Essential Factors for Succession Planning
Kevin Au
Centre for Family Enterprising and Business Advising
Asian Horological Trade and Industry Promotion
Conference
October 2012
ENVIRONMENT
POLLUTION
POVERTY GAP
PUBLIC HEALTH
AIR POLLUTION
CLIMATE
DRUG ABUSE
Problem
•
•
•
•
Consumption
Materialism
Globalization - Business
Capitalism but in its deformed way
– Hegemony of market - Efficiency
– Qualification, organs, uterus, sex, love…
– Individualization
• Deterioration of social values, ethics, identity
Value differences
Business systems
• Profits, revenue, efficiency
• Impersonal, formal
procedures
• Formal position in
organization
• Conditional on performance,
fired if needed
• Retirement, promotion,
departure
• Short-term horizon
Family systems
• Development and support
• Personal, Informal
expectations
• Family position, seniority
• Rewarded for who they are,
unconditional on lover &
support
• Death, divorce, or illness
• Inter-generational; based
on identity to family
But, The Evidence Demonstrate A
Lack Of Sustainability In Family
Businesses
100%
75%
50%

Sale of the business

Loss of family interest

Unpredictable challenges

Industry changes

Missed opportunities

Family conflict

Succession problems

Mismanagement
25%
0%
1st Generation
2nd Generation
3rd Generation
4th Generation
一代
二代
三代
四代
The Key To Family Business Sustainability Is An
Organizational / Cultural Strategy And Not So Much A
Business Strategy
• Business strategies deal with business trend over the next 5-10 years
• Business sustainability / Family business sustainability strategy deals with
how the organization can maintain internal and external alignment to
successfully adapt to change over the long term  it is an organizational
strategy / an organizational culture strategy
In Order To Sustain Long Term,
Organizations Need To Have:
Culture & Philosophy
Healthy & Prudent
Aligned To Sustainability
 Consistent good
 Primacy of
decision making
sustainability
 Operational
 Clear sense of
efficiency
purpose & role
 Stable quality
 Etc.
income
 Strong people/
organization
Creativity
 Able to change
 Able to deal with
change
Development & Growth
For Org & Individuals
 Constantly
upgrading &
renewing skills &
capabilities
Then The Organization & Its People
Will Manifest:
Beliefs & Action That Are They Will Be Mindful &
Guided And Directed
Disciplined
They Will Be Innovative
& Strategic
They Will Be Competent
& Able To Lead, To
Manage, To Change /
Adapt
The Tsao Family – IMC Family Business Model
A Potential Way To Address The Family Business Challenges
The Family System
The Business System
Family
Charter
Business
Mandate
Family Trust Board
Business Trust Board
Family
Trust
Business
Trust
East West (Non-Profit)
Family
Social
Enterprise &
Entrepreneur
ship
+
Learning
Center
Family Members Take Role In Biz Based
On Merit
Business
1.
Separate Family Trust System And
Business Trust System
Family & Business Each Has Its Own Trust / Fund
The Family System
The Business System
Family
Charter
Business
Mandate
Family
Trust
Board
Family
Trust
Family
Description:

The Family will have it own Family Trust
Family Trust will be governed by the Family
Charter and administered by the Family Trust
Board & Family Office
̶
Clear and transparent policies, expectations &
standards for family members to access &
benefit from the Family Trust
̶
A safety-net for family and support for worthy
initiatives by family members
Business
Trust
Board
̶
Business
Trust

The Business will have it own Business Trust
̶
Business Trust governed by IMC Sustainability
Business Mandate and administered by
Business Trust Board
̶
Transparent business re-investment, dividend
& executive reward policies
Business
Targeted Impact:

Prevents the Family from being overly dependent on
the Business financially – removes the family’s
financial motivation / conflicts of interest in leading
the Business

Ensures Business will have adequate capital for
grow and reinvestment
Joint / Cross Stewardship Of The
Family And The Business
2.
Description:
The Family System
The Business System
Family
Charter
Business
Mandate
Family Trust Board
Business Trust Board

Family Trust administered by the Family Trust Board
comprised of representatives from the Family, the Business
and outside experts as appropriate  protect the Family
Charter

Business Trust administered by the Business Trust Board
comprised of representatives from the Family, the Business
and outside experts as appropriate  protect the IMC
Business Sustainability Mandate

Family Trust
Business
Trust

Only the willing and able will lead and steward  with clear
rules, clear processes, clear responsibilities
Cross-Joint governance allows close coordination /
collaboration between Family and Business w/o formal
control
Targeted Impact:

Family
Business


Clear governance of the culture of Family & Business 
guided by Family Charter & IMC Business Sustainability
Mandate
Clear governance of expectations & performance for Family
& Business  Performance Mentality, help prevent Family
Conflict from disrupting Business
Professionalization / Transparency / Meritocracy  Diminish
Family’s focus on control in favor of Stewardship, able to
attract & retain outside talent

Sustained & positive Family-Business engagement

Senior Business leaders can continue to steward after
retirement  long-term management alignment
2.
Joint / Cross Stewardship Of The
Family And The Business
The Family System
The Business System
Family
Charter
Family Trust Board
Business
Mandate
Business Trust Board
Family
Trust
Business
Trust
Family
Business
Family & Business Engage In Stewardship Of One Another
Family Participation In Business By
Choice And By Merit
3.
The Family System
The Business System
Family
Charter
Business
Mandate
Family Trust Board
Business Trust Board
Family
Trust
Business
Trust
Family
Business
Family Members Take Role
In Biz Based On Merit
Family Member Participation In Business By Choice
And By Merit
4.
East West Also Contains The Learning Center To Help
Family & Business Members To Acquire The
Awareness, Skills & Mindset To Lead And Contribute
The Family System
The Business System
Family
Charter
Business
Mandate
Family Trust Board
Family
Trust
Business Trust Board
Business
Trust
East West (Non-Profit)
Family
Social
Enterprise
&
Entreprene
urship
+
Learning
Center
Family Members Take Role In Biz
Based On Merit
Business
The Learning Center Provides Training & Coaching
To Help Family & Business Members Enhance
Capabilities
齐家
治国
The Family System
The Business System
Business
Mandate
Family Charter
Family Trust Board
Business Trust Board
Family Trust
Business Trust
平天下
East West (Non-Profit)
Social Enterprise &
Entrepreneurship
Family
+
Learning Center
Family Members Take Role In Biz
Based On Merit
修身
Business
Our job is to take on new challenges