THE VIEW
The View
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Succession planning could dip a toe in deeper pool of talent

Founders were wheeler-dealers but other skills are needed to sustain and develop a mature business

PUBLISHED : Wednesday, 20 January, 2016, 10:17am
UPDATED : Wednesday, 20 January, 2016, 10:17am

When Henry Cheng Kar-shun appeared last week alongside his son Adrian Cheng Chi-kong to talk about New World Development’s plans, reporters were quick to focus on what interested them: the company’s succession plans.

It is however hardly a secret that leadership of New World will pass to Adrian Cheng in the same way that Henry Cheng took over from his father, the company’s founder, Cheng Yu-tong. However Cheng Senior remained very much in the frame, regardless of the sign saying “chairman” on Henry Cheng’s desk.

New World’s situation is similar to that of most of Hong Kong’s biggest companies, where the founders are getting a lot older and succession plans generally involve just one set of people: their sons. Indeed it is hard to think of any major conglomerate that has not reached this stage of development, be it the Cheung Kong group, the Lee Shau-kee empire or Sino Land and so on.

In other parts of the world corporate leadership is drawn from a much bigger pool than that defined by family ties and succession is always an issue, and promotes concern particularly at the point when the company passes from the founders to the next generation of leaders.

The founders are getting a lot older and succession plans generally involve just one set of people: their sons

However there are examples of successions being handled in a way that sustains investor confidence. A case in point is the succession of Tim Cook to the leadership of Apple in the wake of the untimely death of its founder Steve Jobs. The dynamic Jobs was a hard act to follow but Cook appears to be doing pretty well, a success reflected in the considerable growth of the company’s business under his leadership.

How will succession work in Hong Kong’s biggest companies? It is too early to supply a definitive answer but look what happened at the Hang Lung Group, which was part of the small coterie of the territory’s biggest property developers while under the leadership of its founder Chan Tseng-Hsi. After the company was taken over by his son Ronnie Chan, Hang Lung fell back into the ranks of also ran developers as the new chairman focused on mainland investments with distinctly mixed results.

The Maxim catering group, which I know rather more about from being in the same industry, provides a more interesting and successful example of succession planning. It was founded in 1956 by James Wu Tak-wu and developed at breathtaking pace. His grandson, Michael Wu, eventually succeeded him, thus skipping a generation to find the right person for the job. Significantly Michael Wu spent a long time climbing the company ladder and working in the kind of jobs which other tycoon offspring would most certainly not be found doing.

Even if questions of family succession, which some people simply describe as nepotism, are to put to one side there are other issues to be faced when finding a successor for a company founder.

The builders of Hong Kong’s great conglomerates can rightly be described as wheeler-dealers with a genius in finding bargains, combined with a formidable work ethic. The ability to sniff out a bargain and exploit its development is hardly to be sniffed at. Nor, as in the case of Jobs, is there any need to be sniffy about the fact that he might have lacked the technological genius of some of his employees but he most certainly understood the technology and, crucially, knew how to align it to what the market was likely to demand.

Skills of this kind are typical of what is required to be a successful business founder, however other skills are needed to sustain and develop a mature business as, inevitably, it faces more competition and changing market demands. The challenge for succession is therefore not so much to find a replica of the founder but someone with another skill set. This makes confining the succession pool to family members even more problematic.

Hong Kong’s leading companies are in a highly unusual position because so many of them started at around the same time and were founded by people of similar ages. So the entire upper echelon of Hong Kong corporate life is, to some extent, concurrently faced with the issue of succession. Remarkably, however, there is little public discussion of what will happen when the current corporate leaders go.

One route to succession, tried with some success by both the Jardine and Swire conglomerates, is to appoint strong and largely autonomous divisional chiefs from outside the family. There have been problems here but a mixture of direct family involvement in management, combined with financial control has largely worked.

Most of Hong Kong’s leading companies have not embraced the idea of granting autonomy to professional managers as they are loath to relinquish central control. Meanwhile we are waiting to hear of better plans for handling the pending wave of successions.

Stephen Vines runs companies in the food sector and moonlights as a journalist and a broadcaster