Tung Ho Steel
A Dozen Years Forging a Successor
In this exclusive interview, Tung Ho president Earle Ho and his son Henry discuss the challenges of leadership succession, and the pluses and minuses of an owner serving as CEO.
A Dozen Years Forging a SuccessorBy Yi-Shan Chen, Hsiao-Wen Wang
From CommonWealth Magazine (vol. 431 )
Taiwan's economy has been soaring for 50 years, and Tung Ho Steel Enterprise Corp., now with annual operating revenue of NT$40 billion, is entering its third generation of leadership.
Founder C.T. Hou launched the company in Jiayi, in central Taiwan, as Tung Ho Hardware, which he built into a business producing rebars and I-beams from salvaged ships. When current chairman and company president Earle J.S. Ho took over as company president 33 years ago at age 35, he began to quietly pave the way for his son to one day take over amidst a complex maze of family equity holdings, as other family members bowed out of the board of directors and company management. As Tung Ho's new facility in Sinwu, Taoyuan County was nearing completion, outsiders began to speculate that Henry C.T. Ho, the 38 year-old second son of Earle Ho who supervised the new plant's construction, would soon take over the corporate reins.
So how does one forge a successor? How are the endless squabbles of a family enterprise resolved amicably? The answers to these and other questions follow in an exclusive CommonWealth Magazine interview with father and son of the Ho steel dynasty.
CommonWealth: What have both your experiences been with corporate handovers?
Earle Ho: I was 35 when I became company president. I was a graduate in economics from National Taiwan University, and had gone overseas to study. I was then at Stanford University's graduate research center. I didn't really want to come back. But it's a family business, and the family was calling. I had four younger sisters and was the only male child, so I really had to come back.
Henry Ho: Everybody knows I have an older brother who's an artist. Ever since we were little we've had different personalities. I was more interested in the business, so it was kind of an unspoken understanding that I'd be the one to come back and do business. I had also majored in economics while at Harvard.
Earle Ho: Actually, I've been grooming him his whole life (smiles proudly).
Henry Ho: You make it sound like my whole life is already a done deal (laughing). Although he never really said I definitely had to come back, it was implicitly understood.
CommonWealth: What sort of grooming?
Earle Ho: I demanded that my kids learn their maths well, and that their concept of right and wrong and their values had to be sound. Simply put, I trained him in my way of thinking and molded his external circumstances.
Henry Ho: But I still think if a kid isn't really interested in business, it's going to be tough. I think when we were younger, they realized that my brother and I were different and pushed me in the direction of my natural interests.
CommonWealth: Why the demand for good math skills?
Earle Ho: Math is the master of people's lives, especially in business. Someday you're going to have to count money, and money goes out much easier than it comes in. My father was also exceptionally good at math, and I've found that those who are quick with numbers and mental calculation tend to show good judgment.
Henry Ho: I think what my father is trying to say is if you have a good grasp of math, sound judgment comes easier.
Taking the recent typhoon disaster as an example, if you want to move 10 people, 100 people, 1,000 people from affected mountain areas, the resources you need are different for each number. Anyone with a decent grip of math would have concluded that this was no job for local governments to handle alone after just a few quick calculations, so the central government should move in and take over the heavy lifting. This is what I mean by judgment.
CommonWealth: Which is better, handing over a family business to a family member to run or to a professional business manager?
Earle Ho: I don't think it's a question of either being good or bad. In Taiwan's corporate culture, however, I think it's better if a family member is in charge, because they view the company as home and will take care of it. The overriding concern is not merely to make money but to take care of the business.
I think a lot of folks are opposed to corporate dynasties, because some family-run corporations don't differentiate between public and private affairs, leading to abuses. I do feel, however, that 80 percent of family businesses are healthy, and when this is the case, having an equity holder run the business is the best option.
There is indeed now a certain view in society that the CEO should not be a family member. But I think if there are professionals in the family, then they are qualified to be CEO.
The key to the matter is responsible leadership, constantly keeping tabs on whether you're still qualified to lead. If not, perhaps it's time to say: I should step down.
