Cheng Kar-chun talks about the successor Family inheritance must have both ability and political integrity

In 1978, the New World Centre opened. Known as the "city within a city", this landmark building was a hotel, department store, office, serviced apartment, and entertainment city, making it the most fashionable destination in Hong Kong at that time. Since then, the Cheng family has embarked on a dual-track development model of jewelry and real estate, and the discerning Cheng Yu-tung and Cheng Kar-shun father and son have gone out of Hong Kong to target the mainland market, and New World Department Store has once become a benchmark shopping center in major cities in Chinese mainland. Who would have thought that a new world center would open the door to the wealth of the new world of business for Zheng's industry.

However, the inheritance of wealth is not an easy task, and the choice of successor is particularly important. Cheng Kar-Shun, the head of the Cheng family, who is also the chairman of New World Development and Chow Tai Fook Jewellery, was inspired by the question of future succession in a recent interview.

"Still observing, but not easy to find" This sentence in the interview, it is not difficult to see Cheng Kar-chun's cautious attitude towards the arrangement of the successor. Cheng Kar-chun bluntly said during the interview that he is still making decisions about the family's major enterprises, and whether he needs a successor in the future has not yet been decided. If he really wants to choose a successor, he put forward six conditions: "selflessness and enthusiasm for the family business", "leadership skills that are convincing to employees and colleagues", "pursuing the golden mean", "having both talent and morality are the most important", "being able to take care of other family members", and "inheriting the family culture".

The high standard is actually more dependent on the leaders of the family business, who take more risks, work harder, and have a more entrepreneurial spirit. Therefore, the pattern and ability of family business leaders often have a more critical impact on the success or failure of a family business. Therefore, Cheng Kar-chun's requirements for his successor are not high.

For the sake of the continuation of the family, Cheng Kar-chun even proposed that he does not necessarily have to find someone from the family to be the manager of the company, and he does not mind hiring "outsiders" to manage the company, as he said in the interview, "If there are no suitable family members, you can recruit from outside".

I'm not sure if there's a knock on family members, but it's important to hire a professional manager. As an investor, I agree that in my opinion, hiring a professional manager is a sign of the maturity of a family business, as the so-called 'professional people do the professional work'. If a company only thinks about its own family every day, there will definitely be a deviation in judgment, or due to the deviation of the core values of two generations, the company will turn from prosperity to decline, such events are common in family businesses.

As one of the most important influencing factors in the inheritance of family wealth, Zheng Jiachun, as the second-generation helmsman of New World, is well aware of the truth, so he does not announce the determination of the heir when it is not necessary, which has the advantage of giving more opportunities for family members to exercise and perform, and at the same time avoiding divisions within the family, which is not conducive to the inheritance of family wealth. This unexpectedly reminds me of the disputes of some family businesses in the mainland, where the founders are still mostly in charge of the founders, but the issue of second-generation succession has also entered a critical period, and these founders can learn Xi from Cheng Kar-shun's open-minded thinking, which should take family longevity as the main consideration, break the traditional and rigid thinking mode to manage the enterprise, rather than tightly binding the prosperity and decline of the enterprise through blood relations.

Selecting people is the "root" and culture is the "soul"

The key to successful inheritance is not only the material assets and concrete management of the enterprise, but also the inheritance of family culture. Under the leadership of previous generations, it is necessary to polish and sort out the spiritual wealth upheld and precipitated in the process of family business entrepreneurship and development, and pass it on to future successors in combination with the uniqueness of the family. Obviously, Cheng Kar-Shun is aware of this problem, so he mentioned in the interview that the successor must be able to inherit the family culture, he knows that pure material wealth cannot last long, and the family culture that supports the success of the business can move towards a century of development.

Therefore, in Cheng Kar-shun's view, the Pearl River Power Plant, the renovation of Guangzhou's North Ring Road, the renovation of the old city in Chongwenmen in Beijing, and the housing project in Wuhan have not received corresponding financial returns, they can be happy to improve the living environment, travel convenience and quality of life of residents.

Although Cheng Kar-Shun has been influenced by Western culture since childhood, he has been able to integrate China's conservative and traditional "golden mean" culture into the development of his own business, forming a very family-like business principles, business behaviors and value propositions, so in addition to the ability of the next generation of successors, it is more precious to recognize family culture.

Keeping a business is the foundation of family inheritance

It is said that it is not easy to start a business, and it is even more difficult to keep a business, and the Zheng family is also the same. The story of Cheng Kar-Shun and his father's disagreement that eventually led to Chow Tai Fook's listing has been widely circulated, showing his sensitive business sense, and from the recent NWS (00659. HK) change of major shareholder also demonstrates the wisdom of Cheng Kar-Shun in leading the Cheng family to maintain their business.

We all understand that NWD's main assets are ports and highways, which are interest-bearing assets, and the cash flow model is completely different from that of the parent company, New World Development. Chow Tai Fook Group of Companies, which is the holding platform for the Cheng family's important assets, has more assets similar to the nature of income income. After NWS returns to Chow Tai Fook Group, it is possible to recombine assets, which is conducive to standardizing operations and improving management efficiency.

The above operations are similar to IBM, which divested its PC business in 2004 to focus on the server market, and Alibaba Group, which spun off from its e-commerce business in 2019 and operated independently, all of which are through the reallocation of assets to form the competitiveness of enterprise clusters and achieve operational excellence. Therefore, the replacement of the newly created major shareholder should be a consideration for the restructuring of the family's assets and the improvement of management professionalism. It can be seen that the Zheng family, who has been in the business circle for many years, has flexibly applied the reallocation of assets to the preservation and appreciation of family assets, which is fully in line with what he said in the interview: "To do a good job in the family business together, the most important thing is to do it with heart and put the family first." ”

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