Midea Group: Founder to CEO Succession

Midea Group Co., Ltd. was a white goods empire built by its Chinese founder over several decades; consequently, the Midea brand led the home appliance industry in China. In August 2012, the 70-year-old founder and chairman retired as board chairman. The founder’s chosen successor was a 45-year-old professional manager and the former chairman and chief executive officer of one of Midea Group’s firms. This manager faced a grim situation as he took over the position: business performance was plummeting, Midea Group was urgently in need of a strategic transformation, senior management would likely resist taking orders from him, and, at a basic level, the organization was overstaffed and ineffective. In addition, many senior managers felt that the founder’s son would have been a better choice as successor to his father, following Chinese cultural traditions. The manager knew that changes would be necessary to help Midea Group thrive, but such changes were complicated by complex organizational structures and the countless subcultures caused by Midea Group’s former growth-oriented focus. How could the company successfully navigate this succession process?

This case is suitable for an elective course in an graduate program, or for an executive education course that addresses family business and succession planning. The main learning objectives of the case are to do the following:<br><ul><li>Understand the pros and cons of family executives versus professional executives.</li><li>Analyze the succession decisions of a founder, including the choice of the right person and how to structure family business relationships to address corporate governance issues.</li><li>Compile a list of preparatory steps that a founder should take before any succession in order to mitigate the disadvantages of handing the business over to a professional manager.</li><li>Examine and assess the position of a professional executive when facing the controlling family and the management team of a family business.</li></ul>

• Incentive, Professional Manager, China