The Power of Si Li Ji Ren: The Succession Code of the Lee Kum Kee Family

Mencius said: “The influence of a noble man is exhausted in five generations.” Later generations extended the thought: “A family that passes down virtue may last more than ten generations; one that passes down diligence and learning, somewhat less; one that passes down poetry and books, less still; and one that passes down wealth and rank rarely lasts beyond three generations.” The common saying that “wealth does not last three generations” springs from this very source.

Of the world’s enterprises more than two hundred years old, Germany has 837, the Netherlands 222, France 196, and Japan 3,146 (with seven Japanese firms more than a thousand years old), while China has only five surviving establishments older than a hundred and fifty years. The odds of becoming a century-old establishment are just forty-five in a million.

According to McKinsey’s figures, the average lifespan of a family business worldwide is only twenty-four years, and only 30 percent survive to the third generation.

A family and a family business that endure beyond a century are therefore exceedingly precious—worth looking past the surface to study the essential code of their succession.

As a 136-year-old family enterprise, Lee Kum Kee is a rare thing among Chinese family businesses. Many articles have introduced and studied the Lee Kum Kee family, and in particular its family charter and family meetings, whose distinctive clauses and modes of convening are often talked about with relish—and, through the method of hindsight attribution, tied to the family’s successful path of succession.

I would like to take a different perspective, and try, through my own understanding, to offer a modest analysis of the Lee Kum Kee family’s succession code.

In the diagram above, the foundational stone at the very bottom is what I take to be the essence of the Lee Kum Kee family’s succession—namely, the transmission of the spirit of Si Li Ji Ren, thinking of others’ interests, which has also become the family’s “mission.” The breakthrough that allows this mission to be passed on is captured in the phrase “when the family is in harmony, all things prosper.” At the same time, “the spirit of perpetual entrepreneurship” and “a structure blending East and West” are the key forces and the driving power that carry this “family vessel” far out to sea.

Before turning to the analysis, I attach a family tree of the Lee Kum Kee family, so that readers may understand the relationships among the various figures mentioned below.

Si Li Ji Ren

Lee Wai-sum (Sammy Lee), a core member of the fourth generation and chairman of Lee Kum Kee’s health-products business, recalls:

When I was young, my father often took my elder brother and me to attend other people’s funerals. We would stand quietly to one side, watching the living remember the dead and listening to their eulogies. As the mourning music rose, the deceased’s whole life would play out like a film. Some people would weep silently; some, after the funeral ended, would linger long, unwilling to leave. And some, though famous and buried with great pomp, had scarcely anyone who truly missed them.

My father told me that although some people are gone, the deeds of their lives remain in people’s hearts. More importantly, through attending funerals, I came to think more deeply about the meaning of life.

In a single lifetime, a person should be responsible for what he does. Whether one can accomplish things—do them well, do them on a large scale, and make them last; build a real enterprise and make a contribution to society—that is the ultimate aim of a human life.

The Lee family has lived its life by the ideal of Si Li Ji Ren. These four characters come from the Tang-dynasty calligrapher Yan Zhenqing’s Dispute over Seating Precedence, in the line: “One cultivates oneself not for a name that outlasts the age; one acts only with thought for the benefit of others.” Lee Man Tat—the pivotal figure who bridged the generations and laid the foundation for Lee Kum Kee’s rapid growth, a core member of the third generation—took the last four characters, wrote them out, and hung them in his office. Of this he once wrote: “‘One cultivates oneself not for a name that outlasts the age’—this was a maxim for the world contained in a piece of calligraphy the elder Mr. Liu Taixi once gave me, and throughout my life it has played the part of an alarm clock. Property, fame, even life itself are but passing travelers in the long river of a lifetime, a single drop in the ocean—who, in the end, commands its currents? As the stars wheel and the world’s affairs turn over, only deeds that benefit society can be remembered and recited; only the spirit can withstand the washing of the years and the erosion of a changing age, letting the meaning of a life endure.”

If we trace this family spirit further back to its point of origin, we come upon a story:

In the late nineteenth century, Lee Man Tat’s grandfather and his mother fled by small boat to what is today Nanshui, Zhuhai, and opened a tea shed where fishermen setting out to sea could eat, drink, and chat. Many came to eat; some ate on credit, to repay after they returned from fishing and sold their catch.

