A Journey of a Family Business

1. 0 INTRODUCTION This article is discussing about managing family business by the group CEO of KHIND, Cheng Ping Keat. The article is mainly on managing a family business which is known as Khind. Khind is an international company founded by Cheng Ping Keat’s father Cheng King Fa, aged 72. Under his vision and guidance, the business has grown into one of Malaysia’s leading local electrical products manufacturer. When Cheng King Fa needed help as the business grew, he seconded his brother, Cheng Hup to join in. Khind initially started out as a family business which eventually grew and expanded throughout time.

This article discusses about the advantages and disadvantages of running a family business and the author had highlighted the conflicts which rise throughout the process of the business. 2. 0 SUMMARY A family business is basically a company managed by family members. According to the author, running a family business has more advantages in the early stages as compared to starting a business with a partner with no blood ties. The author believes that the bond of trust and common interest within family members has a huge impact on the growth of the business.

According to Cheng Ping Keat, there are few strengths and weaknesses of a family business for comparison. According to the author, there are few benefits of starting a family business. One of them being, having a low start up capital without any interest payment. Besides, having management personnel who are trustworthy and willing to share the gains or losses of the business is also an advantage. The author mentions that the probability of success during the early stages of the business is quite high. However, he also emphasizes on the weaknesses of family business.

The first example mentioned is the lack of a consistent supply of capital for the business especially when the business starts to expand. He justifies his point by giving an example which was the challenge faced by Khind when a factory is required to be built and increase cash flow during one point throughout the growth of the company. However, Cheng Ping Keat’s father and uncle were quite lucky as they were able to obtain the capital due to several fortuitous events at that time. Even so, he greatly emphasizes that these kinds of opportunities are very rare.

In this article, it is also mentioned by the author that every enterprise will stumble upon some problems regarding the management of the company. In his opinion, if these issues are not resolved accordingly, it could be a huge disadvantage to the business. He also feels that leaders of the company should be capable and responsible in order for the company to operate smoothly. The author illustrates that members of Khind each have their own branch of family. Based on the history of Khind itself, a family business is prone to conflicts due to different interest of family members.

This is a very common situation as each individual has different needs to provide for their own family. He also states that the passing on of the business from one generation to another often causes internal disputes. These cases are usually due to the different mindset, education and lifestyle of the younger generations. He then mentions that it was due to the internal dispute in 2001 that caused Khind to suffer its first loss since being established. Managing a family business is like balancing a balance between family and company.

Cheng documents clearly in his article three different management models which could possibly be used and the possible corresponding outcomes. He showed that a bias towards either side of the balance, which is either toward the family or towards the company, will eventually lead to many negative outcomes, and if not handled correctly and in time, will have a negative impact on the business. 3. 0 Critique From the article, it is found convincingly agreeable that it is not fair that the female members of the family is not allowed to get involved in the family business.

This show the prejudice and discrimination directed against women as leaders. Based on the results from EVA analysis, it is proven that firms led by women are 10–20 percent more profitable than businesses led by men. The Caliper study findings are summarized into four specific statements about women’s leadership qualities. First, women leaders are more persuasive than their male counterparts. Second, when feeling the sting of rejection, women leaders learn from adversity and carry on with an “I’ll show you” attitude.

Third, women leaders demonstrate an inclusive, team-building leadership style of problem solving and decision making. Fourth, women leaders are more likely to ignore rules and take risks. Tan Sri Dato’ Sri Dr. Zeti Akhtar Aziz is a successful female leader. She was appointed Governor of Bank Negara Malaysia in May 2000. She has been with the central bank since 1985, in a career spanning several senior positions in monetary and financial policies, and reserve management. Dr. Zeti is one of the founding members of the Asian Consultative Council for the BIS and is currently the Chairman of the Council.

This proves that woman leaders are capable of leading an organization. Therefore, it is not fair if talented and capable female leaders cannot involve themselves in the business due to the gender issue. The author believes that family members basically trust each other and have a common undertaking, and hence dedicate all their efforts to the success of the family business without any grudge. All the family members know is that it is all ‘for the sake of our own business’. Based on the author’s point of view, we do agree to a certain extent that family members basically trust each other.

However, In our opinion, trust and reliability between family members cannot last long in a family business. Distrust happens when one or a few family members betray their family by trying to sell the family business shares to others, some family members will also try to dismiss other family members position in the family company due to distrust between family members. This happens when some of the family members intend to take over the ownership of the family business. Without trust between family members in a family business, the family business performance will decline or progress poorly.

For example, on June 29, 1994, there was a court case involving Yeo Hiap Seng Holding Company. This happened because Alan Yeo, grandchild to the founder of Yeo Hiap Seng Holding Company tried to sell the shares to Keppel Group and Wing Tai Holdings which could jeopardize the control rights of the Yeo family in YHS. As a result due to the case above, the relationship of trust and dependence among family members were damaged. Based on the opinion brought up by the author, we agree that later generations do not experience the hardships of the pioneering stage .

Although the younger generation does not have much experience when compared to the older generation when it comes to doing business ,they are actually better educated in this new era. Therefore, we conclude that the younger generation can perform and achieve success in the business field . Businessman of this generation who are better educated prefer to introduce modern management styles in the company which could help them improve in their business. Youngsters now are more systematic in managing a company by using computer.

They are more creative and innovative. Furthermore, the younger generation are more savvy with technology than previous generations. They usually spend more time online. So, youngsters can easily start a business online. They could promote their products through online advertising on websites because many customers these days, especially teenagers prefer to make purchases online. Based on the opinion brought up by the author, we disagree that “wealth in a family will not last through three generations”.

Based on our standing, the author did not explain clearly when he stated that “wealth in family will not last through three generation”. The author only emphasized about internal conflict which are quite common in a family business and it will cause the withdrawal of family business. In our opinion, “wealth in a family will not last through three generation”, it is a false rumor. The success and improvement of the family business depends on the performance and hardworking of the family to operate the business.

The success and improvement of the family business also needs to be based on the education and moral values. If family members are more tolerant amongst each other then it will not cause internal disputes. Conflicts will not happen within a family if allocations of incentives or returns are fair and not bias. For example, Yeo Hiap Seng, a well-established and profitable old family business which was set up in the year 1900 has been successfully operating until now. Therefore this proves that the wealth in a family could last three generations if the management between business and family are consistent and balance.

Based on the article, we found that the author was defined the important terms which are subtitle from the article without overemphasize or underemphasize. The descriptions of the important terms helped us to understand better on what the article is about. Besides that, we also found a few points which were started a debate among ourselves. These points are regarding the female issue and also “wealth in a family will not last through three generations”. Next, we found that the strengths of this article were easy to understand.

The author also showed a diagram of family business management models to make us understand better on how to manage a family business. In addition, we found that the title mentioned by the author is clear about the journey of a family business. However the overview is confusing and misleading as the overview is about the Khind business but the overall article is about the general knowledge of a family business. The author shows no bias in this article. He mentioned both, the strength and the weaknesses of a family business. 4. 0 Conclusion

In conclusion, we found this article is good. The most ideal solution in management model is model 3 which is balanced the needs for the family members and company to ensure the smooth operations and development of the company. Therefore, we will recommend this article to another reader especially to the business field students and the small and medium enterprises (SMEs). This is because this article had offers many practical lessons for them. They can run their business by follow the management role to balance the needs for the family members and for the company.