PART II OF TWO PARTS

SINGAPORE – Family businesses are perceived very differently in the East and the West.  In Western countries, the “family firm” may be viewed as an originator, but not perfector, of businesses. A family business may be viewed as a “mom-and-pop” operation that, if truly successful, will progress to so-called professional management.  In the United States and Canada, the emphasis has been on the transfer of power to professional managers and the separation of control and ownership.  

Family businesses in the West imply a degree of nepotism: family members on a board of directors, a spouse as president, and unemployable cousins sprinkled in menial jobs.  Further, a “paternalistic” structure implies a condescending, meddling atmosphere subject to the personal discretion of the founder—as opposed to an objective meritocracy.  There are, of course, successful family firms in Canada and the United States, but they are less common and suffer more scrutiny. 

The Asian context is different.  Nepotism and paternalism do not carry the same negative connotations within the Overseas Chinese Diaspora.  To them, the interests of a family and its business are intertwined; the survival and prosperity of one is tied to the other.  

Gordon Redding, former Dean of the University of Hong Kong School of Management provided an insightful analysis of the Overseas Chinese Diaspora in The Spirit of Chinese Capitalism.  I got to know Redding years ago.  He is very experienced and has spent time both in Hong Kong and Singapore. 

One overwhelmingly consistent theme in discussions Overseas Chinese Diaspora family businesses is “patrimonialism.”  That word as such is not used by them, but it is the only word which captures adequately “the themes of paternalism, hierarchy, responsibility, mutual obligation, family atmosphere, personalism, and protection.”  (According to Redding, personalism is “the tendency to allow personal relationships to enter into decision making.”)  

The very nature of patrimonialism causes Westerners to bristle, as it smacks of a male-dominated hierarchy.  There is a glass ceiling to be concerned about; women are rarely even in the room yet.  To some extent, the notion of patrimonialism resembles the “social contract” that existed between employer and employees in the U.S. and Canada in past generations: spend your career with the firm and you will be rewarded with job security and a good pension.  In other words, there was a form of mutual loyalty.  

For the Overseas Chinese, the cliché phrase “run your family as a business, and your business as a family” has a ring of truth.  The family and business are intertwined for historical reasons.  As part of the sojourn of the Overseas Chinese, the family has become the basic survival unit, and families do not fuse naturally into the general community.  

Redding explains that members of a family among the Overseas Chinese are often “motivated by the pragmatic exigencies of protecting and enhancing the family resources on which they, in turn, are very dependent.”  The Overseas Chinese view family as the bedrock of their lives, the anchor in a world with competing interests.  The notion of family “extends beyond its members to encompass its property, its reputation, its internal traditions, its ancestors’ spirits, and even its unborn future generations.” 

One Singaporean family advisor noted that it is sometimes difficult for Asian families to give significant amounts of money—as this is outside the family.  The priority is to maintain family wealth for the family and to keep the family legacy alive.  In the West, it is common for our successful clients to set up foundations and to give away the bulk of their estate. 

A Chinese entrepreneur based in Hong Kong or Singapore will enlist the help of siblings in far-flung places to assist in the family enterprise.  An older brother, for example, will summon his younger brother back from a career in Canada because his help is needed back in Hong Kong.  Or, a Singapore entrepreneur expanding into the Los Angeles market will seek out a cousin to provide trusted input, even if he is not an expert in the particular industry.  Blood comes before expertise.  While perhaps not wise from a Western perspective, the Overseas Chinese put their primary emphasis on trust (particularly for critical decisions) rather than on professional, independent expertise. 

That is changing, however.  The child sent overseas, say to Los Angeles, finishes his education and decides—against family wishes—that California is, well, rather attractive.  One of my Hong Kong Chinese friends joked that, “if you want your kids to return, then send them to the UK—and not the US.”  In the UK they get a great education, but they are for some reason not attracted to the damp climate.  By contrast, studying in southern California, the lure of beaches and a fine climate makes the crowded cities of Hong Kong and Singapore a bit less appealing. 

While there may be similarities to the Western model, the Overseas Chinese model remains distinct.  Redding explains:   The answer as to its special nature is that it retains many of the characteristics of small scale, such as paternalism, personalism, opportunism, flexibility, even to very large scale.  It does not follow the Western pattern of professionalization, bureaucratization, and neutralization to anywhere near the same extent. 

In other words, while in a Western context the family business is a transitory stage, for the Overseas Chinese the family business model is a preferred way of doing business.  For the Overseas Chinese, Redding notes, the family provides roots:  “It is hard for a Westerner to understand the extent to which the Chinese depend on family; how they look out and see the vacuum of no-man’s land—traversed as it may be by the networks they construct—but no man’s land nonetheless.” Within the culture, the family business is a credible way of running a business and is particularly well-suited to the environments of the Overseas Chinese.  

The bottom line is that the family business is viewed very differently in an Asian context than in Western countries.  The above discussion demonstrates that there are clearly some advantages to the family business model, namely responsiveness, flexibility, networking, and trust relationships.  At the same time, there are challenges arising from an international context where East and West cause friction with a single family enterprise. 

Rudyard Kipling’s poem of 1889 coined the well-known line:  “Oh, East is East, and West is West, and never the twain shall meet.”  This is, in fact, no longer true—including in a family context.  Family businesses are now increasingly dealing with the challenges of East and West within their own family.  These challenges can, of course, be successfully traversed—but it is one more dimension involved in navigating a successful transition.