Every year many did not come back to settle their debts—a fact bound up with the circumstances of the time, for the fishermen led hard lives, and it was no easy thing to trade fish for money to keep a whole family fed. The tea shed was small and the business modest, yet every year at New Year the grandfather would burn that year’s book of unpaid debts.

Lee Man Tat’s father often told this story, passing on the grandfather’s own words: never let the book of debts become a burden on the next generation. The story left a deep impression on Lee Man Tat and inspired him greatly. It planted, in his very bones, the idea of Si Li Ji Ren.

By the fourth generation, Sammy Lee expanded Si Li Ji Ren into three key points and nine principles. The three key points are:

(1) Empathy—putting oneself in the other’s place: in doing anything, one must think from the other side’s position. A superior should think from the standpoint of a subordinate; in business, one must think of satisfying the guest, the customer. For instance, one family member holding a senior executive post traveled often; whenever he was about to return home, he would put himself in his family’s place, asking what the family who had waited a week for him would want him to do.

(2) Attending to the other’s feelings: whatever one does or says will affect the other person’s feelings. Many company bosses, phoning a director, open at once with “Where are you?” or “What are you doing right now?” But members of the Lee Kum Kee family tend to ask first, “Am I disturbing you right now?” or “Do you have time at the moment?” Though this is only a simple courtesy, different ways of speaking affect how others feel.

(3) Helicopter thinking: to consider a problem as if from a helicopter—rising above the limits of the individual and the immediate, standing high enough to see far, thinking, for example, from the standpoint of the whole nation, the whole people, the whole society.

The nine principles are: mission, leverage, innovation, self-discipline, dedication, integrity, learning, balance, and system. These nine principles have gradually become the values of the Lee Kum Kee family as well.

Si Li Ji Ren is the core culture of the Lee Kum Kee family, and as we trace it we find behind it a thread that appears and disappears, running through 136 years and continuing across five generations. This thread grows ever clearer—and it has become the family’s mission.

What, in the end, is a mission? Sammy Lee says: a mission is the responsibility to see a certain thing through, no matter what. A good mission is one that makes benefiting society one’s own proper business and takes this as the fundamental pursuit of one’s life. A true mission should be just such a good mission. The significance of a mission is that it helps us find our coordinates in life and know our position clearly: where we are, why we live, and how we mean to make something of a lifetime. Only with a clear mission does one hold firm convictions, and only then does one have an endless supply of drive. And when each person has an endless supply of drive, only then can the family have an endless supply of drive.

When the Family Is in Harmony, All Things Prosper

Why is “when the family is in harmony, all things prosper” the breakthrough for the Lee Kum Kee family? Because the Lee Kum Kee family went through two crises over dividing the family, each of which nearly brought catastrophe upon the family enterprise.

The First Crisis of Division

The first division came in the 1970s, when Lee Man Tat’s eldest uncle, Lee Siu-wing, and his second uncle, Lee Siu-tang, began entertaining thoughts of emigrating. But his father, Lee Siu-nam, believed the family’s inherited enterprise must not be forsaken.

At the same time, Lee Man Tat’s proposal that Lee Kum Kee launch an inexpensive, mass-market product clashed sharply with the two uncles’ philosophy of making only high-end goods, and the uncles proposed to buy out the shares held by their brother Lee Siu-nam.

For Lee Siu-nam to acquire his two elder brothers’ shares would have required 4.6 million yuan, which Lee Siu-nam and his son could not raise. After a six-month standoff, the uncles—eager to cash out and leave quickly—agreed to let Lee Man Tat buy all the shares in installments, which allowed the family enterprise to be preserved intact.

After this family dispute, Lee Siu-nam was nearly ruined; the company’s output fell and its performance languished, and Lee Kum Kee for a time carried negative net worth.

Lee Kum Kee was reset to zero once more, but Lee Man Tat finally retired the great black cauldron used to boil down oyster sauce, adopting substitute raw materials and industrialized production, and launched an affordable Panda Brand oyster sauce in the United States. This product broke through quickly in the American market and then caught fire back in Hong Kong.

The Second Crisis of Division

After the first crisis of division, the running of Lee Kum Kee gradually passed to Lee Man Tat and his younger brother Lee Man Lok; the younger brother became Lee Man Tat’s able assistant and acquired a large share of the company’s equity.

In 1987, the company began advancing into the mainland market. And at this crucial moment—the final push—the younger brother proposed to divide the family.

