My class begins with a diverse group of MBA and HBA students from around the world sharing personal stories about their family business. A young woman in the front of the class began by describing her father’s views on her role in the business. He is a successful developer of some prominence and when his daughter shared with the class that her father “would not” hire her into the family firm, most of the class took a dim view of “dad,” with some expressing displeasure with a solid round of boo’s! The discussion centred on what is a family business for if not a vehicle to provide opportunity for family members?
After considerable debate, my student concludes that her dad had two reasons not to hire her: First, he said he would not want the other employees to think that she was hired for her last name. Second, and most importantly, he didn’t want her to think she was hired for her last name. The second point’s a mood changer, with several expressions of “Ah, how sweet!” The students immediately “got it” that not hiring his daughter was an expression of love. He cared so much for his daughter that he wanted to ensure she was armed for the world with a healthy dose of self-worth, self-confidence and self-esteem.
Over the ten years since we launched the Business Families Centre at the Ivey Business School, I have seen dramatic change in our students’ attitudes and awareness of family business. In the first several years of my course titled “Leading Family Firms,” I would ask the students about their intentions with the use of their education in relation to their family firm. About half would reply that they came to Ivey to get a degree to get “away” from the family business, while the other half came for that same degree to “help” the family business. When I asked, how many have shared their thoughts with their parents? There was dead silence. The lack of communication between parents and children about their family business was glaring, though not totally surprising as kids don’t typically spend a lot of time talking with parents about their jobs. But these were business students, self-selecting to come to a place to talk about business every day.
I reminded my students how difficult it would be for their families if they discovered this mismatch of expectations at an inopportune moment. Consider the peaks and valleys of the financial markets when a business’ value may swing dramatically. Parents may have a great, “once in a lifetime” opportunity to sell their firm at peak valuations but they hold onto it because they want to pass it on to their children. This missed opportunity can turn sour when their children later announce that they have their own passion and want nothing to do with the family business. Conversely, parents may sell a firm to a strategic buyer to ensure their own retirement objectives are met, only to discover that their kids harboured a dream of taking over the firm they “grew up in.”
Thankfully, things have changed for the better and I can trace the upswing to two factors worth mentioning. Firstly, the dramatic meltdown of the global financial system in 2008 put tremendous strain on the employability of all students. Companies that were recruiting students vanished overnight or scaled back offers as they cut employees by the thousands. Suddenly, there was a new found respect for mom and dad surviving all these years as business owners. Students learned that their parents managed to plan for the long term in ways that some of the largest firms did not. The second factor has been a better understanding of the strengths of family owned firms as communicated by advisors. In the past, the advisor community often approached the subject of family business by emphasizing the negative, like highlighting the failure rate for firms lasting to a third generation. Today, we know that family firms outperform other ownership forms and of all firms that last those three generations, the survivors are disproportionately family owned. In short, we are communicating a message of success while still offering to assist family firms with the unique challenges they face. When you speak to an entrepreneur from a perspective of “congratulations on your years of success” and then ask how can I help you, the chance of dialogue goes way up. My students today are much more comfortable being transparent with their parents about the family firms, and parents are proud to discuss their business with their kids.
The advisor community is also getting a better handle on helping families understand the clarity of purpose needed to succeed. At Ivey, we hosted a celebration with advisors and business families a few years ago and prominent family business advisor David Bork provided some sage advice to our audience. He reminded us that families would be better served if they remembered their roles:
“The task of family is to raise responsible adults who have high self-esteem and can function independently in their world – Acceptance is unconditional. “
“The task of Business is to generate profits – Acceptance is based on competence, ability to develop skills to produce and perform”
Keeping their distinctions clear is critical for long term success for both the business and the family. As my student found out from her dad, over the long haul, this tough love approach builds a stronger family and a stronger business.