AM Lecture 3

International Management > Asian Management > Converging management? > Chinese management > Weaknesses

Weaknesses

Wah suggests that the style of CFBs has weaknesses. As they grow, the weaknesses of CFB management will start to override the strengths. In order to be more efficient in a larger company, management style needs to include specialists and delegations of authority. This means that, to ensure continuity of the family business, it is essential for the management to change from being family-managed to professionally-managed.

The real challenge is to maintain its entrepreneurship and flexibility (owing to the short chain of command), while still being professionally managed.

Adaptations required

CFBs work well as small firms, but If they plan to expand, CFBs need to adapt in order to survive. There are a variety of key issues to consider:

Separation of family matters from business by practicing a comprehensive and reliable accounting system, meaning more accountability and less ad hoc arrangements
Redefinition of the business direction, a corporate vision and mission statement, as well as developing a set of corporate core values. This a more objective approach to business
Creation of a comprehensive organisation structure with a clear line of responsibility for each position in the hierarchy
Development of an effective and equitable performance appraisal and reward system, implying an ability to get rid of people for underperformance, and to promote the right people, rather than family members
Usage of proper channels of communication (open and two-way communications) and an upgrade of meeting effectiveness
Creation of a learning organisation by continuously developing management capabilities and upgrading skills
Adoption of a more participative and democratic leadership style. The autocratic, paternalistic leadership style works in small firms, but not in large ones.

Note: In Italy, family businesses grow very large, but it has been shown that if the leader's vision is in any way flawed, the company will eventually break down. Thus for CFBs to survive, they need to take steps to prevent collapse from occurring.

Guanxi

Guanxi guanxi everywhere...