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Family togetherness and the factors leading to greater individual choi [#permalink]

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New post 20 Oct 2017, 00:00
FROM ISB Admissions Blog: Family togetherness and the factors leading to greater individual choice
The concept of family togetherness has changed considerably in the Indian context in the past few decades. India was a largely holistic society in which people lived in large joint families. They shared their roof, wealth, occupation and emotions with all other members of the family. The family was always held together by its trusted stewards who had shared vision, values and traditions. More importantly, individual members subjugated to the larger interests of the family, community and the society. The decision-making power was generally concentrated in the ‘Kartha’ – the family patriarch. The matriarch/mother operated as the family’s ‘CEO,’ i.e., the chief emotional officer – who ensured emotional bonding among family members. The family unit was primarily jointly held and its wealth, agrarian or other, was considered indivisible. To a great extent, it was a mix of survival and insecurity concerns along with the members’ need for affiliation that led to “togetherness.”

Changes in inheritance laws gave daughters also equal rights to family wealth. Simultaneously, the concept of Hindu Undivided Family (HUF) slowly disappeared. Parents started providing formal and professional education to their daughters. Attractive entrepreneurship/job opportunities made individuals economically self-reliant and socioeconomically more mobile. Material aspirations of individual family members grew with strong urge to decide own life style. They sought to be the stewards of the family but wanted to limit that role to their immediate family unit. As a result of this gradual shift, the power and dominance of the ‘kartha’ kept falling.

At the same time, the emotional glue provided by the mother also started losing its influence. The pace of these socio-economic changes increased even further since 1991, when India adopted economic reforms to integrate with global economy. In essence, post-independence India witnessed a gradual shift from ‘collectivism’ to ‘individualism’ in families, business or not. As shown in the Figure, this change was manifested in a number of ways.

Image

 

 

  Figure: Factors leading to greater individual choice and affecting family togetherness

(Upward arrows denote rising trends and downward arrows denote receding trends)

 Source: Kavil, Ramachandran and Bhatnagar, Navneet, Thomas Schmidheiny Centre for Family Enterprise, Indian School of Business, 2014, http://www.isb.edu/sites/default/files/togetherness_in_family_business-whtppr-version_5.pdf
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Un-please to succeed [#permalink]

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New post 30 Oct 2017, 01:00
FROM ISB Admissions Blog: Un-please to succeed
The role of the family business leader depends on the background of the family, its structure and the conditions under which he assumes that role. Someone who becomes the leader during times when the family and its business is struggling may face very different kinds of challenges than one who becomes a leader in a planned manner. The challenges also depend upon the preparedness of the leader, turbulence or stability in business and the support of the family as well as the business team. While the role of the leader in the business and the family is shaped by the circumstances, almost all leaders must learn to un-PLEASE to ensure continued success.

Please: Many a times the family members may not be pleased with the decisions, but if it is in the long-term interest of the business and it must be taken, the leader should be able to convince the family members.

Loneliness: The authority that comes with being a leader often comes at the cost of loneliness, especially in the case of founder-promoters. The loneliness of the leader would prevent divergent viewpoints coming from different family members and next-generation members that often result in innovation, new venture creation and critical review of resources allocation to adapt to strategic changes in family firms.

Entitle: In financially sound business families, it is often seen that the members or the next generation feel entitled to the business. The competitive environment and increasing shareholder activism would not allow such entitlement

Assume: The “license raj” provided continued success for family businesses due to limited competition in the markets. Hence the leaders assume successful business is in their genes. Such assumptions don’t suffice in a competitive environment.

Settle: During the days of closed economy, business was predictable to a greater extent. However, recent years indicate that innovation is key to survival. Companies that become complacent soon turn irrelevant.

Establish: In family-owned businesses, the leaders have established authority over the professional top management. The leader’s decision is final, even if it is wrong in the business perspective. Often the Board of Directors too falls in line with the leader for fear of upsetting him. A good leader is one who is able to put processes in place for fair and informed decisions to be made.

Whether the decisions are business- or family-related, the leader must be fair to all, there should be no imbalances. In the process, they may end up displeasing a few people. As long as it is in the long-term interest of the family members and the business, it is ok to un-please at times.

Source: Bang, N.P. and Subramanian. S., Business Standard, October 26, 2017, http://www.business-standard.com/article/opinion/unplease-to-succeed-117102501460_1.html
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Why family businesses outperform their publicly traded rivals [#permalink]

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New post 30 Oct 2017, 01:00
FROM ISB Admissions Blog: Why family businesses outperform their publicly traded rivals
Watching New Economy starlets like Amazon steal all the headlines, it would be easy to assume family empires are a dying breed, rapidly being replaced by corporations where meritocracy rules, capital runs free, ownership is traded swiftly and the financials are posted for all to see.

Not quite. The family-controlled firm remains at the heart of even the most modern industrialized economies. Family-run businesses still account for the vast majority of the world’s companies—about 90% of them, in fact. Some are little more than corner stores, but they still make up 33% of all American businesses with revenues of $1 billion and up, and 40% of such companies in France and Germany, according to Boston Consulting Group.

Many are the exact opposite of the cobwebby firms of yore—they include such modern marvels as Wal-Mart, Samsung, LG and Foxconn, which probably made your iPhone. More importantly, as a group, family businesses deliver superior returns. When Credit Suisse analyzed financial data from 920 large family-controlled companies from around the world, it found that over the past decade their share-price returns have outperformed the global MSCI benchmark by 47%.

Why would companies rooted in the past outperform modern publicly traded corporations? The main reason is their ability to think long term. The CEOs of your typical non-family-owned public companies don’t spend a lot of time at the helm—the average tenure is less than 10 years—and they’re under more pressure than ever to maximize short-term results.

The leaders of family-run companies, on the other hand, are focused on where their businesses will be a generation from now. Horst Brandstätter, owner of the German maker of Playmobil figures, ran his company for 54 years. He reportedly once gave a designer 10 years to develop a new product line.

Sean Silcoff’s revealing feature offers a rare glimpse inside James Richardson & Sons—a Winnipeg-based company older than Canada itself. CEO Hartley Richardson is part of the fifth generation to run the company, and over the past 24 years, he’s grown its revenues to $9 billion. Now he’s facing the biggest challenge of his career: Who will take over when he’s gone?

More than one family business has been brought down when control passed to children or grandchildren who lacked the smarts or instincts to run a big enterprise. The Richardsons were so afraid of that happening that they pushed the next generation out of the corporate nest to prove themselves before they could get a shot at the top job.

The experiment was perhaps too successful. Having seen—and thrived in—the outside world, many of the 20- and 30-somethings in the sixth generation are in no rush to return. Some in the family are questioning whether the next CEO needs to be a Richardson at all.

