"Family businesses are an extremely modern concept"
Professor Benoît Leleux teaches and does research at the International Institute for Management Development (IMD) in Lausanne, Switzerland, where he is the Stephan Schmidheiny Professor of Entrepreneurship and Finance. In 2009 ”The Economist” once again placed the IMD on its list of the world’s top universities offering an MBA degree. Leleux is a member of the jury for the “IMD – Lombard Odier Global Family Business Award,“ which has been presented annually since 1996. In 2009 Merck was honored with this award.
Professor Benoît Leleux: If there's one thing that the business world has been looking for in recent decades, it's the reason for its own existence. The maximization of profits was no longer a source of satisfaction, and it mutated into "stakeholder management," a term that nobody knows the precise meaning of. In philosophical terms, the pursuit of profits was only a substitute for something else. That's why people are now turning to other values such as sustainability, fairness, and social responsibility.
Now that there's been a return to values, companies can more clearly see in what direction they're going. This, in turn, helps them to make decisions more efficiently. The success of a company depends to a large extent on how consistent management decisions have been — and not so much on whether they've been the "right" decisions.
...That may be, but it's my personal conviction that companies have lost a great deal in the course of their senseless search for the "best strategy" — namely, the realization that possibly any strategy is as good as any other one. What's crucial to business success is its rigorous implementation.
The greatest weakness lies in the family itself. Harmony and steadfastness are values that are sometimes more advantageous for a family than for a company. If family harmony is expressed in the circumstance that every family member wants to be equally active within the company, things can go wrong if the family members lack the expertise that is required. The company will suffer, and the family will suffer with it. It's a vicious circle for both parties. That's why it's important for the family to know its limits and stay inside them.
The family is an anchor, an island of certainty in a sea of severe conflicts and insecurities. The family is a lighthouse that can be seen from afar, and it's much easier to navigate if you have a light signal. Many managers are happy to give up higher profits if they can have a more visible direction, and that goes for many investors as well.
Enterprises in which all the family members are involved are in fact an outdated concept. I think the future belongs to family-owned companies. That becomes even clearer if we look at the concept of entrepreneurial families, of which Merck is a good example. The family has held together over many generations because the company has flourished, and the company did well because the family was in some cases able to step aside from the actual process of running the company. In this way, business success and a strong family are very closely intertwined. And it's my belief that it takes a strong family to appoint the best managers, even though these managers are in a sense only "temporary family members." This is definitely an ultramodern concept!
If the family hands over the company management to non-family members, it has to find other ways of connecting with the company. There's a great variety of ways to do that, ranging from internships and training programs to regular meetings with the employees. The family would lose a great deal if it were to distance itself from the company. The trick is to find the right balance.
Professor Benoît Leleux teaches and does research at the International Institute for Management Development (IMD) in Lausanne, Switzerland, where he is the Stephan Schmidheiny Professor of Entrepreneurship and Finance. In 2009 ”The Economist” once again placed the IMD on its list of the world’s top universities offering an MBA degree. Leleux is a member of the jury for the “IMD – Lombard Odier Global Family Business Award,“ which has been presented annually since 1996. In 2009 Merck was honored with this award.
M - The Explorer Magazine: Do family companies still play a role today in view of the global scale of current competition?
Professor Benoît Leleux: If there's one thing that the business world has been looking for in recent decades, it's the reason for its own existence. The maximization of profits was no longer a source of satisfaction, and it mutated into "stakeholder management," a term that nobody knows the precise meaning of. In philosophical terms, the pursuit of profits was only a substitute for something else. That's why people are now turning to other values such as sustainability, fairness, and social responsibility.
What does that mean for the development of a company?
Now that there's been a return to values, companies can more clearly see in what direction they're going. This, in turn, helps them to make decisions more efficiently. The success of a company depends to a large extent on how consistent management decisions have been — and not so much on whether they've been the "right" decisions.
That's a surprising view for an economist to be expressing...
...That may be, but it's my personal conviction that companies have lost a great deal in the course of their senseless search for the "best strategy" — namely, the realization that possibly any strategy is as good as any other one. What's crucial to business success is its rigorous implementation.
What's the greatest weakness of a family company?
The greatest weakness lies in the family itself. Harmony and steadfastness are values that are sometimes more advantageous for a family than for a company. If family harmony is expressed in the circumstance that every family member wants to be equally active within the company, things can go wrong if the family members lack the expertise that is required. The company will suffer, and the family will suffer with it. It's a vicious circle for both parties. That's why it's important for the family to know its limits and stay inside them.
Could you also name a definite strength of families, within the context of family-owned companies?
The family is an anchor, an island of certainty in a sea of severe conflicts and insecurities. The family is a lighthouse that can be seen from afar, and it's much easier to navigate if you have a light signal. Many managers are happy to give up higher profits if they can have a more visible direction, and that goes for many investors as well.
Are family-owned businesses an outdated concept today?
Enterprises in which all the family members are involved are in fact an outdated concept. I think the future belongs to family-owned companies. That becomes even clearer if we look at the concept of entrepreneurial families, of which Merck is a good example. The family has held together over many generations because the company has flourished, and the company did well because the family was in some cases able to step aside from the actual process of running the company. In this way, business success and a strong family are very closely intertwined. And it's my belief that it takes a strong family to appoint the best managers, even though these managers are in a sense only "temporary family members." This is definitely an ultramodern concept!
What can be done to make sure that the family holds together for reasons besides purely financial ones?
If the family hands over the company management to non-family members, it has to find other ways of connecting with the company. There's a great variety of ways to do that, ranging from internships and training programs to regular meetings with the employees. The family would lose a great deal if it were to distance itself from the company. The trick is to find the right balance.
