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India Knowledge@Wharton | Family firms and the invisible CEO

India Knowledge@Wharton | Family firms and the invisible CEO
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First Published: Mon, Jul 23 2007. 01 27 AM IST

Updated: Mon, Jul 23 2007. 01 27 AM IST
When your family business involves a network of 52 family shareholders, as it does for Bukit Kiara Properties, a Malaysian real estate firm, pulling everyone together for a family dinner can be hard work. But N.K. Tong, who co-founded Bukit Kiara with his father and is group managing director, says there’s just one person to call: “My auntie.”
Tong’s aunt plays a role some scholars describe as a family business’ “chief emotional officer”, an informal function usually filled by a family member. Nearly all such businesses have a person who plays the chief emotional officer role, according to Raphael “Raffi” Amit, a Wharton professor of entrepreneurship, who chairs the executive committee of Wharton’s Global Family Alliance, a private forum that brings global family business leaders together with researchers. “There is always a confidant, either the patriarch of the family, a trusted lawyer or other friend of the family.”
John Ward, co-director of the Center for Family Enterprises at the Kellogg School of Management at Northwestern University, says chief emotional officers play a number of key roles. “Not only do they provide emotional support —smoothing things over and keeping communication open—but they also help acculturate in-laws, protect family traditions and values, and make sure the family gets together to socialize and have fun.”
But the topic is not as warm and fuzzy as it sounds: Not only can the emotional officer job be stressful and go unrecognized, it can also fall dangerously by the wayside as businesses are passed on to succeeding generations. “With succession, it’s not just a question of who will head the business, but who will be the new patriarch of the family,” says Amit.
Ward notes that families pay a lot of attention to the highly visible tug of war between the founder and his successor, “but where families often have the greatest difficulties is passing along the chief emotional officer’s role.”
This blind spot comes in part because the work of the emotional officer is often invisible to the family, he adds. “The issues are gender-loaded. Historically, the founder is a man, and his wife plays the chief emotional officer. Her function often goes unrecognized.”
Do highly educated immigrant entrepreneurs help the US maintain its edge?
Emma Lazarus’ words at the base of the Statue of Liberty—“Give me your tired, your poor, your huddled masses”—are well known. According to a new study led by Vivek Wadhwa, an executive-in-residence at Duke University’s Pratt School of Engineering, “highly educated” and “entrepreneurial” should be added to the list. Based on a survey of 28,000 companies, the study found that immigrants in the US who are creators of companies combine entrepreneurial drive with strong educational backgrounds, especially in the STEM (science, technology, engineering and mathematics) areas.
The research is a follow-up of a study published earlier this year by Wadhwa and his team, which had found that immigrants were one of the founders in more than a quarter of all the engineering and technology companies set up in the US between 1995 and 2005. It counted $52 billion in annual sales by these companies, which employed 450,000 workers in 2005.
The new study revealed that 96% of immigrant founders held graduate or postgraduate degrees, with 47% holding Master’s degrees and 27% having PhDs. Three-quarters had their highest degrees in the STEM fields. The largest concentrations outside of that were in business, accounting and finance.
Wadhwa says the Duke project underscores the point that a significant portion of immigrants in the US is highly educated, fuelling a tech boom, leading innovation and creating jobs.
These findings are especially significant for Indian immigrants, he notes. “Indians are among the best educated of all immigrant groups,” he says, adding that they founded more engineering and technology companies in the US in the decade up to 2005 than the next four groups combined—those from the UK, China, Taiwan and Japan. They accounted for 26% of all start-ups, about 117,000 jobs and $14 billion in revenue in 2005.
To increase donations, appeal to the heart—not the head
Here’s a pop quiz. Read the following statements and see which is more apt to tug at your heartstrings:
A) Rokia is a seven-year-old girl who lives in Mali, Africa. She is desperately poor and faces a threat of severe hunger.
B) In Zambia, severe rainfall deficits have resulted in a 42% drop in maize production from 2000. And, an estimated three million Zambians face hunger.
If you answered A, you are like most people, according to a study conducted by Deborah Small, a Wharton marketing professor, and two colleagues. The researchers found that if organizations want to raise money for a charitable cause, it is far better to appeal to the heart than to the head. Put another way, feelings, not analytical thinking, drive donations.
That people would want to give money to identifiable victims such as Rokia rather than unnamed famine victims, may not seem all that surprising. But Small and her team, in a series of field experiments, delved deeper into the issue of sympathy and how it relates to charitable giving. They found that if people are presented with a case of an identifiable victim along with statistics about others caught up in a larger pattern of illness, hunger or neglect, donations actually decline. Also, if people are told about the inconsistent levels of sympathy evoked by identifiable and statistical victims, people reduce their giving to identifiable victims, but do not increase their giving to statistical victims.
What implications does this hold for charitable organizations? “It’s all about putting together a simple, emotionally compelling message,” Small says. “The best way to do that is in the form of a picture or a story, something that purely engages the emotional system. The mistake that many charities make is trying to appeal both to emotion and to reason. They assume this would be more effective than appealing to only one or the other, but it isn’t.”
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First Published: Mon, Jul 23 2007. 01 27 AM IST