Source: Hood, Duncan, October 28, 2017, https://beta.theglobeandmail.com/report-on-business/rob-magazine/why-family-businesses-outperform-their-publicly-tradedrivals/article36727765/?ref=http://www.theglobeandmail.com&
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ISB Faculty Insider Series – Professor Luis Martins [#permalink]

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New post 02 Nov 2017, 04:00
FROM ISB Admissions Blog: ISB Faculty Insider Series – Professor Luis Martins
The Faculty Insider brings to you insights from the prestigious faculty that teach at the Indian School of Business, through one on one interviews.

In this edition we bring to you an interview with Dr Luis Martins, visiting faculty from the McCombs School of Business, who speaks about effective techniques to design & run organisations, well-managed firms and the latest research in the field of organisation management like Employee Voice.

He teaches Management of Organisations (MGTO), a subject that talks about how excellent managers create the right structure, culture, motivation systems and incentive systems for their employees to achieve the goals of the organisation. Professor Martins is very popular with the students at ISB for the great sense of humour that he brings to class while teaching some of the most essentials skills of a good manager. He uses examples from real organisations to illustrate the importance of the core concepts from class.

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Mishal Kanoo: 24 hours in a day is not enough [#permalink]

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New post 02 Nov 2017, 22:00
FROM ISB Admissions Blog: Mishal Kanoo: 24 hours in a day is not enough
Mishal Kanoo is tired. Asked if he is having a busy day, the chairman of century-old Gulf conglomerate the Kanoo Group inhales deeply on his cigar and responds: “Twenty four hours in a day is not enough. If you sleep too little, it’s miserable, and if you sleep too much, there’s not enough time.”

It has been more than two years since Kanoo Group instigated a restructuring to “professionalise” the business – removing some family members from management roles and bringing in outsiders to head up a newly organised group.

But the changes have taken longer than many envisaged and Kanoo is weary. Family relationships are complex at the best of times, and wrestling power from people close to you is bound to make things more difficult. The process has been anything but smooth.

Still, he insists progress has been made. “We have [new senior executives], most members of the family have taken a back seat; it’s still a struggle, but we have managed to ‘change the guards’. That shift towards trying to professionalise the business has happened, but the results will take a while to settle down.”

Kanoo Group has enjoyed almost continuous growth since it was established in Bahrain in 1890 by Haji Yusuf Bin Ahmed Kanoo. It expanded to Saudi Arabia in the 1930s, followed by the UAE, and now also has offices in Oman, the UK, France and India, with more than 4,000 employees and another 6,000 under its joint ventures. Real estate, travel, shipping, machinery, logistics, energy, industrial chemicals and retail all come under its vast empire.

But now it is at a crossroads. The new investment ventures could see Kanoo Group pulled in different directions based on the best performing sectors in the years ahead. But Kanoo does not wish to predict what these will be. “It’s hard to pinpoint,” he says. “I define the world as two worlds right now: the old world and the new world. The old world being FMCG, oil and gas, retail, and the new world being anything to do with IT.

“The biggest misconception people have is that you flip on a switch and the light comes on. It doesn’t work like that in business. You are talking about a change in culture.”

Fitting for the head honcho of a 125-year-old family business, Kanoo uses the metaphor of a parent-child relationship to explain his outlook. Referring to the complex shifts the group has undergone in recent months, and its reticence to predict the future, he says:

“Think of it as a child growing up. You can try to explain to a five-year-old what will happen to them when they get married, and they look at you like a deer in the headlights thinking, ‘What are you talking about?’ because they are not prepped for it. It takes a while but eventually there will be an inflection point at which they have understood and absorbed.”

At Kanoo Group, such a compromise is being made in that the family members are still “the front face” of the firm. “We are heavy on the PR and strategy side,” Kanoo states. “And that’s the ideal position for family members to be in. You decide where you want to take the firm, and let the professionals execute it.”

Source: Townsend, Sarah, November 2, 2017, http://www.arabianbusiness.com/interviews/382654-mishal-kanoo-24-hours-in-day-is-not-enough
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A great example of entrepreneurship from the grandest of families [#permalink]

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New post 02 Nov 2017, 22:00
FROM ISB Admissions Blog: A great example of entrepreneurship from the grandest of families
Whether true or not, blue bloods in America and aristocrats in Europe have a reputation of blowing fortunes. When you’ve got everything the material world offers entrepreneurship isn’t a priority and fortunes can disappear fast. But no so for the scion of one of America’s grandest families, William Amherst Vanderbilt Cecil, who died this week at 89.

Bill Cecil, as he was better known, came from one of the world’s grandest and richest families, the Vanderbilts. His great-great-grandfather, Commodore Cornelius Vanderbilt, and his great-grandfather, William Henry Vanderbilt, were the richest Americans of their time. In their day, few family names invoked wealth and status as much as the Vanderbilt name did. And even today the Vanderbilt brand is still pretty stellar.

When Bill was born in 1928, the family fortune might not have been quite as big as it was back in William Henry’s days, but the Vanderbilts still owned Biltmore in North Carolina, America’s biggest and arguably grandest private house.

After graduating from Harvard and then pursuing a career as a successful Wall Street banker, Cecil returned to the family estate after his mother died in 1960. Although it was opened to the public by his parents back in the 1930s, by the time Cecil returned Biltmore was losing money. But through his efforts and vision, Cecil turned it into one of the most successful tourist attractions in the US, attracting today more than 1.4 million visitors annually.

As one of his employees told Forbes in an interview about the Biltmore estate back in 1998: “He has a new idea every morning while he shaves. He’s always looking for a product we can be proud of and make money with — like our wine business. He saw visitors pulling grapes off an arbor and said, ‘Hey, why should I let them eat my grapes for free?’”

Cecil also was a great example of stewardship. He passed the running of Biltmore over to his son, Bill Cecil, Jr., when he was in his late 60s and when Cecil, Jr. was in his late 30s. As he told Forbes in the 1998 interview: “I worked on my retirement for ten years. I wanted the successor generation to be 35 to 45 when he took over, at the beginning of the most productive time of life.”

Source: Family Capital, November 1, 2017, http://www.famcap.com/articles/2017/11/1/a-great-example-of-entrepreneurship-from-the-grandest-of-families
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Aviation in India & Vistara [#permalink]

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New post 12 Nov 2017, 22:00
FROM ISB Admissions Blog: Aviation in India & Vistara
Aviation in India & Vistara
Phee Teik Yeoh, CEO Vistara – Interview – 12th July, 2017
In this interview, Mr. Yeoh talks about how he crafted and made Vistara the airline of choice amongst Indian consumers. He is succeeded at Vistara by Mr. Leslie Thng, and is now back in Singapore Airlines in a senior role. The interview is comprehensive, and would help give an idea of things to talk on Day 1

Image

Q1. What makes Vistara different from other airline in India?

