Family Business: Education

Whether an adult son or daughter is eager to understand the ins and outs of the family business or a curious grandchild expresses passion for creating a difference in the world using impact investing strategies, a family’s rising generation needs opportunities for development and leadership more than ever. There are many ways for the rising generation to find a voice and engagement within their family enterprise.

In his book The Voice of the Rising Generation, James E. Hughes Jr. explains not only the strength and power of a founder’s original dream to steer a family’s success but also its capability to elude future generations. He calls this phenomenon the “black hole” because of its unexpected tendency to create silence and uncertainty in families of wealth. When a wealth creator’s intentions are unclear or go uncommunicated, challenges often occur when members of a young and curious rising generation seek to create and grow individual legacies within their family upon entering adulthood.

Developing the rising generation
In many families of wealth, the rising generation is eager to get involved and shape their identity within the scope of their family’s business. Families with strong cohesion are typically well-positioned to make better financial decisions. It is imperative that the next generation be prepared for a successful transfer of wealth through coaching and skill development.

Money and wealth generally aren’t easy topics for parents to discuss with their children, especially at a young age. Sometimes these conversations never even occur, which makes succession planning and understanding the intentions of the wealth creator very difficult.

Knowing these pain points, parents and grandparents can implement an alternative strategy: To avoid stumbling through a tough conversation that leaves everyone feeling emotionally drained and dissatisfied, instead choose to engage the rising generation in the family business and develop leadership skills early on, especially when younger members express interest in getting involved. As future leaders of the family and its wealth, rising-generation members need an opportunity to grow and develop in ways that will prepare them for a successful leadership and stewardship role down the road.

Improving family engagement
Unintended consequences can occur when families experience life changes or begin to transfer wealth. When their family engagement is minimal or expectations are misrepresented, emotions can run high and create barriers to good communication between generations. Families run the risk of damaging relationships and harming the family system when one generation is misrepresented or a disconnect exists between generations. These situations are often much harder to untangle once they’ve hit a breaking point than if they were to be avoided altogether with proactive strategies.

Strong relationships between generations begin with good communication and transparency around intentions and expectations, especially for older generations. Families must embrace the rising generation in appropriate roles that can empower and equip them with strong leadership skills. When I describe engagement for parents or grandparents, I don’t mean increasing trust distributions or naming them CEO of the family office. Engagement is created through increased opportunities for younger family members intended to develop and expose them to experiences and responsibilities that will benefit them later in life. This could be through experiential learning, junior boards, family foundations, philanthropic activities or leadership roles in the family meeting.

For example, if a family finds ways to give together, it often becomes a contagious practice that will open conversations around what each family member and generation is passionate about. It also offers an opportunity to discuss purpose around transactions and emphasize the meaning of what the original creator intended for the family’s wealth.

Giving together is one example of the many opportunities available to teach the rising generation about stewardship, responsibility and humility through a meaningful experience. These exercises in experiential learning are very successful at prompting conversations about family values and wealth, particularly between generations.

The importance of learning and leadership
Families should work together to model a “learning family” approach that enables them to evaluate new ideas and foster an open culture on an ongoing basis. Adopting learning as a core value will position the family for well-sustained succession. A strong willingness and openness to learn — for every family member — is vital for a family’s long-term health.

Learning is also an important pillar in leadership. Kelsey Meyer has written in Forbes about leaders as full-time learners: “I respect leaders who are continuously learning because I know they’re challenging their own assumptions and bringing more knowledge to the table each time.”

It’s no coincidence that increasing leadership experiences for young professionals in the workplace is trending as businesses learn to embrace today’s rising generation. According to a Pew Research Center study in 2018, millennials now make up the largest generation in the U.S. labor force. They are quickly ascending into management and leadership roles, constantly adapting to change. Growing up alongside the fast pace of technology has enabled them to thrive in a state of constant transformation. Organizations are urged to be fluid and challenge traditional hierarchical decision making to embrace the purpose-driven and fast-paced habits of millennials.

This mirrors the strong desires of millennials in family firms to find purpose, clarity and flexibility in their family governance structures. Creating systems and opportunities to empower them is a proactive way to embrace their involvement. For example, families can provide opportunities for their young adults to coordinate and produce educational and leadership programming specific to their needs. Especially with larger families, young adults can serve on a committee tasked with creating relevant and interesting programming for rising-generation members.

