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Making family business our business

New MIT Sloan Executive Education programs help family enterprises prepare for the future.
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MIT Sloan Executive Education
John Davis
John Davis

Did you know that more than half of publicly traded companies in the United States are family companies? This is low compared to other stock exchanges around the world, like Mexico and the Philippines, where family-controlled companies dominate the listed businesses. In fact, family-owned firms account for two-thirds of all businesses around the world, with matching influence on global GDP and job creation. The Family Capital top 750 ranking of the world’s largest family businesses illustrates just how large these companies can get and suggests how much they contribute to the world economy. The companies on this list, including household names like Walmart, BMW, Dell Technologies, and LG Electronics, have combined revenues of more than $9 trillion and directly employ around 30 million people.

Although the ownership, governance, management, and leadership of family firms is critical to the economic success of nations, they are less talked about than anonymously-owned public corporations like IBM, American Express, or ExxonMobil. They also face a unique set of challenges over the long term.

“Family companies perform significantly better in terms of sustainability, profitability, and growth of all kinds when compared to non-family businesses,” says John Davis, a globally recognized authority and pioneer in the field of family enterprise. “They are even shown to be more innovative than non-family companies. But despite their success, many family-owned businesses face serious challenges with sustaining their success over multiple generations.” Only about 30 percent of family-owned businesses survive into the second generation, according to the Family Business Institute. Twelve percent are still viable into the third generation, and only about 3 percent of all family businesses operate into the fourth generation or beyond.

John Davis is one of the best-known voices in the world of family enterprise and family office. A strategic advisor and professor on the topic for decades, Davis has now joined MIT Sloan School of Management as a senior lecturer and is behind a series of new Sloan Executive Education programs designed to help family owners achieve multigenerational success and prepare for the future.

These programs can’t come soon enough, as digitalization, innovation, and technology have companies of all types on edge. For family-owned enterprises with a long tradition of doing things a certain way, the breakneck speed of technological change and industry disruptions can feel especially disorienting. Disruption and change are shortening time horizons for all businesses, but family businesses have extra layers of complexity — the future success of the business is inseparable from the well-being of the family — and all the more reason to be better educated about the future.

“I have always said that family businesses are slower but better,” says Davis. “But these days, can you still be slower and better? Where MIT really has done a lot of work and can add a lot to the thinking around family enterprise is the area of technological change and disruption and how it’s influencing industries, business models, and the way work is done. There is no faculty out there that is stronger in these ways than my colleagues at MIT.”

Davis’s new executive education programs help families manage disruption, think about where their industries are going, and get ahead of change — all while managing the evergreen issues that families need to stay on top of, such as preparing the next generation for skills they’ll need in the future, having the right governance, and keeping family relationships strong.

In all three of these courses, participants engage in interactive classroom work and exchanges among families from around the world. In the two Cambridge, Massachusetts, programs, families attend as teams and have daily private, facilitated discussions with an experienced family-enterprise coach to focus on their interests and agenda. And each family team leaves the program with a tailored action plan built together over the duration of the course.

“I’ve been doing this for 40 years, and my work now is about the future of family enterprise,” says Davis. “Where business is going, where family offices are going, how ownership is changing, how capital is being raised, and how families are changing. All of these trends influence the nature of family enterprise, and I am mapping these changes and thinking about how this influences not just the management of a company, but the role of owners of these companies.”

The dynamic global family business ecosystem is set to grow even more important and influential in the years ahead. By virtue of this ecosystem’s impact on the economic health of countries and the well-being of their citizens, these new programs are well aligned with MIT Sloan’s mission to make a difference in the world.

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