Vistara, when it first came to the market vowed to transform the flying experience in India forever. I’m glad my team and I have been able to fulfill the promise from day one. What makes us different is we put customer at the center of everything we do.

We aim to provide a seamless and personalized service which has eluded many travelers until the arrival of Vistara. So, it’s all about delighting our passengers with a memorable experience which will keep them coming back for more. We have differentiated ourselves from all airlines not just in terms of our product but also our service. Just to give you an anecdote – many passengers for instance, tell us that they can see the sincerity, the genuineness in the way we approach our business, in the way we deliver service to our customers. They always talk about our cabin crew smiling with their eyes. These simple gestures wow the travelers and all this is made possible because of our culture of customer centricity in everything we do.

Q2. India is the fastest growing market in the world. What are the major challenges of operating in India?

Even though the rate of growth rate has come down from the 20s to the teens, even then it is one of the fastest growing. In May, India reclaimed the spot for being the fastest growing in the world beating China.

The fastest growing market also brings the challenges of the infrastructure not being able to keep pace with the fast pace of growth. It also puts a strain on ready availability of skilled resources. One of the biggest challenges is the high cost of doing business. For instance, the ATF, and landing-parking charges at the airports. Coupled with this high cost of doing business is the extremely price sensitive nature of the market.

The challenges are not small and together with the issue of infrastructure puts an immense strain on the operators in the Indian aviation market. Profitability is one issue and the other is about how the infrastructure bottlenecks, which if not addressed promptly enough, will trim the growth of aviation in India very soon.

Q3. What were the key inputs you got from the big parent brands – Tata and Singapore Airlines, when you set upon this venture?

We are indeed blessed to have two global iconic brands as our parentage. For a start, to have come from the union of these two trusted and well respected brands, which excel in service, paves the way for Vistara’s smoother than expected entry into the market. Even after our launch, the fact that we are from Singapore airlines and Tata earns us a lot of credibility and that has been supported by delivery subsequently. This is something that is not easy to achieve in such a short span of time.

The other advantage of having two global brands is that we can easily harness the best practices from these highly successful brands to bring to bear within the organization. Without a doubt we aim to excel in service much in the same manner which has allowed Singapore airlines to be one of the best airlines when it comes to service excellence in the world.

Q4. The industry demands a lean cost structure. At the same time Vistara is trying to deliver service excellence. Can they be contradictory at times? If yes, what is the right balance between the two?

It is not a zero sum game. It may appear to be so but it need not be. If you recall, I just mentioned about how we are winning over customers simply because our cabin crew smile with their eyes. What is the cost of doing so? Nothing. It’s all part of the training and culture we imbibe within. There are many other examples whereby which you can excel in service without breaking the bank. For instance, it is about being intuitively thoughtful and anticipatory of the needs of the travelers whenever there is a flight disruption. In doing so, we delight them with pleasant surprises when they least expect in their encounter with Vistara. So, being intuitively thoughtful, sincere and genuine about wanting to delight our customers is costless.

Having said that, to succeed in the tough aviation market like India requires one to be nimble and agile, not just in the execution, but also in the way we manage our costs. This is where we focus a lot on how we can flush out inefficiencies from our process and how we could leverage more strongly on technology to bring about excellence in service. We also look at how we could flush out cost from what I term as a non-customer fronting activity and reinvest part of the cost saving into providing delights for the customer in terms of service and product.

Q5. In a market where excess capacity is being rapidly inducted into the market, it becomes necessary for airlines to keep coming up with new ancillary revenue streams to strengthen their bottom line. How does Vistara intend to innovate here? We see airlines abroad tend to get ancillary revenues to the tune of 15-20% in certain markets and in India, IndiGo gets 13% of its revenue from ancillary streams. In this industry, at a time when margins are just 5-6%, what does Vistara intend to do on this front?

Without a doubt, the huge capacity induction into the market will put pressure on the airfare (yield) making the profit margins from ticket sales, if any, to be wafer thin. Hence, it is no surprise that airlines, not just in India but across the world are increasingly looking into ancillary revenue to write out the vagaries of pricing from immense capacity induction. At the same time, I would like to look at ancillary revenues being the outcome of airlines increasingly looking at providing choices to customers. This is what Vistara is positioning itself in terms of allowing passengers to pick and choose added product and service features that make sense to them and for which they are prepared to pay a little more.

Vistara has always believed in catering to the needs of its passengers in an intuitively thoughtful way starting from when we first launched our Premium Economy class product. We were the first and remain the only Indian carrier to have the Premium Economy product today essentially to cater to the uniqueness of some of the business travelers who do not mind paying a little more for a whole lot more comfort and exclusivity whenever they travel.

In our two and a half years of operations, we have also introduced a slew of ancillary product and services. For instance, the Corporate Early Flyer gives passengers the flexibility to take an earlier flight should his or her meeting get over earlier than expected. By paying a small token amount of fee, one earns the flexibility which may be very valuable to some of the time starved frequent fliers. We also have paid lounge access and some can even purchase excess baggage in advance so that they do not have to go through the hassle of paying the excess baggage fee in a hurry before the check-in counter closes. So, it is about providing choices because no two passengers are the same and some are more willing than others to pay extra for the additional services. This allows Vistara to better manage the thin margin that one can get out of ticket sales alone.

Q6. In India, 2/3 of the market share belongs to LCCs. The biggest carrier, IndiGo has a market share of about 41%. The next best, Jet Airways is about 23% points away at about 18% share. What does it mean for the industry that there is one single airline tending to be monopolist? In future, this could mean that they have extra power over setting prices in the industry in terms of fares. They can also squeeze more fuel discounts by virtue of their scale.

With every threat, lies an opportunity. While one views dominance to be a threat, I would like to view IndiGo’s dominance as an opportunity, strange as it may be. Do not forget that IndiGo is a low cost carrier (LCC) player and 2/3rd of the market is driven by LCCs which means that Vistara being a FCC has a lot of opportunity to state its presence in the market because as you mentioned even Jet Airways has a share of around 20%. It is not an overcrowded field of players when it comes to FSCs so there lies the opportunity. Having said that, you are right to say that market dominance does a lot of harm to the industry especially to the customers who would always like to have choices. The dominance of one player alone in the market sometimes stifles creativity. Therefore, one of the many things players with a smaller market share can do is to be more creative in their efforts to differentiate themselves as much as possible. If you do not have the scale to win the market, then you have to rely on product and service. This is exactly what Vistara has been focusing on and has been achieving. We have a market share of a mere 3% but the followers that we command and the good reviews we continue to receive from the trade and travelers is much more than what our market share would speak for itself.

