The Fangtai Way of Succession: How One Family Passed the Torch

Yesterday, at the Fangtai School inside Fangtai’s Yuyao headquarters, I attended the “Enduring Family Enterprise Succession Workshop” and, for the first time, came to understand Fangtai’s corporate culture and family succession up close. I was moved by the distinctive way it has planted traditional Chinese culture deep in the soul of the enterprise. Within Fangtai’s headquarters there is a “Hall of Sages” in the style of an old private academy, and every morning the entire staff recites classical primers such as the Three Character Classic and the Standards for Being a Good Pupil and Child—this has become a fixed daily ritual. Chairman Mao Zhongqun put forward a sixteen-character guiding principle for Fangtai’s culture: “Chinese learning to illuminate the Way, Western learning to perfect technique; blending Chinese and Western, governing technique by the Way.” This reflects his pursuit of fusing Confucian thought with modern management: leading Western technique with the Chinese “Way,” and drawing spiritual momentum for the enterprise’s growth from the union of Chinese and Western cultures.

Many enterprises today are exploring how to shape a corporate soul through traditional culture, but no small number stop at mere form. What allows Fangtai to blend Confucian culture into its bloodstream is the high alignment between family values and corporate strategy: the “benevolence,” “integrity,” and “responsibility” they uphold are at once the family’s inherited character and the enterprise’s foundation for existence. This culture has carried Fangtai down a differentiated, high-end path in market competition, and has won the recognition and cohesion of its employees. Only when corporate culture is truly internalized as the code of conduct of every member can it serve as an anchor when the external environment changes drastically.

This stirred my interest in Fangtai’s approach to succession and to shaping culture, so I did some research on the features of Fangtai’s succession and compared it with other families. Below are some of my reflections and takeaways. Perhaps as I study further, new understanding will emerge, and I will update and iterate on this then.

Succession Mechanism and Leadership Transition

Fangtai Group was co-founded in 1996 by Mao Lixiang and his son Mao Zhongqun—the fruit of the Mao family’s “second venture.” From the very outset, Mao Lixiang had planned a clear succession timetable: the famous “three-three succession strategy” of leading for three years, helping for three years, and watching for three years. Specifically:

1996–1998: Lead for three years.

Mao Lixiang set the example, “leading” his son in the venture together. In this phase he handed decision-making authority over product development to Mao Zhongqun and had him sit in on management meetings. For instance, at the company’s founding, father and son disagreed over the main product and the brand name: the father leaned toward making microwave ovens and keeping the original enterprise’s “Feixiang” brand, while the son insisted on entering the range-hood market and launching a new brand, “Fangtai.” Mao Zhongqun, through a survey of a thousand users, proved that range hoods better suited the needs of Chinese kitchens, and pointed out that the “Fangtai” brand (meaning “convenience for the missus”) was closer to the target customer. In the end the father accepted his son’s plan, the Fangtai brand was born, and it quickly made its name in the high-end kitchen-appliance market. This shows that in the “leading” phase, Mao Lixiang was willing to respect and support the new generation’s innovations, even when it meant “yielding” on decisions himself.

1999–2001: Help for three years.

As Fangtai’s business grew rapidly, large numbers of imitations appeared on the market, and low-price competition caused sales to dip for a time. The sales team once hoped to respond by cutting prices, but Mao Zhongqun insisted on “fighting only the value war, not the price war,” refusing to lower prices blindly in order to protect the brand’s high-end image. Some employees went over Mao Zhongqun’s head to appeal to Mao Lixiang, who stated clearly: “Marketing authority has been handed to the president [Mao Zhongqun]; you must listen to him.” At the same time, Mao Lixiang helped from behind the scenes: he set up an anti-counterfeiting office and, joining forces with government departments, spent three years dismantling several counterfeiting rings, protecting the Fangtai brand from harm. In this phase, the father mostly provided support and experience, lending a “helping” hand when the son ran into difficulty, while the enterprise’s decision-making leadership gradually shifted to the son. During this time Fangtai’s sales not only recovered but grew, and new products launched with strong momentum, cementing Mao Zhongqun’s authority in running the company.

2002–2004: Watch for three years.

