Business schools open doors to families

After a slow start, programs aimed at helping family-run companies are catching on

One day, college student Adam Stone hopes to manage his family's aluminum-fabrication company in Dayton, Ohio.

To help him reach that goal, he's taking advantage of one of the latest trends to hit university campuses: the growth of family-business courses.

In the last decade, business school seminars for family executives have expanded from a handful of offerings to at least 120 nationwide. Now, undergraduate programs are starting to become available as well.

Fueling the drive is a better understanding by schools of the need for these kinds of programs, and demand by family businesses themselves.

Within five years, 39 percent of family-owned businesses will experience a leadership change due to retirement, according to the Family Firm Institute in Cambridge, Mass. These "succession events" will create the largest intergenerational transfer of wealth in US history with about $10.4 trillion in net worth transferred by the year 2040, according to economist Robert Avery at Cornell University in Ithaca, N.Y.

As a result, those people stepping up to the plate want to be sure they're well equipped.

"I figure there's a right way and a wrong way to get into the family business, and I'm trying to do it the right way - that's why I'm taking the courses," says Mr. Stone, who returns as a sophomore next month at Stetson University in DeLand, Fla.

For years, such courses were thought unnecessary or unworthy of serious academic study.

"We were considered oddballs, freaks among academic faculty" in the 1980s, says John Davis, a senior lecturer in the family-business program at Harvard Business School. "Most considered us on the fringe for wanting to integrate conversations with family and discussions about business. Now we're seeing faculty from a number of disciplines interested in what's happening here."

Business schools from Harvard to Louisiana State have jumped on the bandwagon in recent years to offer programs to CEOs who answer to 'Mom' or 'Dad.' These executive programs range from classes on "family dynamics" and "conflict resolution" to seminars on topics such as estate planning and social responsibility.

Many believe it's about time such courses were available. At least since World War II, business schools have been stuck on the public-corporation model. Yet more than a third of Fortune 500 companies (Motorola, Bechtel, and Marriott Corporation, to name a few) and more than 90 percent of all companies in the United States are family-operated. Half of US employees work for a family firm.

"In the last 15 years or so, the number of family businesses facing transition between generations has increased and they have been asking for help managing their transitions and educating the younger generation," says Joe Astrachan, professor of family business at Coles College of Business at Kennesaw State University in Marietta, Ga., one of the first to offer a family curriculum in 1986.

At Stetson, however, family business is very new. Its business school began offering graduate-level sem-inars only two years ago.

But it got a jolt last year when it surveyed undergraduate business majors and discovered that 42 percent planned to work in their families' businesses and more than half overall expected to work for a family business.

So this fall the business school is offering a new family-business "concentration" for undergraduates. Greg McCann, who heads the school's Family Business Center, hopes having an undergraduate program as a regular subject will bolster the graduate seminars.

By creating an academic grouping, Stetson becomes one of only a few schools to treat family business as a serious discipline, he says. The University of Dayton in Ohio, Alfred (N.Y.) University, and a few others go further - offering a minor in family business. Other schools are considering family programs as well, reports McCann, who has gotten calls about it.

Most programs, however, are still graduate-level "executive sessions" aimed at luring family executives from comfy offices back to campus. The idea is to confront tough issues such as: Does a family company owe a family member a job? What rules govern family members on the company payroll? And who runs the business when Dad retires?

Failure to handle such issues can create problems.

Nancy Upton, a business professor at Baylor University in Waco, Texas, recalls a man who had worked for two years to craft a plan to transfer control to his children. A nonfamily president was hired to run things while the children were groomed. But the dad's emotional attachment to the business was too strong for him to leave.

"The dad returned," she says. "He said: 'I know you don't want me here and it may destroy the business, but I'm back.' He's willing to sacrifice his relationship with the family because he's so tied up in his business."

Avoiding such fiascos is a goal of seminars that strive to open lines of communication between family members, says Andrew Keyt, executive director of the Family Business Center at Loyola University in Chicago. He says programs allow families to explore their values - and influence the nation's values by the way they do business.

"My father retired two years ago and we're moving through the succession issue right now," says Mark Litzsinger, vice chairman of Follett Corporation in River Grove, Ill. His company is a $1.2 billion business that sells textbooks and operates college bookstores and other educational enterprises nationwide.

Mr. Litzsinger, a fourth-generation member of the 126-year-old firm, says no company transition is without challenges. But Follett's is greatly helped, he says, because he and other family members a decade ago enrolled in the family-business seminar run by Loyola.

Today, five Follett family members still meet for quarterly seminars on topics that may include attracting and retaining key nonfamily managers, compensation for family, and introducing children "to the responsibilities and joys of the family business" - as well as succession.

Though the net number of family-business programs at US business schools is growing, several seminar-style programs have closed. Some blame excess concentration on the executive market or lost sponsorships.

"Many got into this form of family executive development because they thought it was a cash cow," says Ernesto Poza, director of the Family Business Center at the Weatherhead School of Management at Case Western Reserve University in Cleveland. "For some, when the fizzle is gone, they just abandon it."

Stetson's McCann hopes to strengthen his program by involving not just students, but parents as well. Their signatures are needed for undergrads who sign up. That's because students studying their family businesses may need sensitive information, confidentially, for course work.

For college student Stone, it is the chance of a lifetime to find out if he really wants to join the family business. "I might be able to take over when Dad retires," he says. "Part of me wants to go out and do my own thing - try to do something as great as what [Dad] already accomplished. I'm going to keep an open mind."

*E-mail claytonm@csps.com

(c) Copyright 1999. The Christian Science Publishing Society