Barbara Murray is Executive Director, the Family Business Network.
Joachim Schwass is Director, the IMD – Lombard Odier Darier Hentsch Family Business Center.
John Ward is the Wild Group Professor of Family Business at IMD (Switzerland).
Lausanne is widely acknowledged to be the family business capital of the world. With two major educational centres located there, IMD and the FBN, family businesses can feel assured that their educational and networking needs will all be met
Situated on the shores of the Lake of Geneva, Lausanne has always been an educational centre at different levels: world famous boarding schools, universities and business schools have attracted students from all over the world to this attractive, medieval city. Over recent years, Lausanne has also emerged as the world centre for family business education and networking. Two institutions, which were instrumental in furthering the emerging field of family business as a new academic discipline, are located there: IMD, a business school, and The Family Business Network (FBN), the only worldwide association for family businesses.
The birth of family business education
How did it all start? What is believed to be the world's first international family business programme began in 1988 with the kind of entrepreneurial origins typical to new ventures. Frank Tilley, a Canadian family business entrepreneur in the leather goods industry, took a sabbatical year at an IMD predecessor institution (IMI). With his own needs in mind, he asked about professors or information on family business. Finding none, he wanted to fill the market void with a seminar on family business. (Little did he know that at that time there were hardly any publications or programmes anywhere in the world.) Tilley suggested to the IMD faculty that this would be worthwhile to develop internationally, especially since Europe is at the centre of multi-generational, dynastically oriented family businesses.
Tilley learned of three professors in the US who had an active interest in family business: Ivan Lansberg, John Davis and John Ward. A seminar was put together and Tilley marketed it to alumni and friends of IMD from around the world. An international family business programme, 'Leading the Family Business', was born. Since then, more than 750 participants from approximately 400 families and 40 countries have attended. As a multi-day programme sponsored by an international business school, the participants have come from the older and larger business families with international interests.
Evolution of family business evolution theory
The notice of the early participants is important as the course needed to adapt to the long established cousin-owned businesses more common in Europe. At that time, what little literature and education that did exist was primarily focused on the struggles of business founders in the USA. Then the original thinking and frameworks for what is now popularly known as the 'Stages of Ownership' model (ie, dominant owner to sibling partnership to cousin collaboration) was developed. Listening to the special concerns and experiences of the participants also led to further articulation and refining of concepts such as the family council, owners' council, family university, and ideas on strategic adaptation and renewal. Further, there was a need to learn more about international strategy for family firms and the effects of national culture on family firms.
Early influential family businesses
Three of the first participants in the programme were Stephan Schmidheiny and Thierry Lombard, both of Switzerland, and Hans Peter Wild of Germany. These names are very important in the evolution of family business at IMD and in the field at large. Stephan Schmidheiny funded the first named family business professorships in Europe and one of the first in the world, to be held by Alden G Lank. The family business activities at IMD were also greatly enhanced with the creation of the IMD – Lombard Odier Darier Hentsch Family Business Center, which enables additional research and family business activity. Just this year LODH recommitted its investment in IMD's interests and the Lombard Odier Darier Hentsch Center for Family Business Research was launched. The LODH Center has already supported several new educational cases and research activities in family business culture and best practices of global family enterprises.
Honouring family businesses
Over the years in Lausanne, research deepened the understanding on what makes family businesses more effective. The concept of governance in the family business field emerged a few years ago, in advance of the currently intense attention of the mainstream business world. In parallel to the programme, on occasion of the 50th anniversary of IMD in 1996, the IMD Distinguished Family Business Award was launched, which aims to highlight the global importance of family business and recognise an outstanding company that has successfully blended family and business interests.
Each year a distinguished committee of leading family business owners and academics from all over the world nominate and select a candidate according to a list of seven criteria. Recipients have included: Lego (Denmark); Hermès (France); Puig (Spain); Henkel (Germany); Zegna (Italy); Murugappa (India); and SC Johnson (USA).
Each company has provided meaningful insights into their reasons of succeeding beyond at least three generations. And they have also very generously shared the often difficult and emotionally testing moments that each and every family business faces, sooner or later.