Tempered by the first two phases, Mao Zhongqun’s leadership had won the recognition of his father and the employees alike. From 2002, Mao Lixiang largely withdrew from daily management and entered the “watching” phase, observing whether his son could stand on his own. The son proved himself equal to the responsibility: he boldly brought in management and technical talent from Fortune 500 companies, refined the human-resources and performance systems, and himself pursued an EMBA at CEIBS to raise his management level. Mao Lixiang, for his part, fully honored his pledge to “hand over boldly, hand over resolutely, hand over completely,” transferring management and decision-making authority in full during this phase and stepping back to honorary chairman of Fangtai Group. In 2004, Fangtai formally completed the handover, with Mao Zhongqun taking full command. Subsequently, in 2010, Mao Lixiang transferred his personally held 35% stake to Mao Zhongqun, making him the principal shareholder and completing the transfer of power at the equity level as well.

Through this gradual succession mechanism, Fangtai achieved venture and succession in parallel, and is hailed as a classic case of “entrepreneurial succession.” The first-generation and second-generation founders, father and son, launched a second venture hand in hand, and within just a few years transformed the enterprise from workshop-style contract manufacturing into an industry leader with its own brand and original products. In 1996 Fangtai launched its first self-developed European-style range hood and “made a splash overnight”; by 1998 its sales volume had leapt to the front ranks of its domestic peers. Thereafter Fangtai focused on high-end kitchen appliances and kept innovating, and over 21 years its brand value grew to 14.27 billion yuan. As of 2023, the company’s annual revenue reached 17.6 billion yuan, and Mao Zhongqun has set out a vision of reaching a hundred billion in revenue, leading Fangtai to expand from kitchen appliances into the smart-home domain. Fangtai Group successfully cleared the most challenging succession pass for a Chinese family enterprise—“from first generation to second”—and is regarded as one of the industry’s rare benchmark cases.

Family Governance: Roles and Decision Mechanisms

Division of labor among family members: An important feature of Fangtai’s approach to succession is “separate pockets”—that is, keeping the second generation’s ventures apart to avoid direct conflicts of interest. Mao Lixiang had one son and one daughter. He chose to co-found the new enterprise, Fangtai, with his son, letting Mao Zhongqun run the core kitchen-appliance business; his daughter Mao Xuefei, meanwhile, had already gone into business back in 1992, founding the plastic-parts factory “Lingke” to supply her father’s existing enterprise and helping her father expand the early Cixi No. 9 Radio Factory into Feixiang Group. In short, the son led the new business while the daughter supported and ran related businesses, each with a distinct focus. This arrangement cleverly gave both children room to shine while avoiding the risk of siblings fighting for power within the same company. This “eating from separate stoves” model has successful precedents among other Chinese family enterprises, such as the Liu brothers of Hope Group, who each ran different segments of the business independently of one another.

Talent and decision-making: The core of Fangtai’s family governance is to introduce modern enterprise management while retaining family control, weakening family-style nepotism. Mao Lixiang understood well that many family enterprises are undone by internal personnel disputes and power struggles, so he put forward the idea of “de-emphasizing the family system” and wrote it into Fangtai’s culture manual. Concrete measures included: senior executives at Fangtai Group may not slot in their own relatives; any family member who does not fit the company’s development needs is barred from important management posts. Mao Lixiang even offended his own kin over this: he once declined his own younger brother’s request to serve as an executive at Fangtai, and even when his elderly mother wept and rebuked him as “unfilial,” he held firm to the principle and did not give way. This famous “kneeling incident” became a landmark scene in the Mao family’s transformation, and revealed the first generation’s willingness to set aside sentiment for the sake of the long-term greater good.

In the course of succession, Fangtai gradually established a governance structure in which family members “retreated behind the scenes” and professional managers took charge. After taking over, Mao Zhongqun boldly brought in professional managers and outside experts—for example, recruiting a production director from Samsung and taking in specialists from all fields. At the same time, the roles of family members were adjusted: in 1999, with his father’s and mother’s support, Mao Zhongqun eased his mother—who already held a key post in the company—out of management. In the early days, Mao Lixiang’s wife, Zhang Zhaodi, had served as deputy general manager, overseeing production, procurement, and finance, and enjoyed considerable prestige. To keep the “husband-and-wife shop” flavor from undermining the son’s authority, Mao Lixiang and Zhang Zhaodi voluntarily agreed to withdraw from daily operations. Mindful of his mother’s contributions and feelings, Mao Zhongqun instead appointed her chair of the supervisory board as an honorary post, to show respect and ensure she would still receive the courtesy due her at the company’s major events. This move both preserved his mother’s dignity and completed a smooth transfer of management authority, and it became something of a legend.

