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“Road to Century Enterprise” Summit Forum Provides An Unusual Example
ReleaseDate: 2011-09-28

September 28, 2011, Jiefang Daily, By Ma Hailin

After over 30 years of accumulation through Reform and Opening up, while continuing to create wealth for the society, Chinese private-owned enterprises are now facing a crucial moment for next-generation inheritance, innovation and breakthrough, the political and business circles have begun to explore the topic of how to construct century old enterprises.

On September 25, at “The Road of Century-old Enterprise” Summit Forum hosted by JuneYao Group and JuneYao Airlines, and co-organized by China Entrepreneur Club, Zhejiang Chamber of Commerce, Shanghai, many famous entrepreneurs shared their wisdom and doubts. Here, the reporter selected several unusual models to change the perspective to examine this much discussed topic. According to statistical data, the average life expectancy of Chinese private-owned enterprises is only 2.9 years. To become century-old enterprise or exist even longer, it involves not only dream and target, but also obligation and responsibility; it needs not only inheritance, but also innovation.

Lee Kum Kee: Focus on managing the family to keep unity

Sammy Lee, Managing Director of Lee Kum Kee Co., Ltd, displayed a family tree after he took the floor. Since being handed down from “my father’s father’s father”, today Lee Kum Kee family has 26 members; he is the youngest in the fourth generation. In 1888, the great-grandfather of Lee family invented oyster oil, which was 123 years ago. Everything changes over the period of a hundred years, no one can be certain of its outcome, and it’s hard to imagine the change after a century, so how could an enterprise make advance plan. Sammy Lee said: “Many family enterprises spend a lot of time managing the enterprise; we spend a lot of time managing the family.” By keeping the family united, it ensures the ability of change and innovation.

A decade ago Lee Kum Kee set up a Family Committee, and also a Family Congress; the Family Committee manages business, family’s office, family fund, family study and development center. The 26 family members will hold a routine meeting each year, the 7 members of the family committee will hold a meeting every 3 months, which will last for 4 days. Many people could not understand what they do during the 16 days of meeting. The secret of Lee Kum Kee family is “fun”, hoping everyone will enjoy the next meeting. They use the family committee as an important platform for communication, where they can share each one’s happiness and stress, and discuss different opinions, resolve small problems before they evolve into big problems. Of course, they will also discuss the enterprise’s strategic blueprint, discuss mission, cheer up members, and unify outlook on culture and value.

Lee Kum Kee family also has a “family constitution”, for instance family members must have three years or more external work experience before they can come back to work, such as separating the responsibilities of the family, shareholder, Board of Directors, and the management, and recruiting CEO from out of the family. When making decision, there must be 50% above supporting vote, so what if each of two opinions holds 50%? The Lee family has a simple and fair solution: Throw a dice, although it looks somewhat “superstitious”, in fact it contains traditional wisdom. The family also has prescribed three Nos: No late marriage, no second wife, and no divorce.

What’s more important about managing the family is to cure the illness before it deteriorate, and long lasting entrepreneurship spirit; the enterprise should keep improving previously finished things, and avoid the cycle of starting a business, keeping the business and losing the business.

Lenovo: To be a family enterprise without family

Why should Lenovo, a previously state-owned enterprise, join the discussion on the topic of family enterprise? Liu Chuanzhi, Chairman of the Board of Directors of Lenovo Group, disclosed the special advantage of family enterprise in his view: Family enterprise has a true master, its own undertaking, which constitutes the genes of its long term development.

It is exactly based on the target of “having true master” that Lenovo, previously a pure state-owned enterprise with 200,000 yuan investment from the Chinese Academy of Sciences, organized MBO system reform in 2001. Back then, this record-breaking system reform incident was approved in the form of joint meeting minutes by the Ministry of Finance, Chinese Academy of Sciences, the Ministry of Science and Technology, and the Beijing Municipal Government.

“Such reform brought fundamental change to Lenovo.” Liu Chuanzhi said, on the one hand, it could enable senior colleagues from the startup time to retire from leadership roles, and let the younger generation to take the rein, which can expand space for further enterprise development. Those senior colleagues are like gardeners who reclaimed the land and planted trees, they harvested the first basket of apples, and were satisfied to retire with dignity. On the other hand, there is safe mechanism guarantee, which can enable new strategic deployment. After 2001, Lenovo was no longer merely a computer maker, Lenovo Holdings also set up Digital China Networks, venture capital Hony Capital and Raycom real estate company, all of which are now leading companies in their respective industries.

