Top Universities Launch Programme to Assist China’s Family Businesses

China is the world’s second-largest economy, second only to the United States, and one where the private sector is dominated by family businesses.

China’s economy has grown so fast for so long that it has shaped the future prosperity of an entire generation. However, in recent years, it has been regularly reported that this level of rapid growth is unsustainable – a prediction that may have been proved right, as its stock markets have been in decline throughout the summer.

Benchmark International CEO, Greg Jackson, commented after a recent client meeting in Shanghai, “The government has turned to strongly coercing capital sources towards deployment in public markets. The result is a drying up of the resources privately-held Chinese companies have traditionally turned to in order to fuel their growth and/or exits.”

The shift in the fortunes of this economy has undoubtedly unsettled many businesses, not just in China, but across the world. This decline, combined with China’s dependence on family businesses, could make for a dangerous economic cocktail of uncertainty. It is a fact that 80% of family businesses fail due to a lack of unity[1] (a feeling that could well be created by such an economic shift), and so it is not surprising that the world’s top business institutes are responding in an effort to control any impact by creating initiatives aimed to ensure the success of China’s family businesses.

A New Initiative: Family Business Therapy

Business schools at three of the world’s top universities have launched an executive programme to help develop family businesses in China. These institutes are made up of the Guanghua school at Peking University, Oxford University’s Saïd Business School and Harvard Business School.

The programme, Leading and Transforming Family Businesses, addresses the development of such businesses at a time when many of them are planning to go global. Eric Thun, associate professor in Chinese Business Studies at Saïd, commented: “[China’s family business’] management practices remain immature, and many are reaching a ‘crunch point’ as the founders need to hand over the reins of the businesses to the second generation.”

At Benchmark International, we could not agree more that this is a positive and much-needed initiative if the longevity of family businesses is to be protected, with statistics showing that only 13% of family businesses make it to the third generation[2] .

So how can the owners of these family businesses guarantee success over multiple generations?  One possible answer may lie in the full or partial exit of one or more family members.

 An Exit Can Open More Doors

 A full or partial exit is often confused with a releasing of control or sacrificing future incomes or profits. This is not the case. If a full or partial exit secures a company’s future and its growth, then this is a strategic business decision – not one based on emotion.

 A common problem amongst family-owned businesses occurs when those that have enjoyed success in the past fall victim to the failure to plan succession effectively. As companies are built and grown through the decades by their founders, and then their inheritors, the relationship and emotional complexities of the workplace increase exponentially with each successive generation. According to PwC’s latest Global Family Business Survey, of the 2,378 businesses interviewed, only 16% had a documented succession plan in place.

Developing an effective succession plan at the earliest possible stage becomes increasingly important as more generations become involved in the business. If you would like to find out more about an exit or partial exit from your business, talk to one of our professional advisors today.

China’s Family Businesses

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