A speaker could be invited or a workshop conducted to expose the rising generation to hands-on leadership skills. Committee members will not only benefit from the material presented in these programs, but also gain experience working together. The committee might be asked to provide the larger family with a summary of their learnings and successes. Having dedicated resources and structures in place to embrace the rising generation’s involvement is a great way to introduce conversations that may otherwise seem uncomfortable or difficult.

Some family offices can provide a dedicated specialist with experience in education and training to enhance the learning opportunities and leadership development available to a family and its rising generation. This usually falls under the role of a family education specialist who can function as a facilitator or coach. Having a chief learning officer is a new and increasing trend in the family office space, especially for larger families.

Another way to embrace learning as a family strategy is to appoint a committee of young family members tasked with creating their own development strategy, perhaps with help from a facilitator. Integration is more systemic and sustainable over the long term if the rising generations are involved in setting part of the family meeting agenda or developing programming. This allows the rising generation the runway to vet ideas and propose interests within the parameters of the family’s governance and values.

A comprehensive strategy like this can help the family communicate, make better decisions and build stronger trust with one another.

Takeaways for families
A successful family business doesn’t automatically translate into a successful family system. Families don’t grow through transactions and revenue, as businesses do. Each family is different, with unique situations and success factors that often can’t be measured, and each generation must understand how to make decisions and communicate effectively with other generations.

A family needs guidance in creating structures around empowering the rising generation in their family system. A family’s well-being is strengthened when learning and training are a regular part of each member’s development. Going back to Hughes’s “black hole” analogy, the solution is to establish clarity about family values and intentions.
Family meetings and facilitated discussions can provide valuable opportunities for each family member to express passions, purpose and intention. Practicing key communication and facilitation techniques can make a difference in the outcome of these meetings.

Families that continue to educate themselves will adapt faster to challenges and position themselves for long-term success. Today, that could mean incorporating the millennial generation’s search for purpose. Tomorrow, it might be engaging Generation Z, who never experienced a time without cell phones and iPads.

Families should see the rising generation as future leaders and decision-makers in the family system. By putting structure in place, a family can create unique development opportunities no matter a generation’s habits and tendencies. This is what makes a family sustainable over generations. When families build trust and refine their skills, they are likely to make better and stronger financial decisions.                                  

Jeff Strese is chief talent and learning officer at Tolleson Wealth Management (www.tollesonwealth.com).

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Dramatic change is on the horizon, and multigenerational businesses are facing critical transition issues as ownership in private companies and substantial wealth are transferred between generations. Because few families are ready for these transitions, the family office will play an increasingly important role in supporting the family.

The Family Office Exchange (FOX) has worked closely with families, family office executives and advisers for more than 30 years. According to the 2019 FOX Family Office Benchmarking Report, the rising generation is often unprepared to take on a leadership role.

This FOX proprietary study found that while 41% of families identified “helping the rising generation become productive adults” as one of their top three priorities, 78% of respondents lacked a formal program to educate their rising generation.

FOX has identified three fundamental tips to guide family offices in planning family education programming:

1. Take a more strategic role in helping families prepare future leaders. A key succession challenge is that the rising generation is unprepared to take on a leadership role. Family office executives should become the champion for family learning and design or work with outside experts to institute programs beginning at an early age. Key building blocks for this program may include fostering personal identity and growth, increasing financial acumen, teaching leadership skills, defining the responsibilities of shared ownership and engagement, and providing training in family governance and participation on the board.

Families that do this well form multigenerational committees to develop goals related to family learning. In time, these working groups evolve into a family education committee. Committee members work together to create family learning tracks, set education expectations and plan learning events. With structured assistance from a learning champion or consultant, families reap the rewards of engaged and educated participants. 

2. Focus on family values. All learning programs should be anchored to the family culture, history and values. FOX experience suggests that family learning not only prepares future leaders but also can bind the family more closely together. Common approaches include:

• Exploring and understanding how shared family values can be articulated in the future.

• Openly discussing the family culture and where divergent views may reside.

• Tying family values into core learning programs on topics such as investing, philanthropy and wealth transfer.