Because he was stricken with cancer, the younger brother no longer wished to labor over a mainland market whose prospects were uncertain. He also worried that his wife and children would be shortchanged by the domineering Lee Man Tat, and so he issued a blunt threat: “If you won’t agree to divide, I’ll sell my shares to an outsider.”

Lee Man Tat felt as if struck by lightning; his money had all gone into building factories. To buy, he had no cash; not to buy, and an outsider would come in and the company would be transformed. In the end, the two brothers went to court, and the lawsuit dragged on for six years. Lee Kum Kee, with annual revenue exceeding US$100 million (about 500 million yuan), was even ordered by the court to halt production for half a year.

At the time, Lee Kum Kee stood at a critical juncture: on one hand, it had bought up large tracts of land and was still building factories; on the other, though the American market had been opened through a “sell-on-credit, consignment” approach, large sums of capital had not been recovered in time. The brother’s demand caught Lee Man Tat off guard.

In the end, in 1986, Lee Man Tat raised the enormous sum of 80 million and bought out his brother’s shares.

This time Lee Man Tat’s net worth was driven straight into the negative, and Lee Kum Kee once again fell into the hard straits of negative net worth.

When the Family Is in Harmony, All Things Prosper

On a 2007 episode of the program Dialogue, when the guests present were asked what they considered the core idea behind an enterprise’s success, Qian Wenzhong said “reverence,” Jin Xiangrong said “rules,” and Mao Lixiang said “the unity of three—product quality, corporate character, and personal character.” Though these views differed, all of them broadly concerned the enterprise. Mr. Lee Man Tat, present on the set, solemnly wrote on the small blackboard: When the family is in harmony, all things prosper.

For Lee Kum Kee, ensuring family harmony is even more “vital” than running the business well. In Lee Man Tat’s eyes, “the company is only a part of the family; we care more about how the family continues, and the interests of the family come first. Without harmony within the family, there can be no talk of the family business enduring.”

After the second crisis of division had passed, Lee Man Tat entrusted his second son, Lee Wai-hung, with finding a solution to the family’s problems. Lee Wai-hung spent six years traveling in turn to Switzerland, Britain, the United States, and Japan to learn from them, studying why family enterprises abroad endure across the generations. In 2003, Lee Kum Kee established the family’s highest decision-making and governing body—the Family Learning and Development Committee, or Family Council for short.

Only now can we clearly understand why the Lee Kum Kee family charter contains an ironclad rule: do not marry late, no divorce, and no extramarital affairs; anyone who divorces or has an affair must automatically withdraw from the board; and anyone who leaves the board or the company for personal reasons may sell their shares to the company but still does not leave the family, remaining a member of the Family Council and attending its meetings.

This is because of the searing pain the Lee Kum Kee family had lived through, and also because Lee Man Tat had seen many friends whose families fell into discord and decline, whose businesses failed—not for want of ability or enterprise, but because of disorder in the structure of the family.

In the fourth generation of Lee Kum Kee’s history—Lee Man Tat’s five children—each has a happy family. This family rule ensures that while they strive to create the value of their lives, they also enjoy the happiness of family life.

The Spirit of Perpetual Entrepreneurship

Lee Kum Kee’s origins go back to 1888, in the reign of the Guangxu Emperor, when Lee Kum Sheung was selling dried oysters at a tea shed he had opened in a small fishing village in Zhuhai, Guangdong. By chance, while boiling oysters, he forgot to turn off the fire, and the oyster liquid in the pot turned into a black, paste-like fluid. Reluctant to waste it, Lee Kum Sheung tasted a mouthful and was surprised to find it delicious—and this was the first birth of oyster sauce. He founded the Lee Kum Kee Oyster Sauce establishment in Nanshui, Zhuhai, thus beginning Lee Kum Kee’s century-long legend and the family’s journey of entrepreneurship.

First Stage of Entrepreneurship: Regional Expansion

In 1902, the Lee Kum Kee Oyster Sauce establishment and Nanshui Street where it stood were destroyed in a great fire. Facing this heavy blow, Lee Kum Sheung resolved to lead his family south to Macau, to begin the oyster-sauce business anew and seek fresh opportunities for growth.

