At age 27, Lauri Union was on her way to launch a promising consulting career. After graduating from Princeton, she went to work at Bain and Company for two years before enrolling in the full-time MBA program at Harvard Business School. And then her mother had a message for her. The steel products manufacturing and distribution company her family owned was in “severe distress,” and on the verge of bankruptcy. Union’s mother asked her to take one year after graduating from Harvard Business School to help stabilize the business.
“I ended up falling in love with the business and ended up loving running it,” Union tells Poets&Quants on a phone call. One year turned into 14 as Union not only dug the North Carolina-based business out of a hole, but also turned it into a multi-million dollar revenue company that was eventually sold to a private equity firm.
Now, more than a decade later, Union is returning to the family business space, but this time as an educator. Babson College announced earlier this month Union would head-up the newly minted Institute for Family Entrepreneurship — one of at least a few to recently pop up at elite business schools. “One of our initial goals is to help align families and amplify opportunities for entrepreneurship and innovation as businesses are passed from one generation to the next,” Union says.
FAMILY BUSINESSES REMAIN A SUBSTANTIAL ECONOMIC DRIVER IN AMERICA
One of the biggest challenges family businesses are facing today is a successful handoff between generations. And in recent years, more business schools have begun to recognize the demand for family business management, especially as companies continue to grow and innovate. Just last February, members of the Koch family announced a $12 million gift to Washington University in St. Louis, $10 million of which will be used to endow and establish the Koch Center for Family Business and a professorship.
“There’s a lack of perception about how many family businesses there are and what role they play,” Peter Koch said at this year’s Family Business Symposium on Washington University’s campus. “There’s also a lack of perception about the complexities of family businesses.”
Indeed, family businesses remain a substantial driver of the global and American economy, responsible for 80% of new job creation, says Olin Dean Mark Taylor. Globally, family businesses account for 70% GDP output. Family businesses contribute more than $68 trillion to global GDP and drive 64% of the U.S. economy, Taylor adds.
“Some students may be interested in family businesses to help grow their own family’s business, but many are interested because when you look at family businesses, they drive two-thirds of the U.S. economy,” Taylor says. “About a third of Fortune 500 companies are family controlled, and the return on investment is greater in family businesses. These companies are not thinking of the next year or quarters results. They’re thinking about the next generation. ”
The seed of the Center for Family Business at Olin was planted in 2016 with the launch of the Olin Family Business Program after a $1.09 million gift from the Koch family. It aims to help family businesses survive survive generational handoffs through education, hands-on learning, and family business networking opportunities.
“The Koch family came to us with the goal of building on the success of our family business program and symposium and growing the momentum,” Taylor says. “With the new research center in business studies, we want to reach out to family businesses to learn more about the unique and specific challenges and problems they face, and build a strong research side on our knowledge of management, finance, and strategy for family businesses. To do this, an international search for a suitable candidate for the professorship is ongoing.”
According to Taylor, the school’s Special Topics in Family Business course had more than 100 students enrolled last time it was offered. Olin plans to increase their teaching capacity to take on the growing interests of students in family business.
MAJORING IN FAMILY ENTERPRISE
At Stetson University, the Family Enterprise Center was established in 1998, and business students who have since chosen to major or minor in the area. According to a campus survey conducted by the business school, 42% of B-school students and 37% of all students. Stetson officials say that while 70% to 80% of companies worldwide are family owned, managed, or controlled, only 30% make it to the second generation and 12% to the third.
Students at Stetson who are working on earning their Bachelor of Business Administration in Family Enterprise take required classes to learn about personal, professional, and leadership development, managerial issues in family enterprise, and legal, estate, and asset protection issues. At the end of the program, students take part in a consulting experience as part of their capstone class. To expose students to the industry before graduation, the Family Enterprise Center also hosts the Transitions Conference, in partnership with Family Business Magazine, twice a year, where family business leaders share stories, discuss challenges and connect to support one another.
MANAGING THE FAMILY AND THE BUSINESS
Back at Washington University, Tayler says In many cases when students go on to create startups, many of those ventures become family businesses. And while doing business with friends can be challenging, doing business with family can be even more difficult. That’s why at family business training centers like the ones at Washington University and Babson, one of the key learning aspects is managing communication and conflict with to family members.
At Babson, Union says families will be invited to campus as part of the training alongside current students. “By involving families, it really becomes a family project,” Union says. “This will help align the family and amplify the opportunities for entrepreneurship as it is passed from one generation to the next.”
The University of St. Thomas in Minneapolis takes a similar approach. Offering a family business major to undergraduate business students, the school also invites parents of students and other significant family members to audit classes within the Family Business program. They are also encouraged to participate in family learning by reading class materials and helping St. Thomas students with their course assignments.
At St. Joseph’s University in Philadelphia, Family Business and Entrepreneurship majors go through a three-step approach, the first of which, helps students learn to manage the organization in relation to the family. Next, students learn about the industry and explore innovation, resource allocation, and competitive advantage. Lastly, students focus on the firm’s place in society and how to identify trends and challenges relating to their company’s place in the world.
WHEN FAMILY BUSINESSES COMPETE AGAINST ATTRACTIVE JOB OFFERS
Still, all of these efforts may not matter much when students at elite business schools are receiving lucrative and attractive job offers. For instance, Mrigank Kanoi, who will graduate from Washington University’s Olin this spring chose to be an entrepreneurship major and take Family Business Program courses because his family owns a tea plantation in Calcutta, India. The 100-year-old company is currently managed by his father and uncles, and while Kanoi says the business is in doing well and in good hands, direct involvement from his generation doesn’t seem likely at the moment.
“There’s no right or wrong in family business and the most challenging part is managing relationships when a director is also an employee and family member,” Kanoi says, adding none of his cousins have expressed interest in joining the family business. “I’ll be joining the Whirlpool Corporation finance leadership development program as a senior financial analyst, but hope to apply what I’ve learned at Olin to help my family business continue to grow in future.”