CEOs at Work – Part 1 - Family Firms– Pharma Veterans’ Blog Post #538 by Asrar Qureshi

CEOs at Work – Part 1 - Family Firms– Pharma Veterans’ Blog Post #538 by Asrar Qureshi

Dear Colleagues!  This is Pharma Veterans’ Blog Post #538. Pharma Veterans welcome sharing of knowledge and wisdom by Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi on WordPress, the top blog site. Please email to asrar@asrarqureshi.com for publishing your contributions here.

Statistics say that almost all businesses start as family business. Later, some choose to go public while majority stays as family business. In the US, going public is popular, but even there 90% businesses are family businesses. For example, Wal-Mart which is a giant at 485 billion US$ in turnover and 2.3 million employees, is still a family business.

Recently, I came across a study survey titled ‘Managing the Family Firm: Evidence from CEOs at Work’. The authors include Oriana Bandiera of London School of Economics, Andrea Prat of Columbia University and Raffaella Sadun of Harvard Business School. (https://sticerd.lse.ac.uk/dps/eopp/eopp49.pdf).

Here is the abstract.

[Quote] We develop a new survey instrument to codify CEOs’ diaries in large samples and use it to measure the labor supply of 1,114 family and professional CEOs of manufacturing firms across six countries (Brazil, France, Germany, India, the United Kingdom, and the United States). By this measure, family CEOs work 9% fewer hours relative to professional CEOs. Difference in differences estimates with respect to the opportunity cost of leisure reveal that the pattern we observe is consistent with differences in preferences for leisure, rather than optimal responses to differences in technology or organization correlated with ownership. Differences in labor supply are larger in countries where inheritance laws favor wealth concentration and are correlated with differences in firm performance. [Unquote]

This survey does not consider the age and size of family business as a variable. We do understand that entrepreneurs work at different pace during different stages of business. At the start, the entrepreneur is focused on making the business viable. She/he may work inhumanly long hours to make the business stick. The other reason is that the entrepreneur is wearing multiple hats simultaneously. It is after the business attains a certain business size that the roles are defined, and relevant people are inducted. 

The entrepreneurial psyche is same the world over. We do not find any significant differences on this count. There may be differences in personal orientation after becoming viable. Some people may prefer to take it easy from there while others may never reduce the pace. Similarly, there are huge variations in how much power sharing would be exercised with the employee senior management. 

We shall have a more detailed look at the Pharma business in Pakistan and see how it is going.

Pakistan boasts a robust and thriving Pharma industry. There are about 700 manufacturing companies and may be an equal number of marketing/franchising companies (the number is not available because DRAP does not recognize this business model). 74 manufacturing companies have annual turnover of one billion or more. All of these started as family business and are still being run like that, except few MNCs and few of the Local Pharma who are listed on stock exchange. The rest, which is almost the whole, is privately owned and family run. 

MNCs in Pakistan always had employee CEOs. Previously, these came from abroad, but now Pakistani executives are posted as CEO. Local Pharma has also followed suit, but the number can be counted on the fingers of one hand may be. 

Owner CEOs control all aspects of business. Production, Supply Chain, Business, Finance, HR, everyone reports to them, and they run it singlehandedly. The respective functional heads are neither given full responsibility, nor relevant authority.

This post is about time spent on work by CEOs of family firms. The survey tells two important things. 

One, they spend 9% less time on job than employee CEOs. In Pakistan, the CEOs spend lot of time in office. Mostly, they sit late. However, they use this time to do many things unrelated to current business. They do socializing, politicking, and finding other business opportunities not related to present business. Many CEOs do other activities in the morning and come to office in the late afternoon. They may then sit for the next several hours and may require that the staff should sit with them. So, it is not 9% less, rather it may be 50% less or even more.

Two, they are more prone to leisure activities. For our local CEOs, we may add ‘pleasure’ also. The problem is that it may involve some office staff also who may be required to entertain the CEO. The employee CEOs, the senior executives and all middle-aged and up managers try to get some pleasure somehow within the workplace. It is accessible, it is free, and it can be managed mostly. 

To be Continued……

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