The complexity of business operation determines that the succession itself has a high threshold, even if the successor is willing to take over the burden of the family business, there is also a huge risk of "succession failure".
Wen / Ba Jiu Ling
Not long ago, a storm in which Lao Tzu deposed his son provoked the public's gossip nerves.
WH Group International, the parent company of Shuanghui, issued an announcement saying that Wan Hongjian was dismissed from all positions, including vice chairman, vice president and executive director of the board of directors, for "improperly attacking the company's property" . The 81-year-old father dismissed the 52-year-old eldest son, and the originally most optimistic successor suddenly got off the table, and public opinion was in an uproar.
The world's largest meat company is still firmly controlled by its founder, 81-year-old Bandung. He has two sons under his knees, and the original successor has almost no suspense, and now he has become confused again. In addition to the two brothers, the third generation of the family also began to enter the core layer to participate in the management of the company, which added complexity to the succession of Shuanghui.
About 90% of China's private enterprises are family-run, and in the next five to ten years, 3 million private enterprises in China will face the problem of succession.
When we joke that the "second generation" has a "throne" to inherit in their families, they don't think so.
The survey shows that the proportion of families whose fathers are engaged in traditional manufacturing is only about 10% of the children who take over and continue the parent's industry, and even if they are willing to take over, the success rate is only about 30%. There are very few children who are willing and capable of meeting the conditions for succession.
A few years ago, the chairman of a private enterprise in a certain industry died unexpectedly, and the only son who was starting a business was hurriedly called back, while dealing with his father's affairs, he took over the family business with the help of his mother. Under the pressure of multiple parties, it almost collapsed. But in his view, this business was founded by his father and paid a lifetime of hard work, just like his "younger brother", his father is gone, he has to take care of his "younger brother" with his mother, and he gritted his teeth and persevered.
Bumping and bumping along the way, the company is finally back on track. However, as a very traditional manufacturing enterprise, the original business has its own old ministers in operation, the dealer network is intertwined, the industry competition is fierce, and the growth space is limited.
The successor originally did not have much interest in the family's traditional business, and it was difficult to make a breakthrough in the follow-up operation, and it was a dilemma for a while, which also greatly affected his happiness index.
For the first generation of the family, the issue of succession is rarely considered in the prime of the year, and for the second generation of children, it is a time of playfulness. Succession? That's something to consider a long time later, so that when an accident comes, it's like a catastrophe.
In contrast, a more rational approach should be to introduce professional institutions as soon as possible, such as the family office of private banks, to communicate with the successor in an orderly manner, to set up a shareholding structure, to prepare a set of response mechanisms for unexpected situations, etc., to isolate potential risks.
Parents love their children, and they have far-reaching plans for them. Considering in advance to prepare for the inheritance, laying the foundation, and handing over professional things to professional people, it is not only responsible for the next generation of the family, but also responsible for the enterprise.
The preferred successor to a Chinese family is often the child. So can "child succession" in the traditional sense work? How do family-owned companies in Europe, the United States, and Japan solve this "world-class problem"?
Legendary Yamaha has experienced such a succession failure.
In 1983, Yamaha's "ancestor" Kawakami Genichi retired, and his eldest son, Kawakami Hiroshi, took over as Yamaha's seventh president. At the beginning, Kawakami Expressed his concern, he once said, "Will Hiroshi become Takeda Katsurai?" As a relative, I am very worried. Takeda Nobuyuki was the fourth son of Takeda Shingen in the Sengoku period of Japan, who took over the Takeda family after Shingen's death, and was historically evaluated as a brave and unscrupulous son.
Kawakami agreed with the American-style management style at that time, believing that Yamaha was not working, there were many places to change, and introduced McKinsey as a consultant to promote internal organizational reform and launch a series of new measures.
At that time, piano and electronic keyboard sales were not good, Yamaha resorts' careers were also sluggish, and new attempts were mostly failed, Yamaha lost money continuously, and the interior fell into chaos.
In 1992, Hiroshi Kawakami decided to retire as president under increasing internal pressure. At the retired press conference, he said he "never thought from the beginning that a 42-year-old would be up to the task of President Yamaha." He also said, "I prefer to be an expert in product development and technology than a general-purpose person." This may be the truest thought in his heart.
As a consequence of this failed succession, after Kawakami's retirement, his family's equity was slowly diluted and he lost control. Since then, Yamaha's successive presidents have been professional managers, but it is these excellent professional managers who have led Yamaha back to the top.
The most heart-wrenching result is that the business founded by the ancestors was lost in the hands of their own generation, and the business and the family have been scattered ever since.
So how to define the relationship between family and business, how to build a firewall for the relationship between family and business? Is it possible to arrange the equity and control of the enterprise held by family members more reasonably through the design of the shareholding structure? This involves a series of complex legal, tax, financial, corporate governance and other aspects of the problem, the family to do is to clarify their own needs, and then leave these things to a professional team to design and implement.
Many established family businesses have their own inheritance schemes, which have been constantly revised over the centuries.
After the reform and opening up, the history of Chinese family enterprises is relatively short, so for foreign family enterprises with a long history, what is the "foundation" that determines the long-term survival and steady development of family enterprises?
Jardine Matheson Group, one of Asia's oldest family-owned businesses, was founded in Guangzhou in 1832 by two Scottish-British, William Jardine and James Madison, to trade with China.
Both young men were very adventurous and hard-working enough to discover business opportunities in the course of the times, such as the trade between China, India and Britain after the East India Company ended its trade monopoly; the purchase of the first piece of land for public auction after the opening of Hong Kong; and the construction of the first railway in Shanghai, the Wusong Railway.
