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Families feast on succession dilemma

It can be difficult for the next generation to combine a founder's values with the latest management thinking. Jane Moir interviews two families from Asia and the US, both involved in the food and beverage sector, who have successfully gone through a succession process

Garic Kwok Yung-wai and Stephen Sterling would appear to have little in common. Kwok lives in a crowded, noisy Asian city on the doorstep of the world's fastest-growing economy. He is surrounded by iconic skyscrapers and breathes foul, polluted air. Sterling gazes upon lush greenery each day, enjoying wide open countryside, dazzling California skies and a less hectic pace of life. Kwok makes moon cakes for a living; Sterling makes wine. Yet when it comes to their views on the family business, the pair become increasingly alike. Kwok wants to take the company to new technology and marketing highs. Sterling, likewise, believes the future is steeped in e-commerce.
 
Both are family business members who share a pragmatic approach to succession: keeping the family business alive is paramount, and the logistics of who takes the helm seems likely to be decided more by default than by precision planning.

Succession in Hong Kong
Kwok, 37, is the son of Kwok Hung-kwan, who set up a bakery chain, Taipan Bread and Cakes Co Ltd in 1984. The company has more than 600 staff and around 40 branches in Hong Kong, specialising in the "snowy" brand of moon cakes. These are thick pastries filled with lotus seed paste and egg yolks, traditionally eaten during the mid-autumn festival in Hong Kong and China. The company is a household name in Hong Kong and southern China, winning accolades for brand recognition and management. In 2005 it was named as Hong Kong's top brand by the Hong Kong Brand Development Council.

Kwok, who is the company's director and chief officer of business development, left a career in financial television five years ago to join the family business as he saw his father getting older. "I wanted to help him share his burden," he explains. "On the other hand, I wanted to get some hands-on experience of the market operation as well." He reveals a deep sense of pride over his father's achievements: the elder Kwok started his career as a child labourer, working from the age of nine.

"He is now 69 and is a very experienced person in the industry," he says. "I don't see any reason for him to retire at the moment unless he is willing to. I think he is still very
passionate about his work."

He believes they share a creative goal in trying to get the brand recognised on a regional or even global scale. "My father and I are very similar in our style of management," Kwok explains. "We are looking for creativity and breakthroughs, so you don't really see us clash in our daily lives."

Their age differences, however, become apparent when it comes to taking the brand regional. "At his age, he is not trained to deal with regional branding, so I'm more of a service when it comes to this kind of development," Kwok says.

He says he brings outside connections and networking with bankers, developers, advertisers and public relations firms to the business, in a bid to leverage the brand to new heights. His goal is to develop the Taipan brand in Singapore and Taiwan in particular this year, taking it outside the home ground of Hong Kong and southern China.

When asked whether he feels as if he is being groomed to take over, he is, however, somewhat reluctant to respond. In Hong Kong, it is culturally taboo to talk about succession, the topic of death being strictly off limits. The fear is that talking about the future in this sense is to tempt fate.

Hong Kong business is dominated by tycoons in their late 70s, yet succession is rarely spoken of publicly. Kwok prefers a more modest response. "I would say that being promoted as a director of the board speaks for itself," he says. His siblings – two brothers – also work in the company. Each performs a task relevant to their experience: Kwok has been responsible for banking, finance, staffing, marketing and public relations. At the end of the day, who will be the chairman? I don't know and I don't really care. It's looked upon as teamwork in our family." Should his father relinquish his role, the helm would likely be taken up by his step-mother, Kwok explains.
 
In all, five of the family members are currently involved in the business aside from his father: a stepmother, her daughter and the three brothers. It is not unusual in Chinese family businesses for the mother to take over if the father stands down, although the matriarch would play more of an overseeing role than hands-on management.

A Californian family
This is less of the case for Stephen Sterling, vice president of sales and marketing at the boutique Esterlina Vineyards & Winery and the Everett Ridge Winery in California (pictured).

His mother and father – now in their 70s – have passed the reigns of the family business to their offspring, taking less of a pro-active role in recent years. The family has been making wine for 30 years: Sterling's father and grandfather were wine makers, but it was only in the last 15 years that they started their own vineyards. Today, his grandfather has passed away but his father remains a part of the business, albeit on a smaller scale.

Like Kwok, Sterling pursued another career before joining the family fray. "When we were just growers for other large wineries you could still do your day job and just come up to the vineyard on weekends," he explains. "We've got two wineries now. People expect to have more direct contact with you, and in order to build the brand we established, we had to be involved with the media and the wine industry. That's a 24–7 opportunity. It wasn't the case that you could just spend weekends up at the wineries. It was really the evolution of the business – we grew primarily by acquisition."

Sterling worked in the corporate world for a number of years – including a stint at telecoms giant AT&T – having achieved an MBA in marketing and sales. Likewise his three brothers pursued careers outside the family business, working, for example, as an emergency physician and an attorney. In his mid-40s, Sterling has been part of the family business for about seven or eight years, his role taking on increasing importance from around 2000.

Although sharing a common growth goal, Sterling admits he and his father differ in management styles when it comes to marketing the product. "They (his parents) didn't embrace technology to the level that we (he and his brothers) did," he explains. "They didn't necessarily see the future of things like e-commerce or having a web presence. The great thing about the wine business is that it's really very simple to farm. But it is a laggard in terms of adopting technology."

When the company first started using e-commerce – for example, putting together a wine club – only 10% of wineries took a similar path. Today he says the figure is 98%.

"It's something me and my brothers brought to the forefront," he explains, admitting that at the time his father feared it would be a hindrance. Today the company reaches 80% of its buyers through the internet. "I would say it's probably allowed us to grow 50–70% faster than we would have," Sterling says.

When asked about succession, he too is slightly reluctant. "Our current corporate structure has taken the succession decision-making context into account," he says. "My brothers and I run the company now more directly than my mother and father. I guess that the next generation will take it on. I don't have children, but my brothers have children. We consider that in running the winery."

The younger generation is increasingly becoming involved. "They are starting to understand more of what's going on with the winery," he explains. There are currently about a dozen family members involved in the business and it a process of everyone mucking in. "You get to make more of the decisions yourself than you would (in the outside corporate world). You also get input from family members. You get to see the positives and the negatives."

The family business has gone from growing grapes to starting its own vineyards and now is focused on its third label. "Right now I'm enjoying the growth," Sterling explains.

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