For too long, family business was not only off the radar of graduate schools of business around the world, but also dismissed as something “lesser than” the assumed “big business” management issues that were the bailiwick and future careers of business school students. All that started changing in the 1980s and '90s. Today, business schools are launching, growing, and considering family business as a major subject of study for their students and for the communities where they work. At some schools, things are taking off fast as they move into the next level.
I’ve been fortunate to be at the helm with two other co-directors of the Family Business Program at Columbia University Graduate School of Business, Michael Preston and Daniel Wolfenzon, as we take our program to the next level. And we’ve been fortunate that our students are actively engaged in classes, outside activities, and developing new ideas to meet the needs not just of business managers, but also of family business owners and, more generally, all stakeholders of complex family enterprises. In keeping with this column’s theme of building bridges, it occurred to me that one of the bridges that’s seemed “too far” has been the bridge of academia and family enterprise—in theory and practice. Here are some thoughts on how and why that bridge ought to be built in more places and with more intention.
Why Schools Should Focus on Family Enterprise
Why should schools of higher education focus on family enterprise? Because it matters. It matters to our students, our communities and our world.
- Family business is the dominant form of business worldwide.
- Today’s students are tomorrow’s leaders in their personal and professional lives. As Sigmund Freud said, for a good life one needs lieben und arbeiten—to love and to work. Family enterprise combines both in the most meaningful ways.
- A large percentage of today’s students are from families that own businesses ranging from brand new restaurants to multinational conglomerates. They want to explore whether they might, or might not, join the business—in management, as owners, or both—and whatever they choose, to do it well.
- Students who are heading into finance and wealth management need to understand the private client side of the business. In fact, every year, former students who are now on Wall Street call me to express appreciation for the perspective they gained in my Family Enterprise & Wealth course.
- Students looking at the financial services job market today recognize that family offices, and assets managed by them, are growing fast. Venture capital and private equity are growing too. Family enterprises are always behind the scenes as investors and target companies.
- We’re in the midst of the largest transfer of wealth across generations of all time. This means that sales and transfers of family businesses are happening every day. Anyone who’s going into M&A or management consulting has to be prepared.
- Students today are more interested in entrepreneurship and social enterprise than ever before. Family enterprises are connected to both. By some estimates, the majority of new start-ups are funded with family wealth; impact investing was initially forged by younger generations of major family enterprises.
Based on a variety of studies we now know that:
- About two-thirds of all businesses worldwide are family firms with even higher percentages in some countries.
- One-third of the Fortune 500 companies are family-controlled.
- By some estimates, over half of U.S. public companies are family controlled.
A recent survey found that, over time, roughly 90 percent of families no longer controlled just one company, and in many cases had grown beyond the original business. It seems that family firms are especially adept at creating, adding and spinning off companies. Over time, the firms in the study eventually had, on average, more than six companies; they created between five and six firms; added two or three through M&A and spun off one or two; and changed industry more than twice.
So, the old assumption that family businesses grow slowly and die fast may not be true, and perhaps never was.
Family Outweighs Business
In all my years of working with families, I can’t count the number of clients who’ve said to me that the business they’ve worked so hard to build is worth nothing if it destroys the family. That’s the “love” part of the Freudian equation; no matter what the business is, or how they define the family. I’ve also found that everyone in their own way wants to make an impact. And with a family enterprise, there’s an opportunity to align meaning, purpose, and contribution in incredible ways. Family business isn’t just about spreadsheets and financial decisions. It’s about some of the most profound and complex issues in the human condition. These topics are not only timely, they’re also timeless. I can also assure you that they’re neither simple nor superficial. For these reasons and more, they deserve the full attention of students and the schools where they learn.
