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Executive Interviews: Interview with John A Davis on Family Businesses
May 2007
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By Dr. Nagendra V Chowdary
John A Davis Senior Lecturer of Business Administration at Harvard Business School, the Faculty chair for Harvard Business School`s Executive Education Program 
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What, in a family-run business system,
are women's issues and how
should they be addressed?
You are asking an important question
but one that requires a dissertation to
respond adequately. Suffice it to say
that women play key roles in the family,
business and ownership group but
often are not treated in ways that fully
respect their influence and capabilities.
I encourage families in business
and family business leaders to recognize
the importance of women for
their business and family and to eliminate
gender bias. This is sometimes a
long-term adjustment but certainly
worth the effort.
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In a family-run business, how to
foster change management? Are there any best practices that you would recommend?
Family business systems are typically
strongly influenced by the
norms of the families that own them
and most families prefer to change
slowly to minimize conflict and try
to preserve the status and dignity of
family members who are affected by
the change. The fear in the family is
that the change may hurt particular
family members, damage family relationships
and destabilize the family
business system. A slow-change approach
is not always possible in
business, but when change can be
managed to accomplish the desired
improvements and cushion disruptions
in family members' status and
dignity, it is preferable. The challenge
is to change deliberately while
respecting those affected by the
change. These are the principles.
The art of managing change is part
organization design and part diplomacy,
which is what I have learned
in thirty years of doing this work. -
Is it correct to assume that, in a family-
run business, the growth is curtailed
by the fear of dilution (rather,
obsession) of control?
Sometimes this is the case. Families
are rather obsessed with ownership
control and generally fear opening
up ownership to outside investors.
When the family business needs to
grow to survive and the family cannot
generate the necessary capital
for the business, an insistence on
having 100% family ownership can
get in the way of growth and the survival
of the firm. In these situations
the family should recognize this reality
and consider having outside
investors or selling the business. -
What, according to you, must be
the strongest incentive to manage a
family-run business?
Pride in the business and a desire to
see it succeed. For a listed company (and therefore
diversified shareholdings' companies)
the yardsticks for performance measurement
might be EPS, P/E multiples,
profit margins, market shares etc.
However, in a family-run business,
what would be the equivalents of
these?
A publicly traded family business
would generally use the same performance
measures as other public companies.
Private companies often use
some different financial measures.
But family companies public or private
are also interested in other standards
of performance such as the
quality of their work, the value they
offer customers, the ethics of their
business, and the security of family
ownership control. These performance
indices should also be measured,
creating a balanced score card
for the family business. How difficult it is (and therefore
how) to manage family work relationships
and shareholder relationships
in a family-run business?
Family work and shareholder relationships
are complicated by family
emotions but also strengthened by
family loyalties. On balance, I would
say they are more difficult than nonfamily
work and shareholder relationships
because of their emotional
nature and because family members
have more at stake in their relationships
and must live with the consequences
of problems in these relationships.
They can't just walk away
or easily dissolve them. The good
news is that there are practical ways
to manage family relationships to
keep them strong.
1.
Family Owned Business Case Study
2. ICMR
Case Collection
3.
Case Study Volumes
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