Equity structure and governance: Fangtai Group remains a family-controlled enterprise, not listed on the secondary market. After Mao Lixiang transferred all his equity, Mao Zhongqun became the principal shareholder, securing family control of the enterprise. At the board level, Mao Lixiang stepped back to honorary chairman, not participating in the company’s daily decisions and serving only as an adviser offering strategic guidance. Through this concentration of equity and division of governance, Fangtai achieved a modern family-enterprise model of “ownership held by the family, management professionalized.” In this process Fangtai completed the transition from a traditional family system to a modern one. The family’s role is expressed more in strategic direction and the transmission of values, while day-to-day operations run according to modern enterprise systems. This governance model avoids the drawback of family members hampering the enterprise’s development, while preserving the family’s cohesion around the enterprise’s long-term future. Fangtai’s smooth handover also proves the model’s effectiveness: no internal power struggles, and a successful intergenerational transfer of both power and management experience.

How Culture and Values Shape Management and Succession

The Mao family treats cultural ideals and family spirit as the soul of enterprise succession, and this played a subtle yet crucial role throughout the handover. Mao Lixiang often said: “Is succession, in the end, about passing on wealth, or the enterprise? About passing on the mission, or the spirit?” In his view, passing on the entrepreneurial spirit should come first. Early on, when his children were young, he deliberately sowed a seed of mission in their hearts. By his own recollection, when his son and daughter were nine or ten he was already teaching them that “one day you will found the Mao Group,” cultivating a sense of family responsibility. It was precisely because of this immersion that, when the family enterprise met with crisis, his daughter and son-in-law resolutely went into business to lend support, and his son ultimately chose taking over the family enterprise over further study abroad. One can say that the values of family mission and responsibility moved the second generation to willingly and actively take up the torch, laying the ideological foundation for succession.

At the level of corporate culture, Fangtai wove traditional Chinese culture into its management philosophy, forming a distinctive “Confucian-Daoist management philosophy” and the “unity of three virtues” value system. This cultural framework was built by Mao Zhongqun after he took over, and won Mao Lixiang’s endorsement. The “unity of three virtues” refers to the unity of “personal character, enterprise character, and product,” with “personal character” (moral character) placed first. Fangtai firmly believes that only by getting a person’s character right can there be an excellent enterprise character and outstanding products. To put this core value into practice, Fangtai opened the country’s first corporate Confucius Hall, encouraging employees to study Confucian thought and cultivate moral character. In daily management—whether stressing honest operation and teamwork, or an almost exacting pursuit of product quality—this value orientation is everywhere evident. For instance, the company established the brand philosophy of “personal character, enterprise character, product—three virtues in unity, with personal character first,” and used it to guide employee conduct and corporate decisions. This cultural building strengthened the enterprise’s cohesion and sense of mission, so that during the handover, the whole staff’s recognition of the new leader rested more on their conviction in his character and ideals—reducing the turbulence a change of power might otherwise bring.

Family culture is also passed to the next generation through family precepts and vision, guiding the enterprise’s long-term direction. In the old Mao family home hangs a couplet: “Honor the ancestors, that the family enterprise stays evergreen; love the descendants, that the spirit endures forever”—Mao Lixiang’s hope for the family enterprise. Later, Mao Zhongqun added eight characters within it—“establish yourself and walk the Way” and “lead by example”—forming a new couplet: “Honor the ancestors, establish yourself and walk the Way, that the family enterprise stays evergreen; love the descendants, lead by example, that the spirit endures forever.” The story of father and son perfecting the family precept together vividly illustrates the high alignment of values and the tacit spiritual understanding between the two generations. This cultural ideal of “family-and-country feeling”—bringing glory to the family while serving society—kept father and son aligned in purpose through succession and reduced intergenerational conflict. After taking over, Mao Zhongqun put forward the corporate mission “for the happiness of hundreds of millions of families” and the vision of “becoming a great enterprise,” continuing to weave family values into the enterprise’s vision. One can say that it is precisely because of this shared sense of mission and bond of values that Fangtai’s succession is not merely a handover of power, but a continuation of spirit.

