March 12, 2001
Asian Family Business
Entrepreneurship of fourth
generation saves empire
EU YAN SANG has survived the
"three-generation trap'' common in the history of most Chinese
family businesses because of the entrepreneurship of the fourth
generation, said an economist.
National University of Singapore's
Associate Professor Dr Henry Yeung Wai-chung said the 1990 acquisition
of Eu Yan Sang Holdings Ltd in Singapore by local property developer
Lum Chang Group almost led to the demise of the company as a
"This acquisition ended
the long history of family ownership and management of Eu Yan
Sang Holdings Bhd in Malaysia and Singapore,'' he said.
In his paper, Managing Traditional
Chinese Family Firms Across Borders: Four Generations of Entrepreneurship
in Eu Yan Sang, Dr Yeung said one of the challenges the third-generation
of Eu faced was "the lack of interest among the brothers
to manage Eu Yan Sang directly.''
Even though members of the third
generation had substantial ownership and control of the family
business, they did not participate actively in its day-to-day
management which was instead left to trusted employees.
"The lack of a clear succession
plan by Eu Tong Sen also contributed to the inheritance dilemma
in which equal inheritance essentially forbade any branch of
the family from controlling the business,'' Yeung said.
He said it was the dynamism and
entrepreneurial skills of the fourth generation that saved the
family business empire.
He lauded the current controlling
family members for rejuvenating the business through a combination
of direct family control, a consolidated corporate structure
and a professional management team.
"Eu Yan Sang's example shows
that to manage successfully across borders, a Chinese family
firm needs both professional managers and corporatised organisational
structure,'' he concluded.
When Eu Tong Sen renamed his
father's shops from "Yan Sang Medical Shop'' to "Eu
Yan Sang Medical Shop'', it was meant to "reinforce the
fact that Eu Yan Sang was a family business to be handed from
one generation to another,'' Yeung noted.
It is a testament to the fourth
generation's tenacity that Tong Sen's legacy has been preserved.
It is also interesting to note
that Eu Yan Sang International Holdings Pte Ltd is the only company
which still bears the family name today.
"All other companies founded
by Eu Tong Sen have been renamed or consolidated under different
holding companies,'' Yeung said.
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