The Survival of Malaysian Family Businesses

Topics: Family, Genting Group, Lim Goh Tong Pages: 6 (1454 words) Published: March 11, 2010
Within the span of 100 years, the business, political and socio-economic conditions in Malaysia have changed. Each change offers a new challenge to the business entity.

Family businesses that have survived a whole century, albeit few, are the ones that are willing to move with the times, the others simply slip into obscurity without even reaching the second or third generation.

For example, the Royal Selangor International Sdn Bhd, maker of world renowned pewter, is one of Malaysia’s oldest surviving family businesses. Since it began in 1885 by Yong Koon, the company has been tightly held by the Yong family and is today headed by the third-generation Yong Poh Kon.

Meanwhile, some family enterprises did not even last through the second generation, as in the case of the once famous sawmiller Ong Kian Teck of the 60’s and 70’s. The moment the patriarch passed away, the family business empire fell apart because of bitter family feuds. Instead of one captain steering the ship through the rough seas, they became embroiled in quarrels. Today, the company has been reduced to a small supplier of building materials.

Succession Issues
Management guru and author of Success Beyond Three Generations, Dr. Ong Hean-Tatt, blames failure of Malaysian family businesses on the lack of a good succession plan. The biggest mistake that Alexander the Great committed centuries ago, when his mighty empire was split amongst his four quarrelling generals, is still repeated time and again.

In a number of successful family enterprises, time is given for the succession plan to fully take effect, often with the patriarch watching from the sidelines. Robert Kuok, dubbed the “Sugar King of Asia”, and richest man in Southeast Asia, is now 85, and has long relinquished his position to his son, Khoon Ean.

Similarly, IGB Corporation’s Tan Chin Nam has left it to his children to manage his business, while he retires in Melbourne. IOI Group’s Lee Shin Cheng has also passed on the baton to his eldest son, Yeow Chor, while two of his sons and four daughters all work in the family business.

They say, entrepreneurs are born, not made. In some Malaysian family businesses, the typical Asian culture dictates that the son takes over the family business.

For example, one of Malaysia’s largest housing developers, Mustapha Kamal is teaching his only son the ropes. Another successful developer, FD Mansor of the Glomac Group is also passing the reins to his son. Logistics tycoon G. Gnanalingam of Westports has picked his son Ruben who is said to have an uncanny business sense like his dad.

Even those with substantial operations abroad show their sons their skills. Construction steel tycoon A.K. Nathan who has made his mark in the Middle East, is grooming his son to eventually run his empire.

However, the eldest son is not always first choice. In casino operator Genting Bhd’s case, the baton was at that time passed from Malaysia’s third richest man, the late Lim Goh Tong to his son Kok Thay, who is the second youngest of six siblings. Sometimes, more than one son joins the organization. In the case of I-Bhd, a listed cybercity developer, both sons of founder Lim Kim Hong joined him last year.

In these organizations, where the power base would have been dealt with before the patriarch leaves the scene, chances of survival are higher.

There are also exceptions to the case where the patriarch himself realizes that as the business becomes more complex, professionals have to be engaged, as in the case of Lee Rubber-OCBC Bank Holdings Ltd, which is currently run by professional managers with little influence by the Lee family, although family members still sit on the board.

Succession, according to researcher Dr Edmund Gomez, proves to be a bigger challenge when there is more than one founder. He cites the example of the Tan Chong Group, where the battle scene showcases nephew against uncle. Tan Kim Hor, who co-founded Tan Chong Group...
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