In the future, we have to differentiate our product and service even more sharply and focus on sustainable growth. Sometimes, being small has its advantages as well. Being small allows us to do many things that the larger players cannot do. For instance, when we decided to reconfigure our aircraft to reduce the number of seats in Business and Premium Economy class, we were able to do it in quick time because we were small. For an airline of 140 fleet size, this would be impossible to do in a few months’ time. Secondly, vowing to deliver good service is one thing and actually delivering is another and so far, being small, we have been consistent in upholding our service excellence and my job is to ensure that even when we grow big, we continue to deliver excellent customer service consistently.

Q7. Don’t you think there can be substantial benefit in terms of unit fixed cost once an airline achieves scale?

Dominance is certainly good for the dominant entity in terms of scale. Yes, that explains why IndiGo’s unit costs are lean and mean. That is in fact one of the early challenges we faced when we dint have the scale – Our unit fixed costs were way above the industry average. But as we can see, we now have 15 aircraft operating to 19 destinations operating over 600 flights a week, our unit cost is steadily trending down and that is a good thing to have. With scale, we also start to become more relevant. Although, our product and service was excellent par none, many customers in our early days were not travelling with us because we didn’t have the flight time choices to offer, but we have noticed that ever since we have grown from 5 aircraft to over 15 aircraft, the growth in our passenger base is not linear, it has been exponential due to multiplier effect which scale brings. Therefore, scale has allowed us not just to lower unit fixed cost but also enhance revenue earning capacity.

Q8. Where do you see Vistara going from here in 5 years time?

Without a doubt, judging by the growing accolades and fast growing data base of frequent travelers, Vistara will be going stronger day by day. Yes, we are certainly going to venture overseas sooner rather than later especially once we have attained the minimum 20 aircraft which is the requirement before one is granted the permission to operate overseas by the Indian government. We are going to increase our footprint further in domestic India. It is not just about channelizing all our resources overseas. To be successful, one has to have a domestic network to support the international network and vice versa. We will be growing our domestic as well as international footprint.

So, these are exciting times for the employees of Vistara. We have been working very hard on our long term – 10 year plan that will depict our fleet and network strategy. All I can say is that we are starting all over again to take the thrilling ride which many of the pioneers went through in early days in building the organization again and this time it is about focusing on our first foray in the international arena.

Q9. The competition set of Vistara from the 5-6 domestic airlines today will rise to the airlines of the world competing with Vistara. Is this thought overpowering or do you think Vistara is well prepared to succeed in the international arena?

Right from the start, our ambition has been to go overseas. We know that we have to build an organization that can overcome the challenges that one will encounter when one ventures overseas. If we are going to be a world renowned airline of choice, renowned for its excellent customer service, we will have to be competing with the best airlines in the world, not just the Indian airlines in the domestic front. So, all we have been doing from day one, albeit initially for domestic, is being geared towards our eventual operations overseas – whether it is about our product, service, even the culture we are trying to imbibe within the organization in terms of ownership – all will state us well when we venture overseas where the competition is expected to be keener. We are slowly but steadily gearing up our capabilities and deliveries in confronting the challenges that await us when we go overseas. So, exciting times certainly lie ahead – where competitors are all going to be of different shapes and sizes, some with much deeper pockets than the Indian carriers.

Q10. One last question. What do you as CEO, look for in managers when you recruit?

Everyone can be a good worker, so I reckon managers are leaders in their own shop whether it is a small department of 4, a medium size department of 10, or a larger department or even a division. I always look at managers as leaders. We all recruit employees, needless to say with the hope that many of them turn out to be leaders at the end of the day, not just good workers. To be an effective leader, one has to be ready or willing to be accountable because when you are a leader you are empowered and empowerment means nothing without the willingness to be accountable. Unlike, some industries where a lot of value is placed on individual performance, in the airline industry, it is all about team performance. So, another key attribute for the manager is to be a team player and at the same time, to have the courage to lead the team. In this industry, team work is paramount.
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The Common Traps of Working in Your Family’s Business [#permalink]

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New post 13 Nov 2017, 03:00
FROM ISB Admissions Blog: The Common Traps of Working in Your Family’s Business
“What’s wrong — is the company going bankrupt? Are we being sold?” For Charlie, who had joined his family’s bakery business two years after getting his MBA and earning his stripes at another company, this question from the plant manager came out of the blue.

He was eager to earn his colleagues’ respect, rather than relying on his family name to provide it. So he went to great lengths to be just “one of the gang” in every possible way. This included parking in the back of the building and walking through the production plant, rather than zipping into the reserved space he’d been provided near the executive offices in the front.

It turns out, seven people had gone to the plant manager after seeing Charlie arrive that morning with a sour look on his face. They all wanted to know: Was something bad about to happen? The scowl had nothing to do with work, but until then it had not dawned on Charlie how closely people were watching him. When your family’s name is on the door, you will never just be one of the gang — and everything you do could be fodder for the office rumor mill.

The family business leaders we work with have echoed Charlie’s experience. They have learned that their actions — positive and negative — are amplified because of their status as owners (or owners-to-be) of the company. But that doesn’t have to be the case. Here are some of the most common traps we’ve seen family business members fall into, and how to avoid them.

Working at the company for the wrong reasons. If family members act as if they are there only to collect a paycheck, or because they have nowhere else to go, it sends a signal that all employees should push to get as much for themselves as they can. It’s better to convey that you are interested in the business.

Expecting promotions without putting in the work. When family members start at a level that is beyond their qualifications, or are promoted much faster than deserved, other employees are more likely to focus on patronage rather than performance as they look to climb the ladder.

Working around the chain of command to get special treatment. Too often, family members take advantage of their access to senior members of the firm, seeing the rules as malleable and looking for ways around them. Instead, work through the chain of command, don’t ask for special treatment by relatives in senior positions, and abide by policies for vacation days, expenses, and office hours.

Blurring the boundaries between home and work environments. Office politics in family businesses are further complicated when members bring their family dynamics into the business. It’s important to set clear boundaries within the workplace.

Working in your family’s business can bring enormous reward, but it also carries a lot of responsibility. As Charlie learned, if you work harder than other employees, are willing to learn from the shop floor up, and treat your privilege with modesty, you’re more likely to earn the respect of your colleagues and keep office politics in check.

Source: Baron, Josh., November 6, 2017, https://hbr.org/2017/11/the-common-traps-of-working-in-your-familys-business
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Family business succession: from dream to reality [#permalink]

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New post 13 Nov 2017, 03:00
FROM ISB Admissions Blog: Family business succession: from dream to reality
A study by the EDHEC Family Business Centre shows the rate of intra-family business succession in France is below 20%. While the tax environment exerts a significant impact on the low rate of family succession, it represents only the tip of the iceberg.

