The Dragon Network: Inside Stories of the Most Successful Chinese Family Businesses

Chapter 10

Issues on Sustainability in Family Businesses

Family business success is often acknowledged by how long the company or group is owned by the family. How many generations the business is able to be sustained would be the primary goal of the company. Family performance is not only measured by the amount of return, or expansion of the business, but also by the longevity of the business.

Phases of Growth in a Family Business

Every family business undergoes the following four phases of growth: 1. developing phase; 2. managing phase; 3. transforming phase; and 4. sustaining phase. As the business grows bigger, the challenge is how to transform and sustain it.

The Jakarta Consulting Group has developed a model for managing growth in a family business through each phase, as shown in Figure 10.1.

Figure 10.1 Model for managing growth in a family business

In the developing phase, the family members are the main driving force for the business. The development of the business is also influenced by stakeholders such as customers, employees, and the surrounding community, as well as the competitive environment.

As a family business enters the managing phase, there are seven critical issues that need to be addressed: value conflict, succession, management structure, alignment, compensation, competency, and revenue distribution.

In the transforming phase, non-family management members ...