Perspectives from ISB

An important aspect of succession planning in any family business is the manner in which the next generation is gradually introduced into the business. However alarmingly, a recent study by Peking University has shown that eighty percent of potential Chinese heirs are reluctant to follow in their fathers’ footsteps.

These results point towards an ensuing succession crises waiting to happen. The reason so many second-generation kids in China do not like to join their family business is because they prefer to strike out on their own rather than live under the shadow of their parents. In the past several companies including two of the world’s biggest hotel chains, Hilton and Marriott, and one of the biggest toymakers, Lego have been either sold or handed over to professional managers, for want of a suitable willing family member to run the business.

Hence it will be interesting to see, how Chinese entrepreneurs like Wang Jianlin and Pan Shiyi handle this entrepreneurial urge of the next generation. China’s richest man Wang has already given his son 500 million yuan to invest in whatever he wants. The tycoon’s son, Wang Sicong, has set up Prometheus Capital and has invested in more than a dozen projects so far, mostly related to the video gaming industry. We have to wait and watch whether he comes back to join his father’s business. Meanwhile Pan Shiyi, founder of property company SOHO China, is not so enthusiastic about the idea of his son starting a company himself. The future of many of these organizations depends on the way these relationships and aspirations are handled now.