Researchers agree that succession is undeniably the most emotionally charged process in the lifecycle of family businesses, turning it into the most critical for the business continuity in the family’s hands. Traditionally, understanding what processes lead to a specific human behaviour has been subject to debate by thought leaders beyond the world of family businesses.

Transposing those insights into family businesses makes us wonder whether the family succession behaviour is a product of well-thought of steps allowing to successfully move from the dream to reality or whether the latter is simply a product of imagination or instinct.

Author’s study in collaboration with FBN France’s scientific council analyses the succession process, from the development of the intention for succession by the generation in power to its accomplishment through passing on the baton to the next generation. Building on the perceptions of the senior generation, it shows that the family patterns are one of the key factors triggering or hindering the succession process. Tracing back the family history helps understanding the current generation’s behaviour in regards with succession.

According to Bowen’s Family Systems Theory, families are multigenerational units where emotionally charged patterns can be transferred across generations, some of which can be largely dysfunctional. Understanding the origins of certain patterns in the past and present is an important preliminary stage for the family to deal with existing dysfunctional behaviour of succession where it might be stuck.

One example of functional patterns could be the traditional rituals shared and passed on over generations, charged with pride and respect. As such, they contribute to triggering early on the intention for succession.

As an interviewed family manager puts it: “We all knew it since childhood. Our destiny is sealed in the cradle. ‘You will be in the family business, my son!’ That’s what my father used to tell me. That’s what I tell my children as well.”

Source: Labaki, Rania, November 10, 2017, http://www.campdenfb.com/article/family-business-succession-dream-reality

 
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The world’s best CEO runs a family business – his example is influenci [#permalink]

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New post 20 Nov 2017, 00:00
FROM ISB Admissions Blog: The world’s best CEO runs a family business – his example is influencing others
Pablo Isla, the CEO of Inditex, has just been nominated as the best boss in the world by the Harvard Business Review. His success looks to be influencing other family businesses in his home country to rely more on outsiders to run their businesses.

Isla, CEO and chairman of the Spanish-based retail giant that’s better-known by its Zara brand, and is owned by its founder Amancio Ortega and his family, is the number one best performing CEO in the World for 2017, according to the HBR.

Isla has been running Inditex since 2005. Under his leadership, the business has become the biggest fashion group in the world in terms of revenues, achieving €23.3 billion in sales during its fiscal year 2016. Inditex, which apart from Zara, operates another seven big fashion brands, has more than 7,400 stores in 94 markets around the world.

Asked by the HBR about his view on managing the business with a controlling family shareholder, Isla said this: “I would say in a very positive way. I think something which is very relevant for us as a company, for me as chairman and CEO of the company, is to have the full support of our founder, and I would say of the whole board, in terms of thinking always in the long term, having a long-term approach, investing in the business, paying a lot of attention to everything which has to do with sustainability of the business, from every different point of view.”

Perhaps Isla’s success at Inditex is leading more Spanish family businesses to take a closer look at their top management structures and make the decision to bring in non-family members to run things. Because, just in the last month, two of Spain’s best-known family businesses have ditched family members and brought in outsiders.

More significantly is the decision by Spain’s famous department store group, El Corte Inglés, to replace its family CEO with two outsiders. Dimas Gimeno looks to have got the sack after just four years in the job. Gimeno, whose uncle took over running the business from his uncle and the founder of the business, Ramón Areces, is to be replaced by two long-term employees of the group, Víctor del Pozo Gil and Jesús Nuño de la Rosa Coloma. The two will be joint CEOs.

Source: Family Capital, November 15, 2017; http://www.famcap.com/articles/2017/11/15/the-worlds-best-ceo-runs-a-family-business-his-example-is-influencing-others
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From rock bottom to a £10m family business in Gloucestershire [#permalink]

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New post 20 Nov 2017, 00:00
FROM ISB Admissions Blog: From rock bottom to a £10m family business in Gloucestershire
Here is a question – especially for self-made businessmen and women. A man spends a decade building a business to a £10million plus turnover and then goes on holiday leaving in charge a management team with an average age less than 21.

He is away two weeks. How many times does he call to the business to see how things are going, every hour you might think? In the case of Rob Ayland, chief executive of Completely Motoring, the answer is not a lot.

“I think we had 16 nights away and I spoke to them about three times,” said Mr Ayland, trying to remember whether he had called or not while enjoying a relaxing time with his wife, Melanie, on a sickeningly sunny Caribbean island.

“I was calling them as a father,” he added.

In charge back at home were his sons, George, 25, James, 20 and Charles, 18.

He is not pretending he is a cool as a cucumber either, or that other people unable to leave their businesses without a significant rise in blood pressure are over-reacting. True, there is a lot of pride in being able to place his trust in his sons and knowing they, and the rest of the staff, are perfectly able to run the business as usual – and then there is facing up to the fact you might not be indispensable any longer.

“They ran the business – and had two of the best weeks of the year. And October is usually a quieter time for us!” he added, with a wry smile and raised eyebrow.

Completely Motoring’s achievements as a family business have not gone unnoticed. It walked away with the Gloucestershire Business Awards 2017 Family Business of the Year Award in October.

Re-wind pre-Completely Motoring he held a number of senior positions with the biggest car dealers in the county. Life was good. And then he was laid off. “It was Christmas 2008, the start of the biggest recession in living memory. I had just set up the Mitsubishi garage next door to here. It was frightening. One minute you are in this corporate world with a steady salary, then you’re not.”

He decided if there was one thing he knew about it was cars and selling them. “The banks at the time would not finance a small business. So we self-financed. I sold all my toys – my Ferrari, motorbikes – it all had to go,” he said.

Reputation, worth its weight in gold in the used car market, underscored by the strong family connections and long-term plans have been vital.

Source: Merrell, Andrew., November 15, 2017, http://www.gloucestershirelive.co.uk/news/business/high-flyer-rock-bottom-10m-781632
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Propelling a family business forward [#permalink]

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New post 23 Nov 2017, 20:00
FROM ISB Admissions Blog: Propelling a family business forward
At a time where many enterprises are still debating about making the move into Industry 4.0, local family business Onn Wah Precision Engineering is already powering ahead. Ambitious plans that managing director Lam Keng Yew, a second-generation business owner, has in the works include 3D printing, data analytics, and smart factories – where robots and highly skilled workers labour alongside each other.

The firm may be taking a quantum leap into the future with innovation and cutting edge technologies, but not everything has to change, says Mr Lam. Certain traditional values still prevail, and the 56-year-old company prides itself on a strong family culture where employees are treated as equals.

When Onn Wah was first established in 1961 by Mr Lam’s father, Lam Kok Luen, the business was primarily focused on producing drive shafts and propellers for small boats. He later moved on to more general engineering works. It was only around in 1985 that they started their first foray into precision parts, and semiconductors after that in 1997.

