New | Never too early to start succession planning in a family business

From the moment the Yung Kee restaurant sold its first goose in Wellington Street, Central, in the 1960s, its founder Kam Shui-fai groomed two of his sons for management roles. However he never had the time to develop a structured approach to succession planning.

Following his death, the younger son Ronald Kam Kwan-lai underhandedly stripped the eldest son Kinsen Kam Kwan-sing of his management role at the restaurant. If this were not bad enough, the latter died in unexplained circumstances a few years afterwards, having been pushed out of the only business he ever knew.

Family succession should never end this way—and probably wouldn’t – if more founders of successful enterprises followed some basic rules in long-term planning. Before discussing my approach, I would like to share three of my favorite proverbs that illustrate why having a structure in place is so important for family leaders.

Proverb Number One: The comb to groom a successor has brittle teeth. Each high-potential family member is unique and so will be his or her need to have a formal plan to guide actions. The comb used to groom one family member should not be used a second time.

Proverb Number Two: Size should not matter in family planning. No matter how large a business is, the founder or current family leader should develop formal business planning and written policies 20 years in advance of a changeover. Needless to say, many family owners resist putting plans into place because they do not want to devote the time to ensure it is done. In reality, a family owner should take great care to complete the formalisation or professionalism process before the business actually needs it.

Proverb Number Three: Feelings need planning. Some business owners think that formal plans are the surest way to take the spirit out of the family business feeling. Nothing could be further from the truth. Embedding the family business feeling into every aspect of the family business requires formal planning and written rules. In so doing, owners can create their own organisational culture, which should reflect the entrepreneurial spirit of the founder and the socialisation process that has developed within the organisation. Structure needs to evolve as the business grows, so that the firm can maintain a family based culture.