News Highlights
Author:
Maha Al-Azar,
Media Relations Officer,
Office of Information and Public Relations,
ma110@aub.edu.lb
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INSEAD professor: There's no business like family business
 | INSEAD Professor Lecturing
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Family business is like white water rafting. It includes rough patches, but everyone on board the boat can enjoy the pleasure and excitement of the ride. They are all also responsible for rowing the boat to safety.
Dr Philippe Haspeslagh, a business policy professor at INSEAD university in France, made this analogy during a lecture held in an almost-full Bathish Auditorium, in West Hall on December 5. The lecture was the first in the Olayan Business School's Salim Kheireddine Al Mawarid Bank lecture series.
Professor Haspeslagh, who has several awards under his belt, a long list of published articles and accomplishments, graduated from Harvard University where he was also a visiting professor for one year. He has also acted as consultant to a number of listed and unlisted companies and served as director of the ABN AMRO Research Initiative on Managing for Value. Dr Haspeslagh is also the Paul Desmarais Chaired Professor of Partnership and Active Ownership at INSEAD.
Business School Dean George Najjar introduced Professor Haspeslagh as 'a scholar and a gentleman who has done AUB a great honor in joining us today." He also paid tribute to Professor Haspeslagh's wife, Martine, who is also active in academia, as program director and executive coach at INSEAD's Global Leadership Center.
Professor Haspeslagh is also an expert corporate governance and family business, even though he insists that he "is not a family business academic."
Certainly he is a family business advocate, since he is a member of a business family. But Professor Haspeslagh set out to convince his audience of the benefits of family businesses, by citing researchers who were critics of the family business model.
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He referred to research results of two hardcore US finance academics, Anderson and Reeb, who set out to prove the superiority of the governance system of widely-owned firms over companies with controlling shareholders in the US.
"They ended up with exactly the opposite result," he said.
With such research results to back business families who have often shied away from the limelight, Haspeslagh said: "This should encourage us to stiffen our back and shed our modesty."
He added that although business schools, especially American ones, tend to "herald the greatness of large public multinationals, and to see family firms as somewhat old-fashioned, paternalistic, rather unstable," recently there has been a marked shift. "Many so-called great public firms have seen swift and surprising declines, often in the pursuit of unsustainable shareholder value growth ambitions," he said. "Contrary to accepted wisdom, large family firms may on average be outperforming so-called widely-held firms."
So why do family firms outperform others?
According to his strategy research, Haspeslagh believes that four factors determine the sustainability of performance of large companies: making profit, developing strategy, establishing internal and external partnerships, and ensuring renewal through entrepreneurship.
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Hasepslagh went down the list of four criteria that are required for ensuring sustainability of firms, arguing that family firms have them all covered.
"Profit consciousness, and even more so cost consciousness is simply pervasive in the culture of family firms," he said. "Family firms are [also] natural for focused strategy and execution as well."
"You are also less likely to see reckless gambles which may serve the career interests and ego of an individual but risk wrecking the firm," he said. "Not because some family business heads lack ego. It is however always tempered by a sense of responsibility for that which they have been entrusted with."
Moreover, because of lower turnover of family firms managers compared with public firms, strategies are more likely to see fruition, he argued. Similarly, internal and external partnerships are more likely to benefit from the long tenure of managers, which encourages the growth of trust.
"Conventional wisdom sees family firms as conservative and rigid. In my experience they are great at adaptation," he said.
Haspeslagh insisted that in order for family firms to really succeed through the generations, they should follow an active and responsible ownership model which requires that each family member actively decide that he or she wants to be involved in the family business. And if they choose to opt out, they would not be considered a lesser family member.
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