Today, Onn Wah’s three main services include aerospace, oil and gas, and the semiconductor industry, which contribute more than 70 per cent of the total revenue. Mr Lam adds that Onn Wah’s diversification enables group performance to maintain steady growth regardless of market uncertainty and the ups and downs of any industry since 2009.

Mr Lam says that the company’s biggest achievement is building a strong team of committed employees and engineers. He reveals that an internal study has found that one-third of their staff have stayed with the company for more than 10 years, with 60 per cent who stayed above five years.

Mr Lam attributes this to the positive culture of the company. “There is no hierarchy as staff are treated with respect regardless of whichever job they are doing. We have a lot of communication with staff, and we will share openly if we are doing well or not. It’s not top-down in terms of management style.”

The company is also constantly in tune with what employees want in terms of their work environment. For example, Onn Wah has a nap room for employees to have a quick snooze in the afternoon to refresh themselves, which was done based on feedback from staff.

The next step for the company is to transform itself into a smart factory, where machines, automation and data analytics come together.

“We need to go into Industry 4.0 to keep ourselves competitive, but we intend to do it step by step.” he adds. But while the future may be unpredictable, it is clear from him that the same spirit of innovation, far-sightedness and teamwork will continue to propel the business in the future, just like how it has done over the past few decades.

Source: Shiaov, Vivien., The Business Times, November 22, 2017; http://www.businesstimes.com.sg/hub-projects/enterprise-50-2017/propelling-a-family-business-forward
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Good governance in family businesses [#permalink]

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New post 23 Nov 2017, 20:00
FROM ISB Admissions Blog: Good governance in family businesses
Family-Owned companies in Fiji are a crucial piece of society and the country’s corporate landscape. This can be a good thing as family businesses have long been the engine of growth for economies around the world.

However, family businesses often have short life spans. To ensure family businesses survive, it is important that the principles of family governance become part of the discussion around dinner tables in Fiji.

These principles include putting in place sound corporate governance structures, including a well-structured board, a professional management team, sound control functions, and proper shareholder and disclosure practices. In addition, ways to manage potential challenges within the family, such as family decision-making, shareholding, employment, succession planning, and disputes, also need to be introduced.

As Fiji continues to grow and integrate itself with international markets, the number of foreign investors seeking good business partners in the country will rise. Investors will not only look at the governance of the business but also at the founding family’s role in it: What is the background of this family? Where did their money come from? How is the family involved in the business and how will it be involved in the future?

Once a family business brings in outside investors, improving governance practices, particularly in terms of board structure and shareholder practices, will become an imperative. The investors, while placing faith in the family by investing in the first place, will want to ensure that their interests are appropriately balanced with those of the family.

Therefore, family companies seeking to raise capital or bring in outside business partners, particularly foreign ones, should anticipate such changes and begin to take action. Every company is different and will require its own practical approach to governance. Changes should be done at the right pace based on business needs and what works for the company and the family.

Much of this starts with education and awareness. Family firms should understand why governance is so crucial for their business and family as a whole, and learn how to put appropriate practices in place.

Source: Razook, Chris., November 21, 2017, http://www.fijitimes.com/story.aspx?id=424653
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Corporate Governance, Business Growth and the role of Independent Dire [#permalink]

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New post 04 Dec 2017, 02:00
FROM ISB Admissions Blog: Corporate Governance, Business Growth and the role of Independent Directors
A family business has many challenges as it grows and corporate governance is often pushed to the back burner as more urgent, not necessarily important, day to day activities and expansion concerns take up the owner managers’ time.

The board is the most significant instrument of corporate governance. Once in place, it would improve the quality of decision making process, resulting in better decisions with long term benefits for the company. It ensures continuity, economic growth, maintains investors’ confidence, results in lower cost of capital, minimizes wastages, corruption, risks and mismanagement.

Historically, anecdotal evidence points to the fact that a board goes through a process of evolution as the organisation grows that has a direct impact on the growth, profitability and sustainability of an organisation. The starting point as well as the speed of evolution is largely dependent on the progressive mind set of the board and the owners / promoters.

Each stage of evolution brings with it exponentially improved levels of governance. As this also means higher levels of participation from more skilled and experienced management that is also more progressive, the company begins to see rapid growth and improving shareholder value and wealth. There are three broad stages, not necessarily followed in the same sequence in practice.

Stage One: Rubber Stamp Board or Nodder’s Club or Consent Board: The boards merely rubber stamped every proposal or decision of the promoter/ managing director. The company performed, stakeholders were happy and the boards only nodded. This was the type of board that existed in most companies, big or small, during the License Raj and in the pre liberalisation period. They were generally successful as they had resourceful Promoters who could get the necessary licenses and permits from powers that be.

Two: Functional Board: The board would be conscious of the impact of its decisions on enterprise performance and their competitive positioning and thus focussed on its “work”.  This type of board’s strengths were capitalising on the expertise of its members, better comprehension of how the organisation achieves or can achieve its goals and its ability to harmoniously connect operational issues to strategic milestones.

Three: Strategic Board: The strategic board plays a proactive role and finds a balance in terms of fulfilling of fiduciary responsibilities, overseeing the operational realities and crafting a strategic direction both in the medium and long term.

Evolution from the first to the second stage is the most vital and challenging even today for the Indian industry. However, for rapid inclusive growth where the boundaries expand to global horizons the evolution from the second to the third stage becomes relevant. Independent directors with diverse backgrounds, expertise, and professional experience are central to strategic governance and growth of the firm, whether small, medium or large.

Source: Gupta, Nabankur, ISBInsight, Volume 4, Issue 4, pp32-34
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Financing a family business [#permalink]

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New post 04 Dec 2017, 02:00
FROM ISB Admissions Blog: Financing a family business
A family business run through a limited company will typically be financed in its early stages by a mixture of equity (via money invested in shares), and/or loans from the family shareholders and possibly by an overdraft facility with its bankers.

As the business develops, however, the family may need to consider the possibility of third party investment, particularly if the business is not self-financing and the necessary funds cannot be found from family members, existing shareholders or the company’s bankers. There are a number of categories of third party investors prepared to consider investing in private businesses, ranging from business angels (typically entrepreneurs who have sold one or more businesses and are looking to invest some of the proceeds in growing enterprises) or high-net-worth individuals (‘HNWIs’), to private equity or venture capital funds (funds established for the purpose of investing in unquoted companies). The growing crowdfunding sector may also prove a viable option where the family business is adept at marketing itself to the ‘crowd’ through the relevant online portal.

However, sourcing this next stage funding is not always readily achievable, particularly where the market is less amenable or readily available. The UK has plenty of seed funding available for start-ups, but far fewer options when it comes to scaling up for the next steps. For some commentators business owners are part of the problem too, since their understanding of how funding works is limited. Reports have shown that many small family businesses have been unwilling to embrace further financing, particularly in the wake of the financial crisis. Yet there are two reasons why this reticence may be detrimental to a business once it is properly established.