Many long-lived family enterprises endure not on wealth and systems alone, but on “the transmission of spirit”—the values and beliefs passed down generation after generation.

Comparison with Other Family Enterprises

The Mao family’s succession model at Fangtai is representative among family enterprises at home and abroad, yet not without its own distinctive features. Compared with other well-known family enterprises, it can be viewed from the following angles:

1. Entrepreneurial succession vs. direct handover:

Fangtai chose a succession approach of “father and son founding a new enterprise together,” folding the handover into the opening of a new business. Under this model, the second generation grows rapidly through the practice of venture-building, establishing authority and even surpassing the elder generation (as when Mao Zhongqun’s decisions on product positioning and brand bested his father’s). By comparison, many family enterprises take the traditional path of letting the second generation gradually take over the existing business, with the first generation often holding on to late in life before yielding power, so that the second generation lacks entrepreneurial tempering. This readily leads to a successor of insufficient ability or authority, unable to command respect after taking over. Through entrepreneurial succession, Fangtai avoided this problem, making the handover more like a new business taking flight than a simple guarding of what already exists. This is also seen in cases such as Suning’s Zhang Jindong’s son Zhang Kangyang taking over the football club at home, and Italy’s Ferragamo family opening new brands abroad. In general, however, cases like Fangtai’s—where the elder generation completely lets go and lets the younger lead a new enterprise—are not many, and the success of father and son Mao offers a valuable example for Chinese family enterprises.

2. Dispersed businesses vs. centralized co-management:

Fangtai adopted the “separate pockets” model, letting the children each mind their own domain without hampering one another. This resembles the Liu brothers of Hope Group “eating from separate stoves,” each running a different industry, cleverly defusing struggles over power and interest within the family. By contrast, some families choose to have several children jointly participate in running the same enterprise—for example, the Chen family of Liby Group has eight members of the second generation all holding key posts in the company. To prevent “brothers turning on one another,” the Chen family drew up a family constitution and set up a family council and board, so that decisions follow rules and authority and responsibility are clear. The Lee family of Lee Kum Kee, after learning from a bitter dispute over inheritance among brothers, introduced a “family governance” mechanism: a family council, a family trust fund, a family training center, and a family charter, combining Western rule-of-law culture with Chinese family tradition. Its core is “dual governance”—both corporate governance and family governance—along with systematic cultivation of successors. By comparison, because Fangtai’s family is small (just one son and one daughter) and the division is clear, it has not set up a formal family council; but its family meetings and precepts perform a similar function in major decisions (as in 1994, when Mao Lixiang convened a family meeting to “beseech” his son to return and take over). Fangtai relies more on internal enterprise systems—such as bringing in professional managers and the culture manual—to constrain family members’ conduct. This approach works well in enterprises with small families, and decision-making is more efficient; but for large families with many members (the fourth generation of Lee Kum Kee, for instance, has more than a dozen), a more formal governance structure is needed to sustain consensus.

3. Cultural transmission vs. institutional transmission:

Many century-old family enterprises have their own distinctive values and “family ethos.” What stands out at Fangtai is a family culture rooted in Confucian thought, influencing succession in subtle, imperceptible ways. In this it resembles some Asian family enterprises—for example, Samsung’s Lee family, which reveres the Confucian ideas of loyalty and order and stresses primogeniture; but Samsung’s succession relies more on equity maneuvers and the support of the chaebol system, and has been accompanied by legal and public questioning along the way (such as the succession turbulence in Lee Kun-hee’s era). Fangtai, by contrast, excels through “rule by virtue,” with family members leading by example and winning hearts within the enterprise—an important reason for its smooth succession. By comparison, some Western family enterprises rely more on systems and contracts to safeguard succession. Walmart’s Walton family, for instance, controls the company through family trusts and the board; although professional managers run the show, the family exercises strategic control through equity and board influence. Ford Motor, too, was steered by several generations of the family, yet also once hired a professional CEO, and secured the Ford family’s veto power through a dual-class share structure, consolidating family influence through institutional arrangements. Lee Kum Kee is the model among Chinese families of combining family culture with modern systems: it stresses the family spirit of “forever entrepreneurial” while relying on institutions like the family charter for lasting stability. Fangtai is currently at the second-generation handover stage, its family is small, and its advantage in cultural transmission is clear; looking ahead, if the Mao family gradually grows, it too may consider introducing a more systematic family-governance mechanism to complement its deep cultural ideals.

