Can China's "second generation of private enterprises" successfully take over?

In the next 10 years, the management of private enterprises will enter the peak period of "succession". Whether the "second generation of rich people" born with the golden key can successfully take over the reins will, to a certain extent, determine the sustainable development of China's private economy and the transformation of the mode of economic development. In this regard, we invited two scholars to have an in-depth discussion. This is the fifteenth installment of the "Striving" column jointly organized by the Shanghai Oriental Youth Society and this newspaper. "The second generation of private enterprises already has the foundation to successfully take over the baton He Xiaogang ●With the improvement of China's legal system, the operating environment of enterprises is becoming more and more fair and effective ●The nuclearization of the family structure makes it possible for family conflicts to be resolved at a low cost with the intervention of fathers and mothers ●The second generation of private enterprises may be more capable of comprehensive management than their fathers and mothers Whether it is from the viewpoint of property right system or social support, we believe that the second generation of private enterprises is more capable of comprehensive management than their fathers. Whether from the perspective of the property rights system or social support, we believe that the second generation of Chinese private enterprises already has the foundation to successfully take over the baton, and that they are in an even better position than their fathers and other managers of the same generation. The iron law of "no more than three generations of rich people" should be amended First of all, in terms of property rights system, the second generation of private enterprises is no longer as worried about the security of their own property as their parents were. In China's reform and opening up the early stage of entrepreneurship, due to the private property rights have not been legally protected, private entrepreneurs in the process of entrepreneurship in a high degree of uncertainty in the environment, the difficulties can be imagined! The lack of clear property rights largely reduced the proprietary investment of the father generation of entrepreneurs and lowered the productivity. 2004 amendments to the Constitution of China clearly stipulated that the lawful private property of the citizens shall be inviolable, and that the state shall protect the private property rights and inheritance rights of the citizens in accordance with the provisions of the law. There is constant property, now the property rights belonging to the problem has been very clear, which for the second generation of private enterprises to successfully take over the baton laid a very good institutional foundation. And, with the improvement of China's legal system, the operating environment of private enterprises will become more and more fair and effective. Secondly, family support for the second generation of private enterprises in China has laid an emotional foundation for the success of the baton. The traditional cultural system emphasizes the importance of having many children and grandchildren. In a highly uncertain institutional environment, this kind of productive organization established by relying on a large clan helps to reduce all kinds of political risks and business risks, but its disadvantages are also obvious. One of them is that family conflicts and contradictions are one of the main reasons restricting the growth of enterprises, especially after the loss of the core authority of the grandparents and fathers, the family agency behavior for self-interest deteriorated; the succession process of the fight further weakened the advantages of the whole family, the damage to the business organization is huge, even destructive. Many entrepreneurial family business is at this time to fall. And now China's entrepreneurial family business does not have this problem, because our family structure tends to be more and more nuclear family, the offspring of the owner of the enterprise is mostly an only child, even if there are a few children will not appear the phenomenon of children and grandchildren, the process of succession to simplify a lot of the family members of the conflict between the problem does not exist or can be relatively easy in the father's intervention in low-cost to dissolve the problem. Therefore, the so-called iron law of "no more than three generations of wealth" may need to be revised. Again, strategic planning and rationalization of the succession increases the likelihood of successful succession. The concept of family control makes entrepreneurs plan to take over the baton at an early stage. Chinese entrepreneurs are not as visionless as we think, in fact, most of them have long started to cultivate their offspring, for example, arranging for their children to study in better schools or even abroad; providing them with good opportunities for practical learning, and even allowing them to enter the enterprise to exercise their skills in their teenage years. In order to sharpen their will, their children are often required to start from the grassroots. For example, a survey showed that 83% of Zheshang businessmen said their children should start from the grassroots level before they are arranged to participate in top management activities. This rational mode of succession cultivation is efficient because it not only ensures that the second generation of private enterprises has a deeper understanding of the whole enterprise and gradually builds up emotions with the enterprise, but also helps them understand the hardship of entrepreneurship, which in turn strengthens their belief in the value-addedness of their family's wealth. Finally, the role models laid a good social foundation for the second generation of private enterprises to take over the baton. Many private enterprises in China have successfully accomplished the task of taking over the baton, such as the Fanta Group, BGI Holdings, Hongdou Group and so on. These successful cases have a very good demonstration effect, not only can become a spiritual pillar, but also its experience has a very good reference value, such as Fangtai's "with three years, help three years, see three years," the nine-year transition model has been very successful, has become a successful model of experience. In addition, there are more and more ways to disseminate the knowledge about private enterprise succession, which also lays the foundation for successful succession. For example, in some developed areas of private enterprises, government departments have included the training of "the second generation of private enterprises" into the whole training program for small and medium-sized enterprises. The dissemination of successful succession models and experiences has played an indispensable role in improving the quality and ability of the second generation of private enterprises. It should be emphasized that the second generation of private enterprises does not necessarily mean that they are inheriting their father's business, but rather that they