Developing China’s Family Firms

China now faces a major challenge to shift from investment driven and state sponsored growth to sustainable growth from business enterprise. How well it manages this shift is tied up with how well its burgeoning family businesses evolve and mature.

Peking University, Guanghua School of Management, Saïd Business School, Oxford University and Harvard Business School have teamed up to help Chinese family firms manage this evolution and drive the transformative changes they need to expand and prosper in a competitive global business environment.

Leading & Transforming Family Businesses, the new program from this triad of prestigious business schools, aims to develop organizational leadership skills to steer family businesses effectively and to foster an understanding of innovation and the need to innovate to create customer value in modern often knowledge based markets.

“Chinese family businesses are at a historic turning point,’ said Eric Thun, Peter Moores Associate Professor in Chinese Business Studies at Oxford Saïd.  “At the same time as confronting the challenges in the domestic market that are common to all Chinese firms, many are making leadership transitions from the first to the second generation.”

It is less than 40 years since Deng Xiaoping’s reforms ushered in the era of private enterprise in China. It is estimated now that the private sector accounts for over two thirds of GDP, a figure that is set to rise as the new government continues its plan to cut back on state-owned enterprises. It is then further estimated that 85% of Chinese private sector companies are family owned.

A major concern now is that, as the pioneering entrepreneurs who built this phenomenal expansion retire and pass control to offspring, who may not share the entrepreneurial instinct of their parents, these family businesses risk inertia or decline; a danger often exacerbated by a reluctance to employ professional managers from outside the family. These problems are of course common to family businesses everywhere, but in China the generational change is happening across the whole sector around the same time.

On the positive side, many of the future leaders of China’s family businesses are highly sophisticated, well educated - often to MBA and Executive MBA level - and many are more than capable of meeting the challenges they face.

The key areas where the Leading & Transforming Family Businesses program will provide support are in strengthening corporate governance, increasing the capacity to innovate, and designing sound growth strategies that take advantage of local and global opportunities. The program lists as its objectives:

• Recognise and address the specific challenges associated with family-owned and family-managed businesses in Greater China—from governance to diversification to planning and executing first-time generational transitions
• Formulate effective strategies for achieving common goals, addressing conflicts within and across generations, and planning for the family’s future
• Implement structures and processes that lead to high-performance companies
• Respond effectively to volatile and uncertain economic, political, and market conditions in China and around the world
• Innovate to build competitive advantage in a global context
• Design growth strategies that take full advantage of the business’s strengths while minimising its vulnerabilities
• Develop organisational leadership to meet the challenges facing today’s family businesses

“Chinese family businesses have been and will increasingly be an engine of the Chinese economy. During the programme, we will look at the distinguishing traits and opportunities of family businesses from China, Hong Kong, Taiwan and beyond,” says William C. Kirby, T. M. Chang Professor of China Studies at Harvard University and Spangler Family Professor of Business Administration at the Harvard Business School. “Using case studies of real-world scenarios, world-renowned faculty will sharpen the participants’ skills in analysing issues, exercising judgment and making difficult decisions, equipping them to shape a sustainable future for their family business and a strategic transition to the next generation of leaders.”