After more than 100 years of development, Jardine Matheson Group is now a Fortune 500 company, employing more than 400,000 people in industries such as financial and insurance services, retail department stores, consumer market expansion, engineering and construction, machinery manufacturing, automobile trading, transportation services, real estate and catering. In Hong Kong, the former home of Jardine Matheson, the cultural Oriental Hotel and The Landmark Central that we are familiar with are the properties of the Jardine Matheson Group.
Today, jardine matheson has been passed down to the fifth generation, in the process the shares are dispersed to family members, which risks weakening family control due to the sale of shares by family members. Some families choose to leave their shares in trusts so that they can continue to bring financial benefits to family members while still retaining control.
The choice to master the Jardine Matheson Family is to construct a specific shareholding structure, to involve family members in the development of the business as much as possible, and to maintain a close family member relationship is also regarded as one of the family values. Today, family members in every generation still voluntarily join the group and serve the business.
If there is anything that is the foundation of this family that lasts for five generations, it is the values that all members of the family uphold, professional ethics, independent spirit, business foresight, adaptability to the times, determination, etc., these intangible assets have been sorted out, precipitated and passed on in a long time.
Many families use the "family charter" method to textualize and standardize these "spiritual assets" and become the family's navigation and code of conduct, the content of which is sometimes even very detailed, such as Lee Kum Kee's family charter, "no divorce, no extramarital affairs", "the fifth generation of family members must work in the company outside the family for 3-5 years before entering the family company; the application procedure and post-entry assessment must be the same as that of non-family members.".
Compared with specific equity, wealth distribution, finance and other plans, the "family charter" is more like a family's "bible" and "behavior manual", it seems that its content is relatively retreating, but it allows the family inheritance to "have a law to follow", especially when the family faces major choices, the family charter will play the role of a compass, distinguish between right and wrong, and point out the way. The formulation of the "family charter" is also a technical task, which should be completed by a team of experts to accompany the family.
Why do families need a "private office"?
The goal of an enterprise developed with the family as the main body is destined to make strategic planning in advance with a longer-term vision, including the design of inheritance. A series of professional issues such as equity structure, wealth distribution, corporate control, legal taxation, etc. in the process of inheritance require a set of very professional and customized solutions.
In the old capitalist countries, the "family office" took on this responsibility. It is like a family's private office, helping the family to formulate a succession plan, in addition to taking care of the family wealth, it undertakes many non-financial affairs of the family, including assisting in drafting the "Family Charter", organizing family members' meetings, holding regular family gatherings, family membership planning, legal and tax planning, arranging successor education plans, high-end medical care, quality pension arrangements and so on.
In China, the popularity of family offices is still relatively low. In the 2020 "2020 China Family Office White Paper" released by Ping An Bank Private Bank and Forbes China, only 20.9% of families have used family office services.
Many families abroad have a history of hundreds of years, and the family office system has long been very mature. The history of China's family business development is only more than 30 years, these Chinese family enterprises have their own particularities, how to combine the actual situation of Chinese family businesses, to provide more customized, borderless services, is the primary challenge of domestic private banks. Whoever understands local users better will be able to get a better reputation and gain more family recognition.
Ping An Private Bank has made sufficient efforts in this regard, and although it started late, it has grown rapidly. At present, the scale of private bank customer aum exceeds one trillion yuan, with an annual growth rate of 53.8% (the end of 2020), ranking the first echelon of domestic private banks.
Just as Ping An Private Bank's development vision is "to be the smartest and leading international private bank in China", it provides customers with:
1. Relying on Ping An Group's strong financial resources and financial technology strength, Ping An Private Bank's professional team focuses on "investment, wealth management, protection and inheritance" to customize a complete set of inheritance plans for Chinese families, including investment management, wealth inheritance, top-level legal structure design, tax planning, and successor education.
2. Scientifically design the inheritance scheme structure of domestic and foreign family trusts and insurance fund trusts, systematically carry out family wealth planning, make wealth safe and controllable, and help customers plan reasonably, take precautions and reduce risks.
3. Ping An Private Bank has an expert think tank composed of hundreds of external legal and tax trust scholars to provide wisdom support for family inheritance services. Help customers formulate family charters to comprehensively sort out family affairs and achieve the smooth inheritance of family material wealth and family spirit.
4. Empowered by technology, Ping An Private Bank realizes "intelligent portable" customer service through the "five-in-one" model, provides high-quality financial services to customers through scientific and technological means, and fully realizes the whole process of family trust investment allocation online, so that customers can feel the financial services with temperature.
5. Ping An Private Bank has created an exclusive service platform for entrepreneurs, "Qiwanghui", to provide entrepreneurs and enterprises with one-stop financial solutions including investment and financing, wealth planning, and business empowerment. At the same time, we will build a "safe and happy" public welfare platform to provide one-stop charity planning services for entrepreneurs' families.
"Safe heirloom, inheritance of peace", as soon as possible to introduce a professional team to participate in the family inheritance, itself is an advanced "family governance" concept, Ping An private bank brings not only solutions, but also the long-term companionship of the family, the trust established in long-term service and interaction to create a safe harbor for the family, to help generation after generation of family members to the foundation of evergreen, but also to help China's excellent traditional family style to carry forward, build a harmonious society.
The author of this article | Du Heng | When the value is edited | Link
Responsible Editor | He Mengfei | Editor-in-Chief | Zheng Yuanmei