should make good use of their father's property and other resources to make the best use of their money, and invest their property in the areas that are most likely to create value. Nowadays, private enterprises not only have to participate in domestic competition, but also in international competition. In this context, we can even dare to think that the second generation of private enterprises can not only complete the task of succession, and its comprehensive management ability may also be more powerful than their fathers and contemporaneous business managers. Blue is better than blue First of all, the vast majority of the second generation of private enterprises was born in China, childhood or adolescence has been a personal experience of the operation of the rules of our culture and system, know what is necessary to do business in China, such as the circle of friends can not be lost, the government relations to maintain, and so on. At the same time, the second generation of private enterprises has a broader strategic vision than the first generation, especially the internationalization vision. A survey shows that 70% of private entrepreneurs in Zhejiang have or plan to arrange their children to study abroad. Secondly, the second generation of private enterprises has better material capital and social capital base. "Rich second generation", this is not only not a derogatory term, should become a positive term. "Wealth" is the material foundation of enterprise growth. In the asymmetric information trading market, without wealth, who will believe in your strength? The material wealth accumulated by the father's generation not only helps the second generation of private enterprises to reduce the cost of communication in the transaction process, but also helps them to attract excellent management talents. To a certain extent, the personal connections accumulated by the fathers can be inherited or maintained at low cost. These material and social capitals are an inherent advantage for the second generation of private enterprises. Again, the second generation of private enterprises basically receive better education, and due to the reason of childhood influence, the second generation of private enterprises with a sense of mission to take over the baton, their learning objectives are very clear, can really do the theory to practice, their level of professional knowledge may be far above the parents, their comprehensive management ability may be more significant, and know how to manage the enterprise scientifically and with rules. Finally, the second generation of private enterprises also better understand the relationship between family and enterprise. Well-educated second-generation private enterprises may better understand how to clarify the relationship between the enterprise and the family by reforming the corporate governance mechanism, for example, how to cultivate a harmonious culture and enhance team cohesion in the process of de-familialization. Of course, the second generation of private enterprises is not without challenges, the shade of their fathers is also likely to accelerate their becoming "losers", if they can not do as hard as their fathers, hard work, thrift, perseverance, tolerance and patience, and to fulfill more social responsibility in order to change the perception of the "second generation of the rich", to get more money. If they can't be as hardworking, thrifty, persistent, tolerant and patient as their parents, and fulfill more social responsibilities to change the perception of the "second generation of rich people" and get more social tolerance and recognition, they are more likely to fail. (The author is a professor at the School of International Business Administration of Shanghai University of Finance and Economics.) There are still three hurdles to overcome for the second generation of the rich to take over their father's business Yang Rong ● Whether or not they can successfully take over the baton is a result of the combination of factors from the individual, the organization, and the environment ● Overall, the percentage of second generation of the rich to take over the baton is likely to decline ● The proportion of private companies that have successfully taken over the baton is likely to decline Private enterprises can solve the succession problem by introducing professional managers, etc. The vast majority of Chinese private enterprises are family-owned, and many of the "founding generation" are already over 50 years of age. In the next 10 years, wealth inheritance and whether the "second generation of the rich" can successfully take over the baton has become a proposition that can not be avoided. There are both successful cases and failures of "second generation of rich people" taking over the "founding generation", which shows the complexity of the succession issue, and cannot be concluded simply by yes or no. The author believes that whether the "second generation of rich people" can successfully take over the baton is the result of the combined effect of individual factors, organizational factors and environmental factors. Handing over the baton is not "Zhou Yu playing Huang Gai" Individual factors include two opposing aspects of the incumbent and the successor, and each aspect involves many subtle factors, such as individual qualities, psychology, experience, educational background, ability, etc. From the perspective of the incumbent's individual factors, there is no doubt that the successor is the most important factor in the success of the second generation of the rich. From the perspective of individual incumbents, the most important question is whether the "new generation" is willing to leave and whether they can leave smoothly. Canadian scholar Sharma asserts that "the incumbent's unwillingness to let go" is the most frequent factor in the study of obstacles to succession in family businesses. The enterprise is another "biological son" in the founder's mind, and many entrepreneurs who have passed their prime are still active in the front line of the business battle, and are reluctant to give up their positions. As one manager said, "giving up the business is equivalent to signing the death certificate". In addition, the trust of the incumbent and the tendency to enjoy knowledge*** is crucial to the smooth departure of the "new generation". Some scholars have pointed out that, to ensure the success of a company's succession, the incumbent should have the characteristics of being willing to guide, actively cooperate, and be willing to disclose new ideas. From the perspective of individual factors of the successor, the most important thing is whether the "second generation of rich people" is willing to take over the baton, and whether they have the ability to successfully take over the baton. The first question is the decisive factor. A survey of Zhejiang businessmen showed that 37% of the "second generation of the rich" hope to create a career. The reason is that the family business is not attractive enough. The "second generation of rich" will be due to the father's industry has no development prospects, business scope is narrow and other reasons and lack of confidence, do not want to take over. Secondly, the "second generation of the rich" are more inclined to pursue their own individuality and engage in their favorite jobs when their parents can give them sufficient financial support. Thirdly, many of the "second generation of rich people" who have received higher education or returned from studying abroad have their own unique views on the development of the industry and do not want to be labeled as relying on their parents and getting something for nothing. As a result, many of them choose to leave the family business and set up their own business. Sometimes the second issue is also important. In a study of family businesses in the U.S. that failed to succeed, researcher LeBreton Miller found that 45 percent of succession failures were due to the inability of the heir to fulfill the leadership role. Enterprises missing thoughtful succession plan Organizational factors involve many aspects, in addition to corporate development, organizational culture of the successor's attractiveness, the author believes that the most important is the organization's long-term succession plan and its implementation. Nine Dragons Paper Chairman Zhang Yin said: "I am quite satisfied with my two sons, they are very hard and low-key, but currently do not have the ability to take over, but also need to be honed, I have to be responsible for the company's employees." The process of intergenerational transmission of family businesses is complex and risky, and planned management in advance is crucial to the successful continuation and development of family businesses. But in fact, the succession plan and its management is often ignored by most enterprises, and thus often occurs the phenomenon of critical orders. 2004, Li Haicang accidentally died, only 23-year-old Li Zhaohui had to end his studies to come back early to take over as chairman of Shanxi Haixin Group. Although there is a "veteran" support, but the tender shoulders of the moment difficult to bear the heavy responsibility. Lack of thoughtful succession plan, the enterprise encountered unexpected events, due to the occurrence of enterprise power pattern and ownership distribution of drastic changes, may lead to the collapse of the enterprise. The external environment of modern enterprises is drastically changing and diversified. From the social and cultural environment, on the one hand, the traditional social culture emphasizes "the son inherits his father's business" and does not believe in people without blood relationship; on the other hand, the modern social culture emphasizes the *** same values and concepts, emphasizes the separation of ownership and operation, emphasizes the shareholders' meeting, the board of directors, the supervisory board, the professional managers, each of them has its own duty, mutual control, and effective corporate governance structure. decision-making corporate governance structure. From the economic environment, on the one hand, traditional industries are constantly grafting new ideas, concepts and technologies; on the other hand, economic globalization, information explosion, emerging industries are emerging, and the money-making effect is highlighted. The diversified influences and changes in this environment not only require the "second generation of the rich" to inherit their father's business, but also attract the "second generation of the rich" to cast their eyes elsewhere. Generally speaking, the "second generation of the rich" is well-educated, highly sensitive to new things, easily stimulated by the environment, and has a strong desire to "change for the better". Only 30% of the family business can be passed on to the second generation of the success of private enterprises is a systematic project, a variety of factors are always interlinked, each other, mutual influence, mutual game, the overall role. Among them, the successor's individual factors is the internal cause, and the successor is willing to take over is the decisive factor; organization and environmental factors is the external cause, through the role of internal factors. In the author's opinion, the basic characteristics of environmental factors in the future are change and newness, and the environmental changes and the emergence of new things will continue to impact the traditional concept of "the son inherits his father's business". More and more sensitive to new things, "the second generation of the rich", will hold the advantage of capital, eager to try, independent development of new industries. The lack of organizational "succession planning" and the reluctance of the "founding generation" to completely relinquish their power have reinforced the expectation that the "second generation of the rich" are unwilling or incapable of taking over the business. Although there will certainly be successful cases of "second generation of the rich" taking over the reins in the future, the proportion of "second generation of the rich" successfully taking over the reins may decline in general. According to the "Report on the Development of Private Enterprises in China" published by the All-China Federation of Industry and Commerce, only 30% of Chinese family enterprises can continue to the second generation, and only 10%-15% of them have succeeded in taking over the baton to the third generation. American scholars Davidow and Narva also pointed out that in the United States, only about 30% of the family business can successfully transition to the second generation, only 12% of the family business can be successfully transitioned to the third generation, and the probability of successful succession to the fourth generation is only 3%. These data also confirm the author's viewpoint to a certain extent. To summarize, the author believes that: firstly, the succession problem of private enterprises in China is a long-standing general problem, and with the continuation of time, this problem will attract more and more widespread attention. Secondly, the traditional practice of "the son inherits his father's business" is fading, "rich second generation" if the baton can't take over, it doesn't mean that the original private enterprises can't survive and develop. Private enterprises can solve the problem of succession by improving their corporate governance structure and introducing professional managers. There are countless examples of successful succession models in countries around the world. Finally, the fact that the "second generation of the rich" do not take over does not mean that the "second generation of the rich" are dilettantes, or that they are not as good as the next generation. In fact, the "second generation of the rich" are generally well-educated, idealistic and insightful, have heard and witnessed the wisdom and courage of their fathers in business, and have the capital accumulated by the previous generation, they also have the blood of Chinese businessmen flowing in them, and public opinion should encourage them to independently develop new industries or fields, and create new business models. Their independent development, in turn, may also have a beneficial impact on the private enterprises founded by their fathers. (The author is vice dean and professor at the business school of East China Normal University)