With increasing globalization, business challenges are becoming quite similar for both Western and Asian family offices. Although themes like the rapidly accelerating pace of change, succession and the emergence of environmental and social consciousness are surfacing across the globe, it is interesting to learn how Asian family offices deal with these challenges given the significant socio-cultural and economic differences at play.
These are some key variables which influence the unique way in which Asian family offices manage these universal family office challenges:
Rapidly Accelerating Rates of Change
In general, Asian businesses are younger, more dynamic and have a greater appetite for risk. In comparison to some European family businesses which are moving into their fifth or sixth generation, Asian family offices are known to be more flexible and faster at decision-making. Although this is especially true within the emerging economies like Vietnam and Indonesia, there still seems to be a healthy balance between strong governance structures and the need for a dynamic and flexible approach to business within more established markets like Hong Kong and Singapore. Felicia Heng, Executive Director of Family Business Network (FBN) Asia, comments on the topic: “There are still enormous growth opportunities in Asia, but the need for speed and agility is essential to success in these economies. Businesses have had to learn to operate differently in the context of structures and process. Not that they do not want to have them, or they don’t see the value in them! But because the balance is tipped slightly differently to thrive in the dynamic markets that we operate in.”Welcoming the Next Generation
The ecomonic boom only occured in the ’80s in Asia. As such, succession planning is only now coming into its own as a number of Asian family offices are faced with their first-wave of succession challenges as they embrace the next generation of family office leaders. European businesses are more established, some already dealing with fifth or sixth succession, so they have far more experience in managing these transitions. The business culture in Asia may be dynamic but is known to have rigid rules relating to lineage and hierarchy, as well as a lack of dialogue, which makes succession a tricky business. Denise Kenyon-Rouvinez, Wild Group Professor of Family Business at IMD Switzerland and Singapore explains that “Many first-generation family businesses are run by leaders who are very attached to their positions and find it very hard to let go or facilitate a phased hand-over successfully. Inter-generational dialogue is also a significant challenge affecting succession as often the next generation are forced into businesses whether they are motivated or not. There are generally rigid rules attached to succession which often discourage the younger generation who have a stronger entrepreneurial intent. This rigidity is probably one of the key reasons why studies are indicating that only 20 to 25% of Chinese next generation members intend to join their family business”.Rising Environmental And Social Consciousness
There is an undeniable socio-cultural mindset shift towards ethical social and environmental practices taking place across the globe. Various stakeholders are applying immense pressure to organizations to put people and the planet ahead of profits. In future, companies will need to define and align their business and investment practices to a greater, ethical purpose to ensure ongoing support from customers and employees, especially among the millennial generation. In Asia, where education is a primary focus, the next generation of business leaders has been exposed to the best schools and the most modern training and development. According to Heng: “When the next generation comes back after their tertiary education in Harvard and Princeton or London Business School, they want to do things differently, more sustainably.” There is a unique level of motivation amongst the Asian next-generation to do so, according to Kenyon-Rouvinez: “In Asia, social unrest is common due to significant income inequality. Additionally, environmental concerns are more top-of-mind due to a large amount of sensitive coastline in Asia.” Heng adds: “From time to time we also see some primitive models when it comes to land clearing and plantations that do not reflect a strong environment-preservation mindset.”Global Challenges
Some challenges are common to European, American and Asian family offices. Although Asian businesses tend to demonstrate a greater level of dynamism and agility in the face of change, they are uniquely challenged in the area of succession due to a more rigid approach to inter-generational transfer. Asian companies, like their Western counterparts, are becoming more socially and environmentally conscious, motivated by social inequality and inadequate environmental controls. This article originally appeared on Forbes.This post originally appeared here.