Case study research
Case study research is another ongoing activity in Lausanne. Currently, case writing at IMD is focusing on two areas: ownership forms and adaptive strategy. Ownership designs are found to either insulate the business from family weaknesses (ie, trusts or foundation owners) or to take the business risk to enhance the attachment and interest of family owners (direct family voting ownership). Both alternatives have their limits: too much isolation from the family and the business loses its culture and vigor; too much unchecked family influence inevitably compromises the integrity of the business. The key is that the governed make the choice, not those of another generation.
There's also a great debate brewing between those who believe significant business transformational change is needed to preserve and build long-term shareholder value in an environment of discontinuous change or whether constant, incremental adaptive change works better. Certain conditions favour adaptive change: the business has been constantly adapting in the past; the business has multiple strategic fronts (ie, businesses or vertical integration stages); and the business is proactively adaptive rather than reactively adaptive. Proactive adaptability results from nurturing many strategic sensors by travel, alliances, education and strategic experiments.
To be continuously proactively adaptive requires a special motivation. More commonly successful enterprises coast then stagnate – and then it is too late to adapt. More risky transformational change becomes necessary. The research so far indicates that there are particular motivations for family firms that persistently seek opportunities for adaptation. They feel a sense of social purpose and a responsibility to stewardship. Moreover, they believe their personal reputation is on the line. Care for reputation is an underestimated family business strategic competence.
Early returns on IMD's research into culture are quite promising. The first study shows that family business culture is uniformly stronger in the areas of culture that correlate with business performance (flexibility, customer oriented, etc). The linkage between family values and business culture is now being explored. Workshops are being developed to help families identify their values, manage their culture for strategic advantage, and to transmit their values and culture more effectively.
The birth of the FBN
In parallel to the creation of the educational offerings at IMD, by 1990 the idea of launching an association was already emerging. The new insights into family businesses captured the attention and excitement of many family business members, academics and consultants. A small group of visionaries created the Family Business Network (FBN) in Lausanne. Under the Chairmanship of Drs Albert Jan Thomassen and its Founding Executive Director, Professor Alden G Lank, the FBN was started with a great deal of enthusiasm but no financial resources. The objectives were to "have a world-wide association devoted exclusively to increasing the quality of leadership and management of family-owned enterprises." The initial offerings were a newsletter and an annual conference, both of which are still part of its current membership benefits. The first conference, held in Lausanne in 1990, drew 40 participants – a far cry from today's numbers. Today the association counts over 1600 members from 50 different countries and has seen as many as 500 delegates at its yearly conferences.
The FBN is all about enabling international networking, international learning and international community-building. The activities members can take part in happen at both the global and local levels. At least two-thirds of the family businesses who are members of the FBN enjoy being part of local chapters, many of which organise peer groups, local networking, educational programmes, next generation programmes and local conferences. At the global level, the head office organises the annual world conference, which is the flagship event in the family business calendar. It promotes collaboration on initiatives among the chapters to bring family businesses together from different countries for learning and networking, so that they can benefit from sharing the knowledge and expertise they have gained over the years.
Another new development is being launched this year by a group of next generation members from eight countries. The 'Building the Future' programme is for next generation members who are just emerging from school or university. It allows them to take profit from having some time out before deciding to join their own family business – and gaining family business experience elsewhere. The programme provides internships for young people so they can start learning what family business is about either by joining another family business in a different part of the world, or by joining a programme that supports entrepreneurship in underdeveloped countries.
Industries are sharpened and strengthened when competitors, suppliers, customers and education centres are all located geographically near each other. IMD, early originator of family business education, and the FBN, the global association for family businesses are most fortunate to be in the Lausanne-Geneva region. Local private banks and professional service firms invest keenly in family business insights and services. Several nearby Swiss universities have granted PhDs in family business. And the area is populated with an unusually high number of 100-plus year old family firms.
Lausanne is the Olympic capital of the world, and among other claims to fame, it is now also acknowledged to be the family business capital of the world. Here, business owning families can feel assured that their educational and networking needs can be met through the Family Business Center at IMD and through the FBN. The energy of each institution influences the other and the innovation of one spreads to the other.