Maurice Smith is a business journalist with 20 years' experience in newspapers and broadcasting. He is the author of Great Scots in Family Business.
With the creation of so many new family businesses in the past 20 years, there is a greater demand for specialist education in the field. Luckily for family business members, the academic world is responding with more programmes specifically targeted at the sector
Business school professor John Gatrell had a simple hands-on experience which led him down the road to providing specialist education for the family business sector.
A decade ago, he was advising a part-time MBA student who was one of three siblings who were the second generation of a family business which had become slightly moribund as the founder grew older and was struggling to relinquish control of the business to those coming behind.
"He needed hard practical advice, and he knew that he needed an external mentor," remembers Gatrell. "He learned a great deal through his MBA, and was able to go back and put it to good use."
Today, Gatrell runs the Family Enterprise Centre at Bournemouth University Business School, and is experiencing significant growth in demand for services among hundreds of companies in southern England.
His experience is a repeat of that of many academics and researchers around the UK. The first UK centre for family enterprise was created by Barbara Murray at Caledonian University, Glasgow, more than a decade ago. Other active universities and centres are located now at Manchester and London business schools, as well as Gloucester and elsewhere.
The phenomenon is not restricted to the UK. There are now around 20 service providers around Europe, some of them leading business schools who have adapted programmes for the sector, others being specialist centres such as Glasgow Caledonian or others backed to some degree by the various organisations such as the Family Business Network (FBN) and Family Firm Institute (FFI).
"We have a family enterprise centre and we also have specific events for graduate programmes," explains Gatrell.
"We also run workshops for family business, with succession a great issue. These are often an opportunity for people to ask questions. The nature of the information needed means that much of the delivery is through workshops." However, Gatrell finds that "education programmes are great, but not enough in themselves".
His comments match that of every other family enterprise advisor. He adds: "We have always said that we have to take people through the whole thing.
"They get their real-life experience, which is sometimes a very emotional one. We are there to facilitate the planning process. Education is about helping people to develop, the give them new tools to manage and grow their business. The family business sector is quite unique, but there are aspects of management which are similar to other types of business."
Gatrell's experience is matched by others around the country, including John Tucker at the University of Gloucestershire at Cheltenham and Panikkos Poutziouris, senior lecturer in entrepreneurship at the Manchester Science Enterprise Centre.
Poutziouris is a strong example of an academic and practitioner whose services have been sought-after by advisors and family businesses alike. He retains a link at Manchester Business School, where he was a Fellow in small- and medium-sized enterprise (SME) management for many years.
"People like Poutziouris, Murray and others were pioneers in this area. Europe was very far behind the United States – 10 or 15 years – not only in providing specialist education and advisory services, but also in recognising the importance of the family enterprise sector," comments one long-standing professional advisor.
Today most western European countries have at least one significant family enterprise institute or programme for management development. These include Jyvaskyla University, Finland, Witten/Herdecke University in Germany and Nyenrode University in the Netherlands.
Spain, UK and Italy all have major family business centres and INSEAD – one of the world's leading business schools based in France – offers specialist education for the sector.
The principal issues are very familiar to those engaged in family business advice:
- Succession management;
- Funding growth, both organic or by acquisition; and
- Development of management and "corporate" knowledge.
Specialist advisors have tackled these issues in a "niche" manner to date. For example, succession management is by far the single most fraught issue for every family business.
It can happen at several levels. First of all, if a founder is handing over to the second generation, there are the various problems of timing, compensation, the question of whether the founder thinks his or her successor is up to the job (and the converse question of whether there is a successor who is actually interested in taking over).
These kinds of issues require very specialist advice, dispensed usually after a great deal of counselling, often undertaken "one to one".
Secondly, family enterprises invariably want to fund growth from reserves. Rather than chucking cash back to hungry shareholders, many businesses are able to accumulate cash within the businesses for contingencies such as the need to grow, or to grow by acquisition.
Very few family companies will spend a great deal of that heard-earned and carefully saved money on expensive corporate finance houses and advisors. They are more likely to seek advice internally, as part of a consensus approach developed within the business, or to rely on the counsel of long-standing friends and business associates such as lawyers and accountants.
Increasingly, however, the third major issue – developing and managing corporate knowledge – is one which can gain greatly from a more formal approach such as that offered by the business schools.
Next generation managers are finding an increasing number of possible routes to establishing best practices simply by using the business school approach to find out more. The track is proving to be attractive both to family members working within a business, and to the increasing proportion of non-family managers joining companies.
"I was intrigued when the chance of working with a family business came up," says the financial director of one British confectionery business. The only non-family member on the board, he joined from a listed retail group with whom he had spent nearly 20 years.
"My previous company put me through business school. At first I thought this might go against me in a family business which is very much led by an entrepreneur who had very little formal education himself," remembers the director. "However, I think he realised that the company and family are very much intertwined and have been for more than 25 years and my arrival helped bring new thinking.
"Companies who are used to doing everything in their own way can find it hard sometimes to keep up with changes, for example in technology. Suddenly I found that my own experience, and my formal business education, was actually a big advantage. Our financial planning came together very quickly, especially in the area of capital investment, and we built an efficient new plant which helped us enter new geographical markets."
Responding to the need
The business schools are responding to changing demand, and the realisation that family enterprise and owner-managed businesses create a high proportion of new jobs. Their contribution to the Western economy has been under-estimated for years, especially in economies with strong financial markets such as the United States and the UK.
Many years ago, Babson College in Massachusetts was just about the only business school which most people could identify with education in the enterprise and family business sectors.
Today, more than 150 business schools and institutions in North America and Europe can claim to provide tailored business education for the sector. The number is growing each year, and it is expanding into areas such as Mexico, southern Europe and Asia.
Some of these providers are conventional business schools who have extended their reach into the sector. Others are specialist family enterprise centres which have become attached to universities and business schools, sometimes with the support of specialist consultancies.
"I think it is a lot more acceptable today to tell an entrepreneur or family businessman that you have an MBA," says one company manager. "At least they do not look at you as if you have two heads!"