The Second Generation Takes Over and Innovates

By 1920, Lee Kum Kee passed to the second generation. Lee Siu-wing took no interest in running the business, while Lee Siu-nam and Lee Siu-tang took charge of raw-material procurement, production, and marketing respectively. The two worked hard to broaden sales channels and to improve the recipe and packaging, giving Lee Kum Kee a firm footing in the high-end market.

Expansion to Hong Kong

In 1932, as Hong Kong’s economy rose, Lee Siu-nam decided to move the oyster-sauce establishment’s headquarters to Hong Kong, opening greater room for the brand’s growth. Four years later, using Hong Kong as a springboard, Lee Kum Kee successfully entered the North American Chinese market.

Global Market Expansion

By the 1950s, Lee Kum Kee’s oyster sauce was thriving in both production and sales and had gradually entered the North American, Central American, and Southeast Asian markets, marking its emergence as an international brand.

Second Stage of Entrepreneurship: Expanding the Product Line

Overseas Expansion and the Challenge of Productivity

After thirty years of effort, Lee Kum Kee had built a certain reputation in overseas markets. Yet by 1960, though the brand was well known, the company’s productivity had failed to keep pace, and it remained a small workshop of only twenty people.

The New Thinking of the Third Generation

In the 1970s, members of Lee Kum Kee’s third generation gradually took part in the family business. During this period, the descendants of Lee Siu-wing and Lee Siu-tang were fairly content with the status quo, but Lee Siu-nam’s son, Lee Man Tat, cherished a far grander entrepreneurial dream.

Lee Man Tat’s Innovative Proposal

Lee Man Tat argued that for Lee Kum Kee to keep growing and expanding, it had to launch an affordable, mass-market product. This idea sparked fierce controversy within the family.

Conflict Within the Family

Lee Man Tat’s view differed entirely from that of other family members and drew strong opposition from some of his uncles. These uncles believed Lee Kum Kee should continue to hold to the high-end, high-quality path it had followed for more than eighty years, and they saw Lee Man Tat’s proposal as a threat to the brand’s value. One uncle even proposed buying out Lee Siu-nam’s shares to block Lee Man Tat’s plan.

The Decisive Move

In 1972, unwilling to give up his entrepreneurial dream, Lee Man Tat finally persuaded his father Lee Siu-nam to buy back the opposing uncles’ shares for HK$4.6 million.

The Risk and Success of a New Strategy

Although this family dispute nearly exhausted Lee Siu-nam’s finances, causing the company’s output to fall and its performance to languish in the short term—even leaving it, for a time, with negative net worth—Lee Man Tat persisted in innovation. He retired the traditional craft of boiling down oyster sauce, adopted substitute raw materials and industrialized production methods, and launched the more affordable “Panda Brand” oyster sauce in the American market. This strategic shift proved an enormous success: it not only broke through quickly in the United States but returned to Hong Kong and set that market ablaze.

Third Stage of Entrepreneurship: Business Expansion and Management Innovation

Lee Man Tat’s Innovative Spirit and a New Journey

Lee Man Tat inherited the innovative spirit and entrepreneurial courage of his grandfather Lee Kum Sheung, and was never content with the status quo. Having established success in overseas markets, he turned his gaze to the rapidly rising market of the Chinese mainland.

Decisions and Investment in the Mainland Market

To launch a new entrepreneurial journey in the mainland market, Lee Man Tat resolved to start from scratch and invest on a large scale. He planned to build several ten-thousand-ton-class production bases, a mark of his firm confidence in the mainland market and his determination to give it everything.

Cross-Sector Joint Ventures and New Business Expansion

In 1992, Lee Man Tat signed a joint-venture agreement with Professor Zhao Yunhong, then president of the First Military Medical University, jointly establishing Guangdong Nanfang Lee Kum Kee Health Products Co., Ltd., later renamed Infinitus (China) Co., Ltd. This marked Lee Kum Kee’s formal entry into the Chinese-medicinal-herb industry. This line of business still contributes roughly 20 billion yuan in annual revenue to the company today, a sign of its successful expansion into a new field.

A Full Upgrade of the Sauce Business

In the sauce business, Lee Kum Kee maintained strong momentum. The company built a new plant with 500,000 tons of capacity in Xinhui, Guangzhou, and expanded its product line from oyster sauce to shrimp paste, soy sauce, chili sauce, convenience sauces, XO sauce, and many other categories. Lee Kum Kee became a “sauce kingdom” of more than 220 condiments, reflecting the company’s ceaseless effort and innovation in product diversification and market expansion.

