Stressing 'family' in family business
Eddy Lee, the fourth-generation leader of Hong Kong sauce giant Lee Kum Kee Group, whose brand is synonymous with Chinese cuisine, explains how his family business survived the "succession curse" by rethinking the concept of family business management, Th
With the collapse of many banks and corporate giants in the Western world over the past three or four years, Eddy Lee says there now exists a unique opportunity for family-run businesses to show the world they possess the key to sustainability.
Nonetheless, family businesses need to get over the “succession curse”, according to which they cannot extend their legacy beyond three generations.
LKK, which has survived two break-ups, has learnt to put family first and make business just part of the whole structure. The family has rethought the concept of family business management by positioning family as the core, and treating business as part of the family, not the other way around.
Speaking at Kasikornbank’s exclusive dinner talk held for its KFAM Club, a network of family businesses in Thailand, Eddy said there are some characteristics that all family businesses, big or small, must share.
“Usually problems begin small and then the ‘virus’ grows. Prevention is better than cure. In family businesses, before the family business gets sick, do something about it,” he said.
Family-run enterprises are essentially different from general business enterprises in that the former have not only business issues to deal with, but also the obligation to take care of “family values”, which sometimes can be a personal thing and have nothing to do with business.
“Sometimes [the problems stem from the fact that] the role [of each family member] is not clearly defined.
“The driving force for business systems is to move business forward. But sometimes, family is not looking at the driving forces but is concerned about relationships. Needs may be different. For example, in business, you need to deliver results and show returns to your shareholders; family businesses may be looking for love, care or financial security,” he said.
“Families talk about harmony…we stay together. Business don’t talk about harmony, we talk about rules, KPIs [key performance indicators], and so on.
“You don’t get to choose your parents. But in business you can choose your boss or where to work.”
The Lee Kum Kee family has come to the understanding that family is what is important, first and foremost. “Family is bigger than business. ‘We’ are bigger than ‘I’. Family is more important than oneself,” is his family’s motto, Eddy said.
“This is because if the family gets along well, basically, business will go well. But if family lacks harmony, the business won’t succeed, he said.
This philosophy brought about a big change in the Lee Kum Kee Group as the family decided to review and establish their family “constitution”, values and governance systems 10 years ago.
“One day in 2002, all of my brothers and I sat down together. Normally we would talk about business…how to make more money. But this time we talked about why we’re so busy everyday; what do we want to do in the future? Not for the businesses, but for the family.”
The meeting led to the formation of a family council, which comprises seven members. They have agreed that every one has to meet up every three months, each spending time together for four days, playing golf, eating, meeting, playing games and having fun together.
As Eddy elaborated, positioning the family at the core is not merely lip service; the family council has formulated and implemented a systematic and formal system of governance overseeing family affairs, where the business – LKK sauce and health products – are just two of the components within the family structure. Other components include the Family Foundation, Family Investments, Family Learning and Development Centre, and Family Office, each headed by one of the four brothers.
Stressing each family business has unique characteristics and values. Eddy said his family has made a “gentleman’s agreement” that spouses need not join in the business. “There is no right or wrong. It just happens with my family. I made the decision. We think it’s simpler that way,” he said.
The council has developed a family enterprise structure and the family constitution, which performs like a guideline encouraging family members to do, and not do, certain things.
“We have the ‘3 don’ts’: Don’t get divorced, don’t marry too late and you are not allowed to have a second family.
“If you do, you are out of the business. We don’t have a paper signed, or anything legally binding, but everyone understands [these are the rules],” he said.
However, the constitution, rules, and structures and systems are just the “hardware”; they’re nice to have, but not bullet-proof.
The more important thing is the “software”, which includes their shared vision and values; nourishment of family culture; effective and consistent communication; being aware that little things matter; and commitment from every member, among others.
Most people know Lee Kum Kee from its sauces and condiments, which are sold to more than 100 countries throughout the world. With a corporate support centre based in Hong Kong, Lee Kum Kee has five production bases in Xinhui, Huangpu, Hong Kong, Malaysia and Los Angeles. The group has another business known as Infinitus that markets traditional Chinese herbal health products via direct sales channels, mainly in China. This business is run by professionals, not family members.
