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    The Interview

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    Family business

    Why a family charter can ‘minimize misunderstanding’

    2 April 2024 • by Marleen Dieleman in The Interview

    Fourth-generation family members Dato’ Yong Yoon Li, the Managing Director, and Chen Tien Yue, the Executive Director, explain how drafting a ‘family charter’ and creating opportunities for social bonding has helped Royal...

    Fourth-generation family members Dato’ Yong Yoon Li, the Managing Director, and Chen Tien Yue, the Executive Director, explain how drafting a ‘family charter’ and creating opportunities for social bonding has helped Royal Selangor navigate some of the challenges that often bedevil family firms.

    As any member of a family business will know, misunderstanding can quickly seep into relationships and spark conflict.

    This was the case for the four sons of Yong Koon, a young pewtersmith who moved in 1885 from China to what was then British Malaya during the tin mining boom. Yong Koon started off crafting pewter incense burners and other paraphernalia for the altars of Chinese tin miners before expanding into Western-style products such as cocktail shakers and hip flasks.

    Yet the four sons squabbled over how to run the business, leading to the formation of rival companies. Only one, Selangor Pewter, survived and is now run by fourth-generation cousins Yong Yoon Li and Chen Tien Yue. While Royal Selangor, as the company is now called, has continued to expand to become the world’s foremost name in quality pewter, the memory of that conflict is still front of mind.

    “We’ve gone through the pain of seeing, in the second generation, a rival pewter company set up by siblings in the business. So, we’re very conscious of the potential issues in family businesses,” explained Chen.

    In 2002, Royal Selangor drew up a ‘family charter’ — a type of rule book that lays down guidelines for family members on how to behave and interact with the business.

    “The most important thing is to minimize misunderstanding,” said Yong. “A charter or a constitution really does put things in black and white.”

    No automatic job in the company

    Unlike many family firms which want to encourage the younger generation to learn the ropes of the family business, one of the main rules in the Royal Selangor family charter is that family members must first work outside of the family firm before being brought in with the experience and expertise they have gained.

    In the case of the two cousins, Yong worked as a design engineer for Formula One before later becoming manager of sports car maker TVR in Kuala Lumpur, while Chen worked as a consultant. The two were invited to join Royal Selangor in 2005 and 2004, respectively.

    The process of defining the charter was long-winded but “worthwhile,” says Chen, covering everything from when you must retire to the use of company assets. It also stipulates that the family must go on a retreat every 18 months to strengthen their social bonds and keep the family close.

    “When we get together, we give everyone updates on what we’ve been doing, how things are going in school, and new hobbies. It’s a very social interaction. At the same time, we can give updates on how the company is progressing and what new things we’ve been doing. Everyone feels that they know what’s going on, and they have some say and they’re able to contribute some ideas,” added Chen.

    Although the fifth generation has not yet begun working at Royal Selangor, they are encouraged to learn about the history and legacy of the company by acting as tour guides at the Royal Selangor Visitor Center on weekends or during the school holidays.

    Balancing tradition and innovation

    In many ways, the history of Royal Selangor mirrors the rise of Kuala Lumpur itself, from a small mining village to a megacity. Founded in 1885 from a single shophouse, the company moved in the 1960s to a spacious modern manufacturing facility in Setapak, just outside the city, and now exports to more than 20 countries around the world with retail stores in Malaysia, Singapore, Hong Kong, the United Kingdom, and Australia.

    While Royal Selangor still relies on some traditional craftsmanship techniques, it has constantly innovated to ensure it is creating products that fit with the lifestyles of its customers.

    Democracy
    “The most important thing is to minimize misunderstanding... A charter or a constitution really does put things in black and white.”
    - Yong Yoon Li

    Yong and Chen’s great-grandfather started selling products to his compatriots coming from China before pivoting to more Western items such as drinkware, trinkets, and even toast racks as Malaysia gained independence, explained Yong.

    More recently, the firm has innovated in the way it engages with customers, from creating an e-commerce website in the 1990s to engaging with consumers today via WhatsApp and social media.

    Yong cites the luxury of being able to learn from mistakes. “We fail quite a few times, and that goes without saying, but we learn very quickly from what we do. At the end of the day, because we own the brand, we are really masters of our destiny. We don’t report to any head office around the world. So, we can always adapt very quickly, or relatively quickly, to changing marketplaces or changing tastes within different markets.”

    Legacy as opportunity

    Having a long legacy of craftsmanship is also a selling point when working with new partners and collaborators, explained Chen. The company has collaborated with the British Museum, the V&A, and The Walt Disney Company to produce chess sets, bottle chillers, candle holders, and music boxes, among many other products.

    “If you pick up a piece of Royal Selangor, the weight in your hand, how solid it feels, you think that this is going to be a product that will be around for the next generation, or two or three. And so, what they’re holding feels like it’s something permanent,” he said. “And that sense of permanence and longevity, that you’ll have it for the next generation fits very well with a brand that is itself 139 years old.”

    Watch the full interview to hear more from Yong Yoon Li and Chen Tien Yue on what they believe are the key leadership skills needed to run a family business and why the company is called Royal Selangor.

    Authors

    Marleen Dieleman

    Peter Lorange Family Business Professor

    Marleen Dieleman holds the Peter Lorange Chair in Family Business. She is an expert on the challenges faced by emerging market enterprises in their strategic trajectories. Her research focuses on the governance, strategy, internationalization, innovation, and transformation of business families in emerging markets, and also on emerging market state-owned enterprises and the interaction between these companies and their governments. At IMD, she directs the Future-Proofing your Business Family program.

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