with external shareholders or those that are sold to external parties may place greater emphasis on financial achievements. Financial goals are important to sustain a business, but they’re not the sole determinant of growth and success.
As a wholly family-owned enterprise, I’m lucky to not have to manage the interests of external stakeholders. Additionally, as a people-centric company wherein the concept of family runs strong, profit-making is also not the only goal of the business. This means the business can focus energies on motivating the team and gradually introducing new ideas and changes. Having this family-owned structure makes a difference to the overall health and morale of a company and, in turn, its long-term performance.
Move slowly but steadily toward a legacy.
Taking over a family business is hard, and finding the right balance between the people and the business is complex. However, it’s also meaningful work. From developing and positioning the company toward the future to maximizing the potential of existing staff and bringing in fresh talent, working toward a multi-generational business that can positively impact employees, clients and beyond is a goal I find most worthwhile.
By Carl Hung,
President & CEO of Season Group.
Originally published on Forbes on 8 June 2021