Firstly, there are plenty of funding options to explore. Beyond the obvious commercial banks, angel investors, venture capital and private equity companies, there are also smaller providers, debt funds, challenger banks and crowdfunding platforms to consider. Secondly, for a business to remain innovative, open additional offices or recruit more staff, it will certainly require funding. As such, skimping on these areas may ultimately dilute the quality of the business itself, and its potential for expansion.

A consequence of outside investment may be that the investor demands one or more seats on the board of directors. This may concern some families, but independent directors can often bring additional skills to the company. As such, third party investment may not always appeal to some family businesses given it will be regarded as a threat to the family’s control of the business and to its ability to steer the future direction of the company. However, where the investors are well-matched in providing relevant expertise and experience, as well as much-needed funds, these risks to the family business should be outweighed by the potential benefits.

Source: Ring, Dominic, November 29, 2017; https://www.lexology.com/library/detail.aspx?g=32811cf9-95e5-432f-97e3-152c0d14fafe
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Sharing Wisdom: Lessons from successful family dynasties [#permalink]

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New post 08 Dec 2017, 06:00
FROM ISB Admissions Blog: Sharing Wisdom: Lessons from successful family dynasties
A significant minority of highly successful business-owning families excel and thrive through several generations: Miele, Follett, Takanashi, Henkel, and many more. These families have much to teach us: not only on governance, strategy and business management, but also social and environmental responsibility and economic development.

So what are the features of family firms with sustained high performance over the decades or centuries? Some of the features are counter-intuitive. For example, it transpires that respecting tradition can help you be innovative; also, planning for the long-term helps nurture innovation. In another example, recently popularised by John Mackey, author of Conscious Capitalism, as ‘the paradox of profit’, a company does not tend to maximise profits by aiming to maximize profits. Rather, financial rewards come as a by-product of attention to product, service and customer. A succession of strong quarters is not always good for the business, as we saw in the credit crisis, if it is in dangerously risky trades. The smart business-owning families have understood this insight for centuries, and made it one of their unchanging principles.

The 25 principles of high-performing business-owning families fall into four broad categories:

  • Long-term success in the business – Vision, Entrepreneurial Drive, Business Skills, Employees, Ethics, Succession Process, and Adaptability.
  • Long-term continuity of the family- Pride, Mutual Support, Strong Values, Social Engagement, Fairness, Ability to Handle Conflict, Strength in Unity.
  • Long-term success in ownership- Trust, Control, the Equal/Unequal concept, Voting Rights, Responsible Ownership, and Equity Concentration.
  • What do successful firms do differently today? – Separation of Issues, Formal Processes, Stewardship, Governance Structures and Role of the Family.
 

A clear finding from the research is that the most successful business-owning families do not put profit-maximisation first. When you spend time with them, you notice that they have an intense pride for the business and its history. They also have a really deep sense of family, of unity, and how they can support one another. They have a strong sense of self; they do not try to be someone else. Their self-confidence is a quiet one, because they know that pride comes before a fall, and that modesty is, counter-intuitively, a natural ally of ambition.

For those seeking to emulate the most successful family firms, there are no easy, convenient benchmarks. Success is more to do with character and resilience. Aristotle defined three dimensions of human intelligence: episteme (intellect), techne (craft) and phronesis (practical wisdom and ethical values). It is clear that, for decades, business schools have taught the first two to the exclusion of the third. It is equally clear, from the evidence base on the most highly effective family firms, that Aristotle was right, and that phronesis ought to have parity in business education in the 21st Century.

Source: Kenyon-Rouvinez, Denise , ISBInsight, Volume 4, Issue 4, pp32-34
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How to advise a family business [#permalink]

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New post 08 Dec 2017, 06:00
FROM ISB Admissions Blog: How to advise a family business
Providing financial advice to a family running a business is complex, according to a Europe-wide study that highlighted challenges around growing a business and managing its wealth across generations. This important advisory market segment is increasingly being impacted by a ‘war for talent’, according to the European Family Businesses (EFB) and KPMG Enterprise European Family Business Barometer.

The 2017 barometer found that a family businesses’ ability to attract and retain skilled individuals has become their number one concern. More than four in 10 (43%) of the family business representatives surveyed named recruiting skilled staff as one of their businesses’ major issues, coming ahead of increasing competition (37%) and declining profitability (36%) in second and third place.

With almost eight in 10 (78%) family businesses across the continent employing external directors, representing a steady incline since the barometer first asked the question in 2015, the issue of attracting skills is increasingly pertinent from the bottom to the very top of family businesses.

Ken McCracken, KPMG’s UK head of Family Business Consulting, said: “The culture and values that become apparent to employees within many family businesses, once they have joined, means they tend to perform strongly when it comes to retaining talent.

Elizabeth Bagger, executive director at the Institute for Family Business, commented: “This latest barometer gives important insights into the challenges family firms are facing and some of the barriers to them achieving their ambitions.

“Despite these challenges it is encouraging to see how many families have plans in place to grow their business, including reinvesting in their business, and exploring new markets.  These findings reflect the dynamic, innovative and ambitious family firms we work with every day.”

The survey also looked at efforts to balance family and business, as well as issues around succession planning.

McCracken said: “I’m pleased to see such a majority placing value on preparing a successor and, as such, that half have the next generation in management roles while one in 10 are clear on their aim to appoint a non-family chief executive in the near future.

“However, eight in 10 are without a chief executive succession plan which suggests there is work to do in many cases. I do think there is still an overly blurry line about the distinction between being a family owner and being a family manager. Deciding on this point can be a pivotal moment for a family at a crossroads.”

The responses from UK family businesses also suggest that they are less engaged with exporting than the European average. Less than half (44%) are without any overseas activity; a figure that’s only 24% across the continent. Appetite to change this exporting gap is also lacking according to the UK sample, with only 26% planning to increase their activity levels abroad, compared to 44% pan-Europe.

 

Source: Will Grahame-Clarke, December 05,2017; https://international-adviser.com/advis ... -business/
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Cycle-2 Application Tips [#permalink]

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New post 15 Dec 2017, 12:00
FROM ISB Admissions Blog: Cycle-2 Application Tips
With only a month left for PGP Cycle-2 deadline, here are some handy tips to build a stronger application:

Tip 1: Start Early and Stay Focused

The ISB PGP application has multiple sections that you will need to fill out. The personal details, education & work details, awards, extracurricular, essays for scholarships, scores and other documents need to be uploaded. Its a fairly simple process but is a time consuming one. Its recommended that you start with working on your application as soon as possible. Set timelines for sections and dont wait till the last minute.

