Chapter 7
Leadership Styles of Overseas Chinese Family Businesses
Leadership style refers to the behavior of a leader based on his or her personality, philosophy, and background. There are some leadership styles that can be applied by leaders of any organization, including leaders of Chinese family businesses.
Suitable leadership style depends on the situation faced by the leader. An autocratic leadership style may be most effective when there is a time limit to decide something or when leaders have more knowledge, skill, resources, and experience compared to their followers. However, in an organization where employees have high motivations and various skills, a more democratic leadership style should be applied. A leader must choose a leadership style which is the most effective in helping the organization achieve its goal, while at the same time accommodating the employees’ interests and aspirations. So, we can say that there are no right or wrong leadership styles.
From Dictatorship to Democracy
In the early years, when the business had just been established, Chinese family business founders, without a doubt, adopted an autocratic or authoritarian leadership style. In authoritarian leadership, a leader has an absolute and unchallenged power, controls his or her followers tightly, and asks his or her followers to obey without asking any questions. Authoritarian leadership is one of the three dimensions of paternalistic leadership, according to Cheng and Lim (2012). The other dimension is benevolent and moral leadership. Benevolent leadership means that the leader has individual, overall, and permanent concern for subordinates. And moral leadership requires a leader to display a high level of personal integrity or accomplishments to win the respect and admiration of subordinates.
Under the autocratic leadership style, all decision-making powers are centralized in the leaders, based on their intuition and experience. In a Chinese family business context, it is the founder who has the absolute power. He is the single dominant owner, manager, entrepreneur, founder, and father figure. Autocratic leaders keep strict, close control over followers by keeping a close regulation on policies and procedures given to followers. They believe that direct supervision is the key if an organization wants to achieve success. Because they fear that followers may be unproductive, authoritarian leaders keep close supervision and feel this is necessary in order for anything to be done. Effective supervision is often provided through detailed orders and instructions.
In an authoritarian leadership style, the leader does not consult employees. He does not take suggestions or initiatives from subordinates into consideration. He sometimes does not even trust his employees. Employees are expected to obey orders without asking for any explanations. They are in no position to challenge the leader’s authority directly. Clear differentiation exists between the leader and their subordinates.
In an authoritarian leadership style, in order to maintain his power, the family business owner controls the flow of information. He transmits information only in small amounts to his subordinates so that they become dependent and thus unable to outperform him. The amount of information given to a specific subordinate depends on the degree of trust that the leader has for that individual. Without the control of information, the subordinates frequently have to ask the leader for instructions.
Autocratic management has been successful as it provides strong motivation to the subordinates. The authoritarian leadership style enables quick decision-making, as only one person decides for the whole group or organization. Other characteristics of authoritarian leadership style include setting goals individually, engaging primarily in one way, adopting downward communication, and controlling discussions with followers (Martindale, 2011).
Authoritarian leadership is effective when there are new or untrained employees who need to know which task to perform or which procedures to follow, when new or untrained employees need supervision with detailed orders and instructions, when some employees do not respond to any leadership style and really challenge the authority of their manager, and when there are high volumes of production needed and only limited time to make a decision.
An authoritarian leadership style is usually adopted by a dictator. A dictator is a ruler who assumes sole and absolute power. Again, this kind of person is common within Chinese family business founders. In a dictatorship, an organization is ruled by individuals who are often unrestricted by rules, structure, and system.
Nevertheless, as the company grows and more people with different characteristics join the business, the authoritarian style of leadership can no longer be maintained since it could create resentment, fear, and tension, which could lead to lower employee morale, higher absentees and turnover, and work stoppage. Greater participation must be promoted since more employees want their opinion to be heard.
Therefore, leaders must change their leadership style. A style called laissez-faire leadership is encouraged. In this style, leaders let their followers decide freely on how to do their job. In other words, followers are given more freedom. However, this does not mean leaders do not support and guide their followers, although leaders do not participate directly in making decisions, unless the followers ask them to do so. The laissez-faire leader also provides his or her followers with necessary resources so that they can do their job smoothly. Laissez-faire leadership is beneficial when followers have high skills, knowledge, education, and experience; love and feel proud about their job; have a strong desire to succeed; and can be trusted. However, the laissez-faire leadership style should not be used when followers do not feel safe when their leaders are not around, when leaders cannot make suggestions regularly, and when followers do not understand their responsibilities. If a Chinese family business leader wants to adopt this style, he or she needs to instill a sense of pride in both the family members and the non-family employees.
