Business Case Studies, Executive Interviews, John A Davis on Family Businesses

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Executive Interviews: Interview with John A Davis on Family Businesses
May 2007 - 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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  • How should the necessary skills be nurtured and developed amongst the next generation family members? Do you suggest a formal training (let's say by registering in a course that you teach at HBS) or do you advocate on-the-job training? Or a combination?
    The next generation needs to be challenged, encouraged and disciplined to make sure they are prepared for business leadership. This process starts with having challenging requirements to be hired by the company and only selecting family members who meet these requirements. Usually, it pays to insist on three or more years of outside employment for family members.

    Then, family members need to be given real jobs, with real standards of performance, rich performance feedback and consequences for their performance. Additional formal education, in today's business environment, also should be part of the mix.

  • Succession planning is one of the most daunting tasks of a CEO of a well-managed company. Just the way it happens in a typical listed company, there might be too many contenders for the top job in familyrun business too? How should, the head of a family-run business in such situation, manage the transition? What, according to you, should be the guiding principles for managing the transition without disturbing the business fortunes? Are there any best practices that your research highlights?
    Succession in family companies has been well studied and has produced sensible advice on how to manage the transition between generations. I can't do justice to this work in a short answer but I can give a few pointers. First, the current leader needs to lead the process of succession, making sure it happens and on time. Otherwise, others are too wary to raise the subject directly. Second, trusted outside advisors who are respected by the current leader often are pivotal in choosing the right successor, and making sure that business leadership transitions effectively. Third, ownership control (not necessarily the financial benefits of ownership) needs to be passed within five years of the management transition, and only to those in the next generation who support the business and can get along as owners.

  • What are the critical success factors for managing a family-run business? What should be the key result areas for the CEOs of such companies?
    I'm sorry but this is much too broad a question to answer.

  • What are your current research interests in family-run businesses?
    I am completing a book on the practices of successful family business dynasties and another on family business governance. I am also investigating how wealth needs to be managed to keep a family successful. There are always too many interesting questions and too little time.

  • Is there any relationship (may be a correlation) between entrepreneurship and family businesses?
    I'm sorry but I don't understand this question.

  • What's your advice to all those young and to-be-launched familyrun business aspirants?
    Understanding the mission of your family and taking care of it is as important as understanding the mission of your business and building it.

1. Family Owned Business Case Study
2. ICMR Case Collection
3. Case Study Volumes

The Interview was conducted by Dr. Nagendra V Chowdary, Consulting Editor, Effective Executive and Dean, IBSCDC, Hyderabad.

This Interview was originally published in Effective Executive, IUP, May 2007.

Copyright © May 2007, IBSCDC No part of this publication may be copied, reproduced or distributed, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or medium electronic, mechanical, photocopying, recording, or otherwise without the permission of IBSCDC.

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