Families that focus on shared values and regular communication are more cohesive, better organized and able to work together effectively. Many families begin rising-generation education, or in-law onboarding, by focusing on the family history and values. In some cases, families also focus on finding meaning and purpose in life, in conjunction with these values, before embarking on a specific education curriculum. This “family first” approach provides a foundation for all future learning. It gives learners cultural roots before they begin technical education.

3. Understand that one size doesn’t fit all. Families often span multiple generations, geographies and levels of sophistication. Family learning requires thoughtful planning and customization to meet the needs of the entire family. Programs should also address multiple styles of learning and provide different educational settings, including peer groups, family groups, individualized coaching and online learning.

Families that have thriving and productive rising-generation members allow for autonomy and belonging. It is important to encourage the rising generation to express their personal identity and choose learning opportunities that fit their life paths. It’s equally important that all family members feel a sense of belonging and understand the education and participation that is expected of them. This includes family attendance at industry learning events, in-house programs, education sessions at family gatherings and meetings with consultants. 

A family that is committed to education will also create a pathway for engagement with the family business, including such options as traditional employment, customized learning experiences and an idea lab. The idea lab provides a way to capture the innovative suggestions of all family members who aren’t interested in an onsite experience and provides an appropriate way for them to offer input. It creates engagement and shields company staff from an unexpected call from a family member. Each pathway offers a customized approach for those who want to engage on a different level. Allowing flexibility in how family members engage with the business can work well to accommodate everyone in a diverse family.

The priorities and focus on family education will differ for each family, but the family office can play a key role in making the case for a well-thought-out plan and emphasizing the importance of preparing for transitions.

Mindy Kalinowski Earley is chief learning officer for the Family Learning Center at the Family Office Exchange (www.familyoffice.com).

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Nearly 100 years ago, Pierre S. du Pont was concerned about the difficulties future du Ponts would face as a result of the fortune being generated by the young chemical giant of the same name.

Du Pont, one of the three cousins who transformed the family’s 100-year-old gunpowder business into the modern DuPont Co. in 1902, wrote to his nephew in 1922 about his concern that “du Ponts born to a position of wealth” would not have to “work for a living” as had previous generations dating back to the 1802 patriarchal founder, according to Pierre S. du Pont and the Making of the Modern Corporation, by Alfred D. Chandler and Stephen Salsbury.

The coming generations could need “greater moral stamina to combat the temptations of wealth and luxury and to carry forward, in a manner becoming the family traditions,” du Pont wrote in the letter. He warned: “If you fail in your example those immediately following you may do likewise.…”

Generations later, these types of concerns continue to trouble owners of successful family businesses and other high-net-worth individuals. At the start of the economic downtown in the last decade, 53% of high-net-worth parents reported that they worried about the possible negative impact wealth with have on their children, according to a U.S. Trust Survey of Affluent Americans in 2007. Those who work with wealthy families say that figure still seems valid today and is likely an age-old fear among those who amass wealth. 

Nearly three-quarters of the affluent parents who responded to the U.S. Trust survey reported that they themselves taught their children to manage wealth. Today, there are professionals who can help provide wealth education for heirs. The most tailored, hands-on education can come through the family office. These entities that serve high-net-worth families can offer a wide range of customized schooling and counseling services, starting with children as young as 2 years old.

With the number of family offices exploding in recent years, these entities have often evolved to include family education.

“There is a growing awareness among sophisticated families about the real danger in doing nothing,” says Donna Trammell, director of family wealth stewardship at Bessemer Trust, a multifamily office.

The demand for such services is likely to grow as an estimated $15.4 trillion in wealth is expected to be transferred by individuals with a net worth of $5 million or more by 2030, according to “A Generational Shift: Family Wealth Transfer Report 2019,” by Wealth-X, a company that provides data analysis of wealthy individuals for-prestige brands in industries such as financial services and higher education.

The education offered by many family offices today usually involves much more than just teaching young people how to read a balance sheet, create a budget, understand a buy-sell stock agreement or perform other basic financial tasks. More important, many family offices work to provide social and emotional support to imbue heirs with the qualities they need for a meaningful life.

Ryan Agre, director of Vermeer Family Office, an entity embedded in the Vermeer Corporation, a family-owned manufacturer of construction, industrial and agricultural equipment based in Pella, Iowa, says his role includes anything that could help prepare future generations, whether it’s financial fluency, college planning or character development. He describes himself as “part coach, part teacher, part cop, part firefighter, part disciplinarian,” to name a few roles he performs.

“It is an investment and it’s a long-term payoff,” says Agre about the work a family office does to educate heirs.

The need
Often a family turns to a family office for generational education after a precipitating event, says Jill Shipley, senior managing director of family culture, impact and governance at Cresset Family Office.

Perhaps a young family member hears in school that his family is wealthy. A college-age heir might be approached by a friend with some investment or business opportunity. Marriage plans might necessitate a discussion around prenuptial agreements.

In addition, more and more information about a family’s financial situation is floating around the internet. Some information can be misleading to the next generation, Trammell says.

“If a number is revealed, the family office can provide important context for it,” she explains. “For example, many NextGen clients need some help understanding the different considerations for a $10 million and $100 million pool of assets.”

But while there are instances where the next generation might request more transparency, in most cases “it’s a top-down issue,” initiated by their elders, says Rhona Vogel, founder and CEO of Vogel Consulting Group, a multifamily office.

“Parents are worried about how this inheritance will impact their children,” Shipley points out. “I see parents initiating out of worry.”

Robert (Bobby) A. Stover Jr., Americas family office leader at EY, agrees. He often hears: “I don’t want money to spoil my children.”

Certainly, there are enough cautionary tales of profligate children and squandered fortunes through the ages to keep any parent up at night.

Thayer Willis, whose family founded Georgia-Pacific Corp., knows the pitfalls firsthand. She recalls she had an “attitude of entitlement” and “taking things for granted.”

“My father was a very kind person, but he couldn’t say ‘no’ to me,” Willis recalls. “My father felt like there was plenty, and why wouldn’t he give it?”

But Willis explains that her father was brought up in modest circumstances and had no experience with raising affluent children.

“The people that make the money don’t know anything about bringing up wealthy kids,” says Willis, the author of Navigating the Dark Side of Wealth: A Life Guide for Inheritors. “Parents raised in much more modest circumstances want to give kids things they didn’t have.”

This is where a partner, such as a family office, can provide sound, dispassionate guidance. Indeed, many family offices now have chief learning officers.

“A family office can be a catalyst to preparing the family on three fronts: act as a sounding board for parents in developing messages to share with future generations, reinforce those messages when interacting with younger generations, and act as a capable teacher/coach who is, sometimes importantly, not a parent,” Trammell explains.
This takes the parent “off the hook that they should know better or they should know how,” explains Amy Hart Clyne, chief knowledge and learning officer at Pitcairn, a multifamily office.

The nuts and bolts
Family office professionals agree that helping heirs achieve financial fluency should begin as early as possible and be continuous. Some say toddlers can pick up valuable lessons.

“They know the wealth is around. The sooner you start educating, the better kids are at absorbing it,” says Stover.
Smaller children can play games that require decision making. Shipley suggests fun activities like a bank tour or a visit to a nonprofit organization. Another method is to coach parents to take advantage of everyday teaching moments, such as explaining what happens when you swipe a credit card, adds Lauren Blatz, director of family education at GenSpring Family Offices. These are opportunities to educate children in navigating the real world, not through abstract concepts or theories.

“We try to take advantage of what’s going on in their lives,” such as getting a first paycheck or first credit card, Blatz explains. “We’re trying to coach our clients into more responsibility.”

The Vermeer family office takes advantage of “pop-up learning opportunities” by presenting lessons in person or by video conference, Agre says. For example, Vermeer held a session on the proper use of social media and the potential fallout from a hasty tweet or post.

Pitcairn has developed an “individualized learning map” for heirs that has many different components, including financial aspects, Clyne says. It’s a dynamic approach that allows for flexibility.

While Bessemer Trust offers strategies and exercises families can practice at home with young children, it typically starts working with the next generation in their teens or early 20s.

This enables the NextGens to “get comfortable with their team of advisers before they reach important financial and personal milestones,” Trammell says.

The responsibilities of ownership
Business families may overlook the necessity to educate the next generation to be responsible owners, particularly if a child is not expected to be employed in the business. But early education by a family office in this area can help circumvent future difficulties.

Shipley, who taught responsible ownership to college students whose families owned a business, says even those not working in the family enterprise needed an understanding of business finance, accounting, family systems and family dynamics.

Shipley’s approach is to understand an individual’s goals, hopes and fears, as well as their current and future roles and responsibilities.

“I help families develop governance systems to ensure owners — especially those not working in the business — are informed, have an appropriate voice and understand the implications of being a stakeholder and shareholder,” Shipley says. “Many heirs benefit from technical education on the financials, budgeting, understanding shareholder agreements, gaining clarity around distribution and implications on one’s financial life, estate planning and passing on shares to future generations, etc.”

At Vermeer, all age groups learn about the “implications, opportunities and challenges of family business ownership,” Agre says. “Our NextGen program is geared toward education on Vermeer ownership, in age-appropriate ways, while also helping them understand themselves better, which creates a more stable ownership group.”

This year, for example, children 16 and younger created a lemonade stand. “They had to pick the spot in Pella for the stand, build the stand from a kit, choose the type of lemonade to serve, choose the sales price based on the input costs, sell the product and then (as a team) deliberate and choose a charity that would receive all of the profit,” Agre says.

“These hands-on activities cement how business works, but also the family’s goals of teamwork and philanthropy.”

Family wealth education do’s and don’ts

Amy Hart Clyne, chief knowledge and learning officer at Pitcairn, offers these recommendations for educating NextGens about business stewardship and family wealth:

Do:
Tap your resources. Give the NextGens space to learn outside the family structure and to benefit from experienced professionals who have demonstrated this unique competency.

Set family and individual learning goals. Develop personalized SMART (Specific, Measurable, Attainable, Relevant and Timely) goals. Don’t be afraid to include some stretch goals. For example, a reasonable goal for a 21-year-old family member might be to build a personal budget for 2020. A stretch goal might be to create a personal economic mission statement.

Make it engaging and fun. Provide a variety of flexible formats.  Meet NextGens where they are (which means taking time to understand where they are and what they want to know). If they are old enough and mature enough, enlist them in building their own learning experiences. These experiences should be relevant and current. Don’t just tell them how the world works, show them.

Be intentional about communication and inclusion. Find ways to share experiences in order to build relationships and family cohesion. Parents need to tell their heirs their plans. Find ways to support the individual and ways to support the family. Intentionally bring in-laws into the conversation. Let the younger generations in.

Budget for these experiences. Set aside money to cover the cost of the learning programs — it’s an expense often overlooked. Establish a policy that spells out how the budget will be administered and what qualifies as a family learning expense: grad school tuition, conference fees, one-on-one learning sessions, coaches, etc.

Don’t:
Impose. Don’t be dogmatic or prescriptive. Don’t impose a plan without seeking input from the intended participants.

Assume. Don’t presume your NextGens will learn what they need to know in school. Make sure the advisers you engage have the necessary competency and experience. Don’t presume family members will be able to learn the responsibilities of a role by osmosis. Don’t assume one size fits all.

Vermeer has also instituted family summer camps that focus on relationships. Participants learn about the history of the company as well as the family’s service to the community.

Bessemer Trust takes a holistic approach when working with future owners. The process begins as early as possible, Trammell says.

“If good governance is already in place among the adults, we often suggest forming a junior council when the youngest child is around 7 or 8 years old,” she says. “In that regular forum, often adjacent to or concurrent with the annual stakeholders’ meeting, we can help the junior council understand what it means to be a good steward.”

The content of the forums is age-appropriate and interactive, such as bringing the company’s values statement to life. Other times it might involve interviewing a family director.

“All of this is done in the spirit of preparing them to be the best business owners they can be,” Trammell says. “After each session, we typically encourage the junior council to present what they’ve learned to the broader group, so they start to become confident with their knowledge of the business.”

To help next-generation family members understand what it means to be a partner, Bessemer works with families on their shared vision and on communication and conflict management skills. Having a facilitator present allows everyone to be heard and keeps the discussion moving forward.

“Family members need to trust each other and want to work together, and often that trust is built through regular family meetings that don’t focus only on business decisions,” Trammell adds. “Consistently adding pleasurable shared experiences to the family bank is important so that they will have more to