Chen Koon-yaw (“Yao”), the fourth-generation owner of the Hop Lion Feather Works Corporation, handed the leadership role over to the next generation well before his retirement age. In 2015, then 61, Yao passed the baton to the fifth generation. This was surprising to some, as succession in Taiwan typically ensued from the demise of the incumbent and happened without planning.

Founded in 1908 and headquartered in Taiwan, Hop Lion is a supplier of processed down and feathers to well-known consumer brands specialising in beddings and winter coats, including Canada Goose, Moncler, The North Face, and many others. Yao’s experience of an abrupt takeover of the family business after the demise of his father had led to his decision of not leaving succession planning to chance, and grooming his son as the next leader well in advance.

Taiwanese family businesses were typically young (28 years on average) and rarely went beyond the third generation. The average age of a Taiwanese chief executive of a listed company was 62, making them one of the oldest in the Chinese-speaking world. Some of the first-generation entrepreneurs remained working well beyond retirement age, even into their 80s and 90s or until they died.

A survey conducted by PricewaterhouseCoopers in 2019 found that succession planning was not on the minds of about one-third of the business owners. Only 9% of firms had formally documented succession plans, compared to the global average of 15%.

As with many Chinese business families, it was unsurprising that outsiders were often eschewed while trusted family members were given priority in candidate selection. However, Yao’s idea of grooming his son as a successor was cemented only after the unsatisfactory performance of a professional CEO who was hired to run the business, and an incident of employee betrayal. The latter incident happened in 2008, the year Hop Lion celebrated its 100th anniversary. A trusted aide of 16 years had forcefully taken over the control of the factory in Anhui, China. Hop Lion’s loss amounted to more than a few million RMB worth of investments poured in over several years. Until that point, Yao had not ruled out the possibility of having either internal talent or external executives as succession candidates, but with that episode, he lost faith in both   approaches. He then turned to pin hope on his elder son Yen-chen.

“I believe the reason for succession failure lies with the person who hands over, not the person who takes over,” said Yao, who believed that leadership development should happen long before handover and wanted to ensure that succession planning was a well-thought-out process, not an overnight decision.

At 30, Yen-chen joined the core leadership team, a decision made by Yao to put his son under the radar of senior managers who observed the young leader’s problem-solving capability. Yao also started laying the foundation for the eventual takeover soon after his son joined the company. He recruited junior employees (with his son participating in the selection process) and nurtured the young team for his son to lead. He decided to bring in new blood and cultivate them to grow together with Yen-chen. This would avoid a similar situation he had faced during his early days of working in the company, where he was the target of a boycott by older executives who repeatedly sidelined his opinions.

Yao believed an effective leader would need to embrace innovation for the company to stay competitive. “Only by giving the next generation enough room to play around can they learn from the experience, and cultivate leadership and crisis management abilities,” commented Yao, who ensured that his next in line was not deprived of room for manoeuvre, much like how his own father had not raised objections to his new ideas when he first ascended into leadership.

Written by Tan Wee Liang, SMU Associate Professor of Strategic Management;  Professor Chung Hsi-Mei, I-shou University, Taiwan; and Dr Cheah Sin Mei, Assistant Director at The Centre for Management Practice (CMP) at SMU; this case study delves into the criteria used to select successors for the leadership role in a company, and evaluates the decisions made by family firms in their preferred choice of a successor in the context of a Chinese society.

To read the case in full, please visit the CMP website by clicking here.