The democratic style of leadership can be promoted if a company wants to create equality. In democratic-style leadership, a leader gives his or her followers all available information that could affect their work on a regular basis. He or she also allows the followers to make decisions. In this style, discussion, debate, and exchange of ideas is common. Members’ involvement is appreciated. The democratic style encompasses the notion that everyone should play a part in the group’s decisions. Nevertheless, guidance and control are still needed.
Because freedom to express any thoughts and ideas is guaranteed, democratic-style leadership will stimulate fresh ideas and solutions. It also encourages employees to make self-evaluations regarding their performance, with the help of the leader. The leader also lets the employees decide their own goals, as well as encourages and recognizes self-development and achievements.
Although it seems ideal, this kind of leadership style is not always suitable. It must not be used when roles are not clearly defined and there is a time limit, because it will create problems in communication and hinder project completion. It must also not be used when mistakes and failure will cost the company a huge loss (not just financially), and when safety and security are at risk. In a situation when employees have high skills and knowledge and are ready to share them, and when there is enough time for all to participate, then democratic-style leadership will be effective.
If the authoritarian leadership style can no longer be sustained, then which leadership style would a Chinese family business adopt? Most Chinese family businesses want the family to keep the control in their hands. Nevertheless, many of them no longer hesitate to give employees more freedom to make decisions regarding their work, while at the same time the founder or senior family member provides guidance and support. Some have even made further steps by engaging their employees in discussion, debate, and sharing of ideas regarding the latest business issues. This step is often promoted by the younger generations in Chinese family businesses, many of whom graduated from western universities in the United States, UK, Australia, and other European countries. This in turn often creates fresh ideas and solutions. They also develop plans to help employees evaluate their own performance, allow employees to establish goals, encourage employees to grow on the job and be promoted, and recognize and encourage achievement. By doing this, these Chinese family businesses have actually adopted a democratic leadership style.
One example is Lance Gokongwei from JG Summit, Philippines. Currently, he serves as president and CEO of Cebu Air, Inc., operating as Cebu Pacific Air. Cebu Pacific Air is the subsidiary of JG Summit Holdings. The airline was established on August 26, 1988, and started operations on March 8, 1996. It initially started with 24 domestic flights daily among Metro Manila, Metro Cebu, and Metro Davao. By the end of 2001, its operations had grown to about 80 daily flights to 18 domestic destinations.
Cebu Pacific Air is currently the country’s leading domestic carrier, serving the most domestic destinations with the largest number of flights and routes and equipped with the youngest fleet. The company has 1,182 employees. In October 2010, the airline completed an IPO of 30.4 percent of its outstanding shares. Cebu Pacific carried more than 10 million passengers in 2010.
In the 2000s, Cebu Pacific was granted rights to operate international flights in the region, including Malaysia, Indonesia, Singapore, Thailand, South Korea, Hong Kong, and Guam. International flights were launched on November 22, 2001, with twice-daily service to Hong Kong. On March 1, 2002, it commenced thrice-weekly flights to Seoul. The airlines launched its direct flight from Cebu to Singapore on October 23, 2006, the first low-cost airline to serve the Cebu-Singapore-Cebu sector, and in direct competition with Singapore Airlines’ subsidiary, SilkAir. CEB is now the only Philippines carrier serving the Cebu-Singapore-Cebu route after Philippines Airlines (PAL) terminated its direct service. Recently, Cebu Pacific has been named the 2012 Low-Cost Carrier of the Year. Its CEO, Lance Gokongwei, has been named the Low-Cost Carrier CEO of the Year during the prestigious Budgies & Travel Awards of 2012.
Aside from his job as president and CEO of Cebu Pacific Air, Lance Gokongwei holds key positions in JG Summit Holdings. Lance Gokongwei attributes the success of Cebu Pacific Air to its affordable rates, excellent service, reliability, on-time performance, and commitment to safety. He has a pool of honest, hardworking, and dedicated people committed to providing customer satisfaction. His employees work as a team and he rewards them. Lance Gokongwei also encourages employees to talk directly to management and asks for their suggestions on how to improve the business. It is his leadership style that makes his company thrive in the airline industry.
Cebu Pacific Air probably reflects Lance Gokongwei’s personality and leadership style the best. His leadership style is distinguished as “more operational, more focused, and more consensual.” He is humble and prudent, but he is ambitious. The Cebu Pacific Air offices and airline environment are casual, friendly, practical, no-frills, no-nonsense, and fun. Its in-flight magazine is called Smile and its brochures and websites are dotted with local puns. CEB’s casual uniform of walking shorts and a polo shirt or a sleek knit suit sets the tone for a “fun flight” as the company calls it. Lance Gokongwei rarely wears a suit or tie, and dresses down at the office in rolled-up shirtsleeve and chinos, or in company-issued polo shirts.
