The ‘Chinaman’ Mindset

By Prof. Enrique Soriano

I want to start this article with a brief but compelling story shared by a second-generation successor and Malaysian businessman, Dato Seri Michael Tio. He was the first keynote speaker in the recently concluded “Asia Pacific Family Business Summit” organized by Binapavo. Dato Michael is presently the Group CEO of PKT Logistics. How he transformed his father’s small business that started in 1974 (known then as Port Klang Trading) and operated out of a terrace house into an international logistics giant will serve as inspiration for many overseas Chinese founders and next-generation leaders that are still mired in conflict. The family must be aligned based on shared values to pursue change, so no matter how difficult and challenging the “fear of the unknown” is, the family must never waiver and must continue to tread on.

In his speech, Michael cited a particular conflict when his conservative father demanded a return on investment on a request for specific capital expenditure such as in information technology needed as a pre-condition for PKT joining a tender, “Chinese mentality is always all about return on investment (ROI). It is always difficult for my father to understand that there is more to business than just ROI. In the past, when we buy a piece of land for development, say 100,000 square feet, we build 100,000 sq. feet, we don’t leave any space for trees! When I argued that trees are needed for the environment, my father would counter that trees don’t make money for us! That is the problem for many overseas Chinese founders.”

Another anecdote that Michael shared was when they clashed on the need to brand the organization for it to be recognized by international customers. But his father would incessantly object and caution him, “We should keep a low profile, everything must be low profile, don’t shout in the market, people will notice us, income tax will come after us, there should be no advertisement, and you should never talk to the press. That is the typical China man mentality back then!”

Michael closed his speech by enumerating his struggles, frustrations, the constant clashes with his father, and the difficult crisis periods that PKT had to go through. Despite all this and the resistance shown by his father for years, he continued to press forward armed with a solid vision to transform the PKT group into a world-class organization. After years of proving himself, showcasing his leadership qualities, and delivering on his promise, Michael triumphantly won his father’s trust, whom he fondly refers to in his speech as a typical China man.

Succession planning is a pressing challenge for many family-owned businesses in Asia. Founders past the age of 60 acknowledge the critical need to plan, transition, and empower their offspring to assume important decision-making roles in the business. Still, most of these leaders stop dead in their tracks when major governance decisions are required (preparing a management development plan, setting proper structure, hiring non-family professionals, enforcing clear rules and responsibilities, setting up a holding company, tax planning, etc.). This type of behavior is called the “founder’s syndrome” or “founderitis,” which commonly afflicts many business owners struggling between sharing major decisions and holding on to power. Wikipedia defines it as a difficulty faced by organizations where founders maintain a disproportionate power and influence following the effective initial establishment of the organization, leading to a wide range of problems.

This syndrome occurs when the organization operates primarily according to the personality of the founder instead of working toward its overall mission. In his book, “Founder’s Syndrome: How Corporations Suffer and Can Recover,” author Carter McNamara narrates some of the common problems that can plague an organization during the tenure of the founder:

1. Organizations must evolve through a certain life-cycle change.
2. This change is from typically entrepreneurial, seat-of-the-pants growth to well-planned and managed development. This development cannot occur without first establishing a stable administrative infrastructure.
3. Developing this infrastructure often requires a change in the nature of the founder’s leadership from that of a highly reactive, individualistic style to a more proactive, consensus-oriented manner.

To be continued…