In the Lee Kum Kee family’s dictionary, the words “guarding the estate” cannot be found; what it advocates is “perpetual entrepreneurship.”

Why perpetual entrepreneurship? Sammy Lee puts it this way:

Because of change, there is nothing in this world that can be “guarded.” Whatever stage you are at today, only by actively adapting to change and continually striving forward can you achieve sustainable development amid change.

The development of an enterprise is like the life of a person: from its founding, it passes through the stages of starting up, growing, guarding what has been built, and gradually declining.

Relatively speaking, starting a venture the first time is easy, because people give it their all in the drive to succeed. But once the venture has succeeded, once you are free of worry over food and clothing and your career is going smoothly—can you still hold on to the passion and drive of those early days?

To keep the passion of “perpetual entrepreneurship” is to remain, amid fierce competition and complex, tangled change, forever conscious of moving forward, developing on one’s own initiative. Otherwise, even the greatest enterprise will, without realizing it, fall asleep—until it vanishes from the market.

To achieve perpetual entrepreneurship requires firm conviction and tenacious will, and conviction and will come from the starting point of one’s actions—the pursuit of a mission, the making of a life. Life is precious and hard to come by; to make something of a lifetime is to let one’s life ceaselessly create value for others and for society, making the human journey more brilliant. With such a conviction, one keeps the passion of entrepreneurship forever fresh and keeps creating the value of life.

From this vantage we can look again at the clauses in the Lee Kum Kee family charter concerning the cultivation of successors and understand why they are set up as they are: to better select and cultivate successors who possess the entrepreneurial spirit.

The next generation has the right to choose whether or not to take over the family business, but a descendant who wishes to enter the family enterprise must meet three conditions:

① They must at least graduate from university, and afterward work at an outside company for three to five years;

② The application procedure and the assessment after joining must be the same as for non-family members, and they must start from the ground floor;

③ If they prove unable to do the job, they may be given one chance; if there is still no improvement, they will likewise be dismissed—but if a member of the next generation has achieved something outside, Lee Kum Kee may recall them when the need arises.

A Structure Blending East and West

Lee Man Tat said: What is it that has carried Lee Kum Kee through more than a hundred years and will continue to carry it, healthy, into the future? My own sense is that it is culture—the splendid culture of the Chinese people.

Projected onto Lee Kum Kee, this culture can be summed up as the culture of Si Li Ji Ren. A century of Lee Kum Kee has passed through countless storms and setbacks. At every crossroads where a choice had to be made, it was Si Li Ji Ren that gave us guidance. I have come to understand that Si Li Ji Ren is a compass for according with human nature, according with the times, achieving success, and benefiting society. Si Li Ji Ren has deeply shaped Lee Kum Kee’s development; the culture of Si Li Ji Ren forged Lee Kum Kee.

But what allowed the Lee Kum Kee family to become more united and to address the question of succession more systematically also stemmed from Lee Man Tat’s entrusting his second son, Lee Wai-hung, to spend six years traveling in turn to Switzerland, Britain, the United States, and Japan to learn from them and study why family enterprises abroad endure across the generations. Afterward, Lee Kum Kee sought to blend traditional Chinese culture with the Western culture of the rule of law, and created a platform for communication and consultation—the Family Learning and Development Committee (the Family Council for short), which is also the family’s highest decision-making body.

The core idea of the Lee Kum Kee Family Council is to keep the family and the enterprise appropriately separate. Its central function is to study how to govern the family—resolving family conflicts, building family systems, cultivating the next generation, and the like—all of which fall within the committee’s remit. The operation and management of the enterprise, however, are not the concern of the Family Council.

It is, I think, precisely this structure blending East and West that is the key factor allowing the Lee Kum Kee family to walk its path of succession with ever greater steadiness.

Conclusion

From studying the Lee Kum Kee case, I have arrived at a few reflections:

1. What is a family? A family is a gathering of family stories, one after another.

2. Some family stories string together into the family’s vision, some into its mission, some into its values. A family’s vision, mission, and values are not something to be argued out in a few meetings—do it that way, and they merely become a document shelved and forgotten before long.

3. A family is a piece of brocade: what outsiders see is the splendid landscape on the front, but what truly makes it is the stitch upon stitch on the back.

4. Amid these dense and countless stitches, to find the one stitch, the one thread, at the very source—that is the code that unlocks the right answer.