Next, in order to accomplish new strategic targets and to develop superior core assets in a number of sectors, Lenovo Holdings further adjusted its ownership structure. Liu Chuanzhi said, under the equity structure of 65% held by Chinese Academy of Sciences and 35% by employees, it would be impossible to make such bold adjustments; consequently the Chinese Academy of Sciences sold 65% stock to a private-owned enterprises called China Oceanwide Holdings Group (COHG), which made Lenovo become a complete joint stock company. Now there are still two more things to do, one is to go public to raise capitals, so it has money to make investment; the second urgent thing is to let the enterprise have its true owner. The Employee Stock Ownership Committee owns 35% equity, which has been distributed among senior employees, thus leaders and employees of the new Lenovo Holdings have no company stock, so the Employee Stock Ownership Committee was restructured into Lian Chi Zhi Yuan Company; COHG also sold a portion of equity, and these two portions of equity were sold to the new management. Liu Chuanzhi said: “Now the company has found its true master, it is not only a stage of material, but also a stage of spirit, it’s all yours, in this way they will be very glad to do things, and I believe things will also become better.”

Liu Chuanzhi also cited a negative example: recently HP dismissed the latest CEO. HP once was Lenovo’s teacher; HP’s culture is also very good. However, when HP’s original founder’s children sold all their stock, all the directors became independent directors, and independent directors are responsible for supervising the management, so as not to let it violate the rights of shareholders; but they had no direct relation with the long term development of the enterprise, which resulted in frequent replacement of CEO, and the company’s situation declined. He pointed out that “To become a century-old enterprise, first there must be a good master, then comes a good company.” “I always hope to develop Lenovo into a ‘family enterprise without family’. ‘Without family’ means no blood relationship, instead it can ensure enterprise continuity through mechanism and culture; on the other hand, ‘family enterprise’ means the top management of the company must have the heart of entrepreneurship, and “deem the enterprise as its lifeblood”.

JuneYao: To be longer before being stronger and bigger

As the host of the Forum, JuneYao Group has welcomed the 20th anniversary of its startup, and celebrated the 5th anniversary of the opening of JuneYao Airlines. JuneYao is one of the representatives of Chinese family enterprises, and in 2005, Chairman Wang Junjin put forward the target to build century-old enterprise, and declared its corporate mission was to bring healthier and happier life to the public; they were dedicated to creating family enterprise, and becoming an outstanding globalized century-old enterprise in modern service industry. At the Forum, Wang Junjin disclosed that the aim of building century-old enterprise was to give us a long term target, so as to urge themselves to continually move ahead, and ensure safety, stability, sustainable development, and fulfill its own value in the process of building century-old enterprise.

Wang Junjin shared his four key factors for creating ‘century Enterprise’:

Firstly, be ambitious with perseverance. Only with perseverance can one fulfill one’s ambition, the construction of ’century-old enterprise’ needs untiring efforts from several generations, so there must also be indomitable willpower and persevering spirit. When running an enterprise, we should not be tempted by immediate interests, and cheated by instant success and quick profit, nor should we dream of developing to large scale overnight, or merely pay lip service and do nothing.

Secondly, know the rule and follow the tide. Every step in the overall development trend of Chinese private-owned enterprises is closely associated with key policies introduced by the Party Committee and the state government, every progress is the result of grasping development opportunities. The understanding of global trends and economic movements determines an enterprise’s development speed. Entrepreneurs must follow the general trend, promptly grasp opportunities, take bold steps to face challenges, respond to national policy and appeal with an enterprise’s action, become a “pioneer” in China’s economic development, and a “trail-blazer” for the growth of Chinese private-owned enterprises.

Thirdly, improve attainment and integrity. Do things with conscience, assume social responsibility, create healthy corporate culture, meanwhile absorb good experience, and good practices to enrich oneself, improve attainment and obtain integrity.

Fourthly, set up an enterprise with masters. JuneYao is planning to set up a family committee to discuss and draft an effective management system.

According to relevant data, the average life expectancy of family enterprises in the global context is only 24 years, such duration coincides with the time for the first generation entrepreneurs to control the enterprise, wherein 30% is handed over to the second generation, 10% can reach the third generation, only 3% family enterprises are run by the fourth and later generations. In building century-old enterprise from family’s perspective, JuneYao gives priority to “long lasting”, followed by “becoming stronger”, and “larger”. Based on such strategy, if the enterprise establishes sustainable development method, grasps the period of rare strategic opportunity, fully brings out the advantages of private-owned enterprises, and extensively absorbs successful experience of domestic and overseas enterprises, in this way Wang Junjin believes that it is feasible to fulfill the target of ‘Century Enterprise’.