A recent assessment of the Asian family office sector highlighted some key challenges that are common across both Asian and Western family enterprises. Although themes like the accelerating pace of change, succession and the emergence of environmental and social consciousness are surfacing across the globe, it is interesting to learn how Asian businesses approach these challenges given the significant socio-cultural and economic differences at play.
These are some key variables which influence the unique way in which Asian family enterprises experience and tackle these universal challenges:
The Ever-increasing Pace Of Change
Asian businesses are generally younger, more dynamic and have a greater appetite for risk. In comparison to some European family businesses which are moving into their fifth or sixth generation, Asian family enterprises are known to be more flexible and faster at decision-making. Although this is especially true within the emerging economies like Vietnam and Indonesia, there still seems to be a healthy balance between strong governance structures and the need for a dynamic and flexible approach to business within more established markets like Hong Kong and Singapore. Felicia Heng, Executive Director of Family Business Network (FBN) Asia, comments on the topic: “There are still enormous growth opportunities in Asia, but the need for speed and agility is essential to success in these economies. Businesses have had to learn to operate differently in the context of structures and process. Not that they do not want to have them, or they don't see the value in them! But because the balance is tipped slightly differently to thrive in the dynamic markets that we operate in."
The Next Generation
In Asia, the business boom only commenced in the ’80s, therefore succession planning has now suddenly become a hot topic due to the number of family-owned companies faced with first-wave succession challenges. European businesses are more established, some already dealing with fifth or sixth succession, so they have far more experience in managing these transitions. The business culture in Asia may be dynamic but is known to have rigid rules relating to lineage and hierarchy, as well as a lack of dialogue, which makes succession a tricky business.
Denise Kenyon-Rouvinez, Wild Group Professor of Family Business at IMD Switzerland and Singapore explains that “many first-generation family businesses are run by leaders who are very attached to their positions and find it very hard to let go or facilitate a phased hand-over successfully. Inter-generational dialogue is also a significant challenge affecting succession as often the next generation are forced into businesses whether they are motivated or not. There are generally rigid rules attached to succession which often discourage the younger generation who have a stronger entrepreneurial intent. This rigidity is probably one of the key reasons why studies are indicating that only 20 to 25% of Chinese next generation members intend to join their family business”.
Increasing Environmental And Social Consciousness
There is an undeniable socio-cultural mindset shift towards ethical social and environmental practices across the globe. Consumers and employees, as well as the world at large, are putting pressure on organizations to do what is best for people and the planet before driving the profit agenda. Going forward, companies will need to define and align their business and investment practices to a greater, ethical purpose to enjoy sustained support from people who purchase their products, and employees who work for them, especially millennials. In Asia, where education is a massive focus, the next generation of business leaders has been exposed to the best schools and the most modern training and development. According to Heng: “When the next generation comes back after their tertiary education in Harvard and Princeton or London Business School, they want to do things differently, more sustainably.” There is a unique level of motivation amongst the Asian next-generation to do so, according to Kenyon-Rouvinez: “In Asia, social unrest is common due to significant income inequality. Additionally, environmental concerns are more top-of-mind due to a large amount of sensitive coastline in Asia.” Heng adds: “From time to time we also see some primitive models when it comes to land clearing and plantations that do not reflect a strong environment-preservation mindset.”
Global Challenges
Some challenges are common across most family businesses whether in Asia, Europe or America. Although Asian businesses tend to demonstrate a greater level of dynamism and agility in the face of change, they are uniquely challenged in the area of succession due to a more rigid approach to inter-generational transfer. Asian companies, in line with their counterparts in the West, are becoming more socially and environmentally conscious, motivated by social inequality and inadequate environmental controls.