Another example is Eu Yan Sang. Eu Yan Sang hired K.F. Tan as a group controller; he then became chief financial officer of Eu Yan Sang. Currently, he serves as the company’s chief operating officer. When he was hired as group controller, Eu Yan Sang was looking for a finance executive who could work well with operations and eventually participate in strategic discussions. After beginning his career in finance, Tan served as general manager for NatSteel Chemicals in Singapore, and as managing director for Nextec, a U.S. fabric company. Life at this company closely resembled the multinationals where Tan had worked previously. “This is a very professionally managed company,” he says. “Corporate decisions are made by consensus. Richard Eu, the chief executive officer of Eu Yan Sang, doesn’t come and say ‘Hey, K.F., I want this to be done.’ We freely share our views and come to an agreement.”
Yearning for a Patriarch
As many Chinese family businesses start to adopt a more democratic style of leadership—marked by family members’ collective leadership and greater participation from non-family employees—they nevertheless always yearn for someone who can act as a patriarch or matriarch, even when the founder or senior leader is no longer with the company. As Raphael Amit, the Wharton professor of entrepreneurship who studies family businesses, once said, “With succession in family businesses, it’s not just a question of who will head the business but who will be the new patriarch of the family.” Patriarch is a man who is the father or the founder, while matriarch is a woman who rules or dominates a family, group, or state.
In this family business context, patriarch (or matriarch) refers to someone who is considered older, has many experiences, is considered wise, and is respected by all family members. The person could be anyone. The patriarch can give advice and provide guidance regarding the business and family so that both of them will remain intact. He also provides emotional support, keeps communication open, protects family tradition and values, and makes sure that the family gets together to socialize and have fun. Most importantly, this patriarch would act as a mediator should there be any disagreement, fight, or conflict among leaders. Usually, if there are multiple leaders in an organization, there is a greater possibility that these leaders would fight for recognition. Chinese family businesses are no exception, particularly those that do not strictly adhere to Confucian values.
Consider what happened with Bukit Kiara Properties (BKP), a leading Malaysian real estate development firm. Since its inception in 2000, BKP has been led by the experienced and renowned Alan Tong Kok Mau and his son, N.K. Tong. In 1990, they turned acres of rubber estate land near the fringe of Sri Hartamas in Kuala Lumpur into one of the country’s most exclusive and premium residential addresses, now known as Mont’Kiara. This unique name of Mont’Kiara is now associated with exclusivity that is attributed to Alan and N.K. Tong. Today, with over 1,000 customers, BKP has four subsidiaries, namely Bukit Kiara Builders (BKB), Civil Contractor; Bukit Kiara Interiors (BKI), Interiors Contractor; Bukit Kiara Property Services (BKPS), Property Management; and Tunas Landscape, Landscape Contractor. BKP, BKB, BKI, and BKPS are all ISO 9001:2008 certified companies. The Al Batha Group, one of the largest conglomerates in the United Arab Emirates, entered into a 40:60 joint venture with the Bukit Kiara Group in October 2008. With the joint venture, the group is now known as Al Batha Bukit Kiara Holdings, but the BKP brand name will continue to be used.
BKP won the Malaysian Business Ethics Excellence Award three times in a row, in 2006, 2008, and 2010. The Malaysian Business Ethics Excellence Award is held every two years. It recognizes companies practicing exemplary business ethics guided by their respective Code of Ethics. In addition, BKP became the first property development company to win the Best Overall Small and Medium Business Award in December 2005. In November 2006, BKP won the Product Innovation Excellence Award from the Small and Medium Industries Association of Malaysia.
On one occasion, N.K. Tong, who currently serves as the managing director of BKP, suggested that it was his aunt who always brought the family together. “When she picks up the phone, everyone comes running,” says Tong. Her effectiveness at bringing people together was essential in the late 1990s, when Tong and his father, Alan Tong Kok Mau, sold one family business and started Bukit Kiara. “My dad asked her to find out which family members wanted to join us, and over a single weekend she raised a fair sum of money from over 20 [of them].”
Although leaders of Chinese family businesses always need a patriarch to help them make the business thrive and maintain a harmonious relationship among family members, they do not want this patriarch to boss them around. In other words, the leaders do not accept a patriarch who gives orders in an arrogant or domineering manner.