Inarticulate ramblings of a management consultant

the day to day experiences of a consultant operating in weird and wonderful client situations

Asian Investors -hierarchical?

The second in my series of capital flows from East to West….and the consequences for European / UK and American leaders. You will find the first here…I would recommend that you read them in the order that they are written!

One of the biggest challenges for Western CEOs facing the prospect of Asian ownership is understanding the formal and informal nature of governance. There is a perception amongst many, based on some experience but more often cultural generalisations, that:

  • There are some collective traits which one can apply to Asian leadership and corporate structure
  • These are based (in a similar way to other parts of the world) on some religious heritage…mostly Buddhism or confucianism
  • At its heart, the nature of leadership in Asia is largely based on a paternalistic approach which places experience and age above capability

As with all generalisations, there is some truth and relevance in some of these statements but to repeat myself, the biggest misunderstanding around Asian leadership is that there is some homogeneity.

If we really want to understand the nature of leadership in Asia, we need to look at the context of the history and legacy of the vast majority of companies…which is that they have come from or are still in family ownership. Indeed, at an even deeper level, the history of the role of the state versus that of the family provides a critical social understanding against which to review Asian leadership.

Within the context of the family, there is probably as much variation as you get across national cultures…as the needs, aspirations, interests and perspectives of the unit vary according to the values of the family members.

Having therefore dismissed generalisations in the context of Asian corporate culture, let me completely contradict myself and suggest the following three themes which might be valuable when looking at hierarchies in Asian businesses:

  • Multi-generational ownership and the value of future ‘employment’ for the family is as important as any capital value created. One of the challenges for families in Asia who have divested themselves of their major asset is that the context for their external identity and position in society is changed.
  • Social responsibilities, primarily in the context of long term employment but also other community based activities are deeply engrained in the fabric of the business and the values of the family. These are mostly informal and provide a backstory and social standing for the company.
  • Hierarchies are inter-generational as are external relationships, providing some legitimacy to the opinions of the elder statesman as his reference point has external validation.

The interesting aspect of these ideas is that even in the context of State Owned Enterprises in China, which have never been under private / family ownership, some of these hierarchical traits are still present.

The question I have for you is are as relevant for family owned businesses in Europe as they are for those in Asia? Look forward to hearing your views.

Categories: China, Corporate Culture, culture change, Culture clash, Family owned businesses, Governance, National Culture, Politics, Value Preservation

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2 replies

  1. Ben, as I read your piece I kiept thinking of recent exeperiences I have had with Northern European (North Germany, Scandinavia) companies I have recently been involved with. I found, to my surprise, that many of the characteristics we see in Asia in family businesses, paternalism in particular, are very much alive there too. Decisions are still taken at the top, or not taken at all out of deference.

    I also think that in Asia we need to distuniguish between family-owned businesses which simply pass on the baton and others where the next generation is more assertive, perhaps after a stint in the US, Europe. These are also the companies I think which will likely survive and thrive more.


    • Great to hear from you, Salman…I agree completely, it’s interesting to observe the changing fortune of family owned businesses as they shift from one generation to the next. Nonetheless, some of the characteristics remain constant…informal governance structures, limited focus on support functions in terms of tech and investment…all those areas that PE tend to focus on as they repackage.


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