Henry Ho: There has recently been a lot of reshuffling among American CEOs. This is perhaps a reflection of some professional managers taking too much of a short-term view while giving short shrift to long-term vision. A good owner-manager will do better in this sense. The steel business is different from industries in which the product cycle is shorter. In those types of industries, bringing on a professional manager would be better. But in the steel industry, return on investment is very slow; if you focus on short-term share prices and stock dividends, the problems the U.S. is facing could very well happen.
CommonWealth: Can a leader's vision be passed down?
Earle Ho: Passing the torch must be smooth and is a test of the vision and wisdom of the preceding generation. Future problems must be foreseen if the right person for the job is to be chosen.
CommonWealth: Have you actively tried to cultivate vision in your son?
Earle Ho: Of course. If I'm going to hand over the reins to him, then I have to train him. He must be able to organize people to get things done. He also has to have enough knowledge of the business and enough self-confidence.
Henry Ho: When I first came on with the company I worked in each of the departments, spending a year or two before switching to a new one. At the start I was involved in finance and also worked at the plant and in sales too. Because I had the chance to actually work with a variety of professional managers, I gained deeper understanding and a better sense of how to handle future personnel arrangements and also gained a lot of confidence.
CommonWealth: As the boss' son, how could you avoid being viewed differently by co-workers?
Earle Ho: The older generation should make demands, and the younger generation should fulfill them. One area in which Henry has been somewhat better than me is that ever since coming to work here he has never been late for work. This is something I drilled into him – you definitely can't be late for work. Your co-workers have to believe you are no different than they are.
Henry Ho: You might think we're boasting by claiming that owner-managers are better. But an owner-manager must stand the test of time. When I first started, my mother made a point of telling me that if I wanted to lead this company, I had to be capable. It can't just be that I'm here because no one else wanted to do the job.
On the other hand, after three generations, no other family members are involved in company operations in today's Tung Ho except for the two of us. My mother was adamant about this – we're all that's left of the inner circle of power. Other family members can't come into the company. It's all reliant on professional managers.
Earle Ho: It's just that we don't want to expand family involvement. It's actually a bit contradictory. I just finished saying I hoped there would be family blood involved, but that can also be a liability.
The key here is setting standards. Keeping a family business model in order from generation to generation, setting an appropriate course – it's definitely not easy.
CommonWealth: In the event of a cross-generational conflict, what then?
Earle Ho: That really doesn't happen very often! The family businesses that I've seen are all harmonious. Of course, if the patriarch is an authoritarian – for example, Wang Yung-ching (of Formosa Plastics) of Chang Yung-Fa (of Evergreen) – then this type of situation is more likely to arise.
Henry Ho: Those in the market will definitely say (my father) is an authoritarian. But his great quality is that he is reasonable. Sometimes, we'll make a report and my father will say "no ... absolutely not." But if I am also insistent based on what I see, I'll bring in professional managers to talk with him over and over again.
CommonWealth: Do you ever worry your son has not inherited your vision?
Earle Ho: (Responding quickly) Oh, he has! He's got it.
Henry Ho: When it's decision-making time, I'll definitely make the call. Where we're different is, perhaps because the company is larger, I'll take a little more time to listen.
Even if I'm already set on something, I hope to refrain from "What I say goes." Instead, I'll take time to hear everyone's opinions and reach a consensus. Perhaps you might call that democracy. And perhaps the outcome is the same, but a professional manager will feel that even with the sense of responsibility that comes from ownership, this is his opinion and not just what the boss says.
Translated from the Chinese by Brian Kennedy
Earle J.S. Ho
Chairman, President, Tung Ho Steel Enterprise Corp.
Son of Tung Ho founder C.T. Ho
Education: National Taiwan University, BS, Economics; University of Indiana, MS, Economics
Corporate Achievement: Shifted production to I-beams
Outside Experience: Research fellow, Stanford University Graduate Research Institute
Henry C.T. Ho
Tung Ho Executive Vice President
Second son of Earle Ho
Education: Harvard University School of Economics
Corporate Achievement: Supervised construction of Tung Ho's new Sinwu Plant
Outside Experience: McKinsey & Company Taiwan, 2 years
Chinese Version: 十二年磨出接班人