HKUST Business School Magazine

Philanthropy is another avenue to extend legacy and family harmony Utilize professional managers Professor Yu believes a crisis is at hand with the mainland’s “second generation” entrepreneurs, since a professional management system has yet to take effect, and the influence of the founder can be overwhelming. He argues that the government should support a smooth transition of the enterprise succession, and not just leave the issue to chance. “Only professionalization, the proposition of professional managers, can make the succession of the second generation a matter of course,” he says. The family office can be a resource for the specific transition faced by mainland family businesses, but it is also true that more broadly, the business cycle is increasing in speed while human lifespans grow ever longer. This implies a growth span for Asian family businesses which is more like the mainland experience, given the enormous drive on the part of the founder. While the second generation may have a different experience in other parts of the Sinosphere, and remain more committed to the business, the longevity of each generation puts even more pressure on the family office to come up with solutions beyond the original business that held the family together. So what kind of solutions might the family office, or the multi-family office, provide, looking ahead through the generations? Some family members, of course, might not see much benefit in remaining attached, whether to commemorate parents or grandparents or to allow family control of their assets. One possibility is to use the family office as a council to oversee funding of projects by family members. Instead of simply looking for the best yield in material terms, at least part of the family assets might be spent on promising members of the younger generation. In other words, the family office could provide seed capital to entrepreneurial younger family members. This would require a matrix or other structure to evaluate projects, but unlike the quantitative analysis typically applied to investments, the family council would consider other values. These could be summarized as commitment, confidence, knowledge and passion (or CCKP). An individual within the family should display these characteristics in order to be deemed worthy of seed funding. The basic logic is that in order to preserve wealth, the family needs entrepreneurial energy. In order to preserve legacy, it should devote some part of its resources to promising family members. To preserve harmony and unity, this should be an effort that involves family members, not just professional managers. Insight Biz@HKUST 10

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