A View From INSEAD

The Five Secrets of Family Business Success


 

Professor Randel Carlock

Co-director of The Family Enterprise Challenge

INSEAD is one of very few top business schools to acknowledge the importance of family business to the world economy. Our Wendel International Centre for Family Enterprise carries out not only pioneering research but also innovative teaching – including the unique The Family Enterprise Challenge programme. Here, co-director, Professor Randel Carlock, shares his ideas about how to overcome the many challenges of running a family business.

What is the main challenge of running a family enterprise?

In fact there are five main challenges! First, communication, especially of family values – what are they and how do we make sure everyone in the family and business understands them? Second, careers – who gets to work in the company or be on the board? Third, control – who’s in charge and who makes the decisions? Fourth, capital – how do we apportion ownership and how do we invest (or distribute) the profits? Fifth, but by no means least, connection as a family, which is tricky even in a small family but gets more complicated as the generations multiply.

How have the challenges evolved over recent decades?

In mature economies, such as Europe, North America and Japan, the challenges are surprisingly constant. But in emerging (or recently emerged) economies, such as many Asian countries, the family firms themselves are comparatively young and are experiencing the challenges – especially those associated with the succession of the next generation – for the first time. It’s what theorists call “the liability of newness”.

Are you suggesting that the issues are the same in all cultures?

To some extent, yes. Culture is a bit like climate. I wear different clothes in Singapore and Fontainebleau, but underneath I’m the same person. Obviously, a Chinese eldest son is likely to succeed his father and will be expected to show him great respect, as the culture is more “traditional”.  An American youngest daughter, on the other hand, will face very similar succession issues, even if she demonstrates her respect for the older generation in different ways.

Is succession always a major issue?

Yes, but it’s important to distinguish between succession of leadership and succession of ownership. Both are best addressed through education – whether it’s an MBA for a family member regarded as CEO material or a basic business course for a lawyer or doctor who has inherited a share of the firm. Here at INSEAD, we aim to provide education for both managers and owners through The Family Enterprise Challenge programme.

What’s so special about this programme?

It’s more than special. It’s unique. As far as I know, it’s the only family business executive programme at a top business school to insist that at least two representatives (and ideally five or six) attend. These can be family owners, family managers and/or non-family managers. The great thing is that the groups who attend learn together and from each other. Last time we ran the programme, we had a first-and-second generation business that really bonded with a fifth-generation group. The former taught the latter about entrepreneurship and the latter taught the former about generational transitions. It was incredible to watch.

Do you use your skills as a fully qualified coach and family therapist too?

Absolutely. We are coaching throughout – and on the last day we hold private family meetings for each family. The programme goes far deeper than the typical executive education experience, because it’s all about family members learning to work together and develop the same vocabulary. I think we’re able to achieve this because Christine Blondel, my co-director, and I are a close-knit team with complementary skills. She originally trained as an engineer, before specialising in advising family businesses. Plus, she’s a French woman and I’m an American man. We’ve been teaching – and evolving – the programme for 15 years now and only ever use classroom material that has been developed at INSEAD. It all adds up to the perfect combination.

What’s the best feedback you’ve received from participants?

Well, one Korean family (who had attended programmes at other schools) sent their son to do an MBA here at INSEAD. And another family from Asia is just sending its third group to the programme. It doesn’t get much better than that, does it?

To find out more about The Family Enterprise Challenge programme click here.

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