Here is the link to the application portal

Tip 2: Tell your stories well

There are only 2 essays this year. This is your opportunity to tell the admissions team your story. Focus on what  is your uniqueness, what would you bring to the class and your career goals. Keep your essays within the word limit.

Read what does ISB look for in a candidatehere 

Tip 3:  Talk about your passion

We look for quality extracurricular engagements rather than quantity. It’s always a good idea to showcase a deeply involved engagement/project you’re really passionate about, than to state multiple engagements with little contribution.

Tip 4: Select the right evaluator

Choose an evaluator who has seen your work closely. Its recommended that you request your reporting manager(current or past) to do your evaluation as he/she would know your working style and can give quality inputs. Share a brief on details and depth of your contribution as a reminder can refresher for him/her.

Tip 5: Review, Review, Review

Go through your application a couple of times before submitting it. Check for grammatical errors, typos, missed out sections. Ensure your application is complete – with all documents uploaded and essays reviewed.

Cycle 2 deadline is on Jan 15, 2018. If you have any queries related to PGP write to pgp@isb.edu. If you have questions related to the application portal write to apphelp@isb.edu.

All the best.

Team,

Admissions

 

 
ForumBlogs - GMAT Club’s latest feature blends timely Blog entries with forum discussions. Now GMAT Club Forums incorporate all relevant information from Student, Admissions blogs, Twitter, and other sources in one place. You no longer have to check and follow dozens of blogs, just subscribe to the relevant topics and forums on GMAT club or follow the posters and you will get email notifications when something new is posted. Add your blog to the list! and be featured to over 300,000 unique monthly visitors

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This post has been originally posted on the Admissions Blog and re-posted here for convenience

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Cycle-2 Application Tips [#permalink]

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New post 15 Dec 2017, 12:02
FROM ISB PGP Admissions Director Blog: Cycle-2 Application Tips
With only a month left for PGP Cycle-2 deadline, here are some handy tips to build a stronger application:

Tip 1: Start Early and Stay Focused

The ISB PGP application has multiple sections that you will need to fill out. The personal details, education & work details, awards, extracurricular, essays for scholarships, scores and other documents need to be uploaded. Its a fairly simple process but is a time consuming one. Its recommended that you start with working on your application as soon as possible. Set timelines for sections and dont wait till the last minute.

Here is the link to the application portal

Tip 2: Tell your stories well

There are only 2 essays this year. This is your opportunity to tell the admissions team your story. Focus on what  is your uniqueness, what would you bring to the class and your career goals. Keep your essays within the word limit.

Read what does ISB look for in a candidatehere 

Tip 3:  Talk about your passion

We look for quality extracurricular engagements rather than quantity. It’s always a good idea to showcase a deeply involved engagement/project you’re really passionate about, than to state multiple engagements with little contribution.

Tip 4: Select the right evaluator

Choose an evaluator who has seen your work closely. Its recommended that you request your reporting manager(current or past) to do your evaluation as he/she would know your working style and can give quality inputs. Share a brief on details and depth of your contribution as a reminder can refresher for him/her.

Tip 5: Review, Review, Review

Go through your application a couple of times before submitting it. Check for grammatical errors, typos, missed out sections. Ensure your application is complete – with all documents uploaded and essays reviewed.

Cycle 2 deadline is on Jan 15, 2018. If you have any queries related to PGP write to pgp@isb.edu. If you have questions related to the application portal write to apphelp@isb.edu.

All the best.

Team,

Admissions

 

 
ForumBlogs - GMAT Club’s latest feature blends timely Blog entries with forum discussions. Now GMAT Club Forums incorporate all relevant information from Student, Admissions blogs, Twitter, and other sources in one place. You no longer have to check and follow dozens of blogs, just subscribe to the relevant topics and forums on GMAT club or follow the posters and you will get email notifications when something new is posted. Add your blog to the list! and be featured to over 300,000 unique monthly visitors

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China Faces Family Business Succession Crisis [#permalink]

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New post 17 Dec 2017, 22:00
FROM ISB Admissions Blog: China Faces Family Business Succession Crisis
China has a problem with family businesses: a sizeable number are preparing to hand over control to the next generation. However — in a development that some say will hurt and others think might help the world’s second-biggest economy — some may not stay in business at all.

More than half of the children of the wave of entrepreneurs that built China’s export economy after former leader Deng Xiaoping opened the Communist nation to free market capitalism in 1979 do not want to succeed their parents as bosses of their family firms, surveys and academic studies suggest. Instead, they would rather work for themselves or in fashionable industries such as banking, investment and technology.

“What China is facing is a big social and economic loss,” says Joseph Fan, co-director of the centre for economics and finance at the Chinese University of Hong Kong. Observers of the trend pin the cause on factors from the individualism of Chinese millennials to the fact their business-owning parents have worked so hard to succeed in a business they neglected to involve their children in their companies. Children of entrepreneurs who sent them to school or university in the West can also return home inspired to start their own venture that is based on experiences they had abroad.

Professor Jean Lee, co-director of the Centre for Family Heritage at the Shanghai-based Ceibs says, “China’s family business sector has lacked that culture of raising and educating the children in the ways of the family business and the family business culture”. She explains that busy entrepreneurs “do not groom their children to take over”. Many are “raised by grandparents and then they are often sent to the west for boarding school and university”, she adds. “The bonding with the family is not very strong, and those who return to China come back full of new ideas and aware of other career options.”

Yang Liu, the mainland Chinese-born founder of men’s apparel company JoeyWears and a director of global female entrepreneurs’ association SheWorx, says many young Chinese business founders in her network were also born into family businesses that they now choose not to work for. “When the family has money the kids have a lot of options,” she explains. “They get educated abroad and then they can choose what to do next. The family business does not really excite them when they can start their own company or invest in other start-ups.”

Gym founder Mr Li says, “China is changing. When my dad started out perhaps China did not have enough buildings, so we needed companies to construct them. But now we have different problems such as obesity and chronic diseases like diabetes. What China needs now is companies that can help people construct not better buildings, but better bodies. So I want to solve this new problem.”

Source: Rovnick, Naomi, December 13, 2017, https://www.ft.com/content/5fa885ac-c61b-11e7-b30e-a7c1c7c13aab
ForumBlogs - GMAT Club’s latest feature blends timely Blog entries with forum discussions. Now GMAT Club Forums incorporate all relevant information from Student, Admissions blogs, Twitter, and other sources in one place. You no longer have to check and follow dozens of blogs, just subscribe to the relevant topics and forums on GMAT club or follow the posters and you will get email notifications when something new is posted. Add your blog to the list! and be featured to over 300,000 unique monthly visitors

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This post has been originally posted on the Admissions Blog and re-posted here for convenience

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China Faces Family Business Succession Crisis   [#permalink] 17 Dec 2017, 22:00

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