4. The founder’s attitude toward letting go:

The success or failure of a family enterprise’s succession hinges on the first generation’s attitude. Mao Lixiang set an example here—he planned ahead, was willing to let go, and willing to retreat behind the scenes. This magnanimity of “succession done right” made Fangtai’s transfer of power extremely smooth. In contrast, at some enterprises the founder, unwilling to let go, missed the window for succession. For instance, certain Chinese entrepreneurs, well past seventy, still cling to their posts, leaving the second generation long without tempering; or, uneasy about their children’s ability, they meddle in every detail while in office, thereby weakening the successor’s authority. There are also cases of “the child unwilling to take over,” as with the Taiwanese entrepreneur Wang Yung-ching, who in his later years was troubled by disputes among his children, and whose enterprise fell into disorder for a time. Mao Lixiang, on the other hand, “beseeched” his son to take over very early, and agreed one by one to the demanding conditions his son laid down (abandoning the existing business, restructuring the team, relocating to a new factory), showing a high openness to and support for the new generation’s thinking. Such magnanimity is not common among China’s first-generation entrepreneurs. One survey notes that worldwide, the success rate of family enterprises passing from the first generation to the second is only about 30%, and China’s several million private enterprises are now facing a “grand test of succession.” Mao Lixiang’s enlightenment and foresight are, without doubt, key to Fangtai breaking the curse of “wealth not surviving the second generation.” Only when the first generation truly lets go can the second dare to venture boldly, and the enterprise have a chance at lasting endurance.

5. Long-term vision and social responsibility:

Some of the world’s long-lived family enterprises often transcend the commercial plane, fusing family mission with social responsibility, and so endure through the generations without decline. The Mao family at Fangtai has a similar breadth: they link the flourishing of the family enterprise with the family’s accumulation of virtue and good deeds, and have set out the vision of becoming “a respected, thousand-year eminent family.” This gives family members a longer view and greater sense of responsibility in running the enterprise, keeping them from sacrificing a century-long foundation for short-term gain. A similar example is the Jiang Xipei family of Far East Group, whose family precept stresses “cultivate the self, order the family, serve the country,” and who are dedicated to public welfare, actively shouldering social responsibility during major events such as the pandemic. Abroad, the Rothschild family has for more than two hundred years upheld both “family honor and responsibility,” engaging in commerce as well as philanthropy and public affairs, so that the family’s influence extends beyond the enterprise itself. Walmart’s Walton family also gives back to society through its foundation and extensive charitable giving. By comparison, families that see succession merely as the continuation of wealth and power more readily decline amid intergenerational change, through internal friction or damage to their public image. Fangtai’s experience shows that elevating family values into corporate culture and a sense of social responsibility not only helps internal unity, but also wins the enterprise a good reputation and external support, thereby standing it in invincible position through succession.

The Fangtai family’s way of succession is embodied in a few points: “plan early, dare to let go, value culture, govern well.” It draws on the successful experience of family enterprises at home and abroad (such as dispersing the children’s businesses to avoid infighting, and valuing the transmission of spirit), while feeling out a distinctive model suited to its own situation (entrepreneurial succession, de-emphasizing nepotism, and so on). Compared with other family enterprises, the Fangtai case highlights an innovative practice of Chinese family enterprises in succession for a new era: amid the great tide of market competition and shifting ideas, it kept the roots of the family bloodline while infusing the soul of modern management. It is precisely this succession wisdom, combining tradition and modernity, that has helped Fangtai reach its goal of lasting endurance—and that offers a useful reference for many more family enterprises.