“The essence of Chinese economic organisation is familism,” (Wong, 1985, p58). The majority of Chinese businesses outside mainland China, including the largest conglomerates, are family owned. The family is the foundation for all Chinese business enterprise. It is argued by many that Chinese family businesses (CFBs) place family above business. The Chinese tend to view their business duties more as responsibilities to the family rather than creating wealth and profits. As a result of this they have been termed “Chinese Business Families” rather than “Chinese Family Businesses” (Chen, 2001).
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This is a significant topic to discuss as the Chinese model for doing business is not that well researched. The West has been fairly scared of the East and their business structures as they are so dissimilar to the Western model. However, it is critical for Western businesses to understand the Chinese model for business in the ever increasing of globalisation and the increasing participation of Chinese businesses in the global market. This essay will firstly briefly discuss the cultural and historical background to the CFB. Then the essay will be divided into three sub-sections.
The first section will argue that CFBs do focus on family rather than business success. The second section will argue that the CFB model, due to its many advantages, actually causes high levels of business success and so family is not the focus of businesses but rather the mechanism to reach and become a successful business and so the two go hand-in-hand. The third section will argue that at the of the day CFBs place wealth creation above family as they, reluctantly, move away from the CFB model and become more westernised so they are able to compete in the global market.
There are two main deep-rooted treads of culture that have bound the Chinese people for over 5000 years. The first is agrarianism, which conjures a very communal ethos, group cooperation and harmony as well as loyalty and obedience to familial hierarchy. The second thread is said to be morality: the Confucian system is said to be the social fabric of Chinese culture and has been ingrained within Chinese society for over 2000 years.
Confucian scholars developed an ideology based on the moral nature of man, harmony of society, political legitimacy and order and unity and it is claimed, “the early period of intellectual ferment profoundly affected the formation of Chinese management”, (Chang, 1976, p76). Confucian ideology centred on morality, virtuous rule and rigid, hierarchical socio-political relationships. Confucius stressed the importance of social hierarchy and social relationships and the requirement of harmonious operation and welfare of society (Wah, 2001; Pun, K., Chin, K. and Lau, H, 2001). The first section will argue that CFBs do concentrate on their family responsibilities rather than business success.
Confucianism’s negative evaluation of profit is still available to structure the calculations of the educated Chinese. The organisational structure of CFBs incorporates the family in all its elements and Chen’s (2001) four pillars of CFBs demonstrate how family is the focal point and emphasis on family over profits (Brook, 1999). The first pillar is that a CFB is a ‘family-directed operation’.
It is headed by either a patriarch or a matriarch, usually the individual who founded the business, with other members holding key positions within the business. The extended family will normally have its own allied companies or subsidiaries that are all linked together to form a complex network of companies with ownership distributed through out the extended family and cross holdings are common to create intra-family interdependencies. Even when a Chinese business is a publicly held corporation, it is often family controlled. CFB members share responsibility of operations and take a hands-on approach.
A main feature of the CFB model is that of informal decision making, which occur outside the boardroom at events such as family dinners (Chen, 2001). The organisational chart of a CFB seldom reflects a true picture of power distribution within that company. Job titles have little reflection on members’ actual roles and often someone with a high-level sounding title may only be a figurehead. Business deals maybe based on family reasons rather than the merits of the business proposition, which leads to a financially attractive deal to be rejected (Chen, 2001).