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MBAs and business successions

#MBA #Business #successions

I believe that those who enter MBA programs can be largely classified into four major groups based on motivation: 1) those who want to be valued highly within their companies; 2) those who want to be valued highly outside of their companies (i.e. who want to transfer to a new position); 3) those who want to be valued highly by society (i.e. who want to start their own company); and 4) those who want to be valued highly by their families (i.e. who are taking over the family business). Today, I’d like to talk a bit about the often-overlooked fourth group, which consists of those taking over family businesses.

Some in this group might feel, if it is possible that they might eventually become the president of a given company, that they maybe should train somewhere outside the firm someday, and leave their preparations at that. Those who adhere to such a lackadaisical approach to business succession, however, will not fare well in the modern business environment. Family successions are not akin to the traditional transitions of power that occur in Japan during the end-of-year personnel reshuffling. It is a frequently-cited fact that small-to-medium sized enterprises (hereafter, SMEs) represent 99.7% of businesses in Japan and approximately 70% of its workforce. The extremely thorny issue of children inheriting businesses from their parents, or the parents passing them on to their children, remains an under-observed management challenge.

So, we come to business schools. When you undertake an extended term of study at a business school, you will come face-to-face with the superiors and subordinates affected by the business successions that inevitably take place every 30 years—an experience that can provide you with a number of important guideposts for future action.

However, the question arises: “What about the major firms and listed companies that make up the remaining 30%?”. There are more listed companies than one would imagine that are operating under the “owner company” model (where the company founder owns more than a certain percentage of stock). Plus, owner companies tend to receive higher marks on management indices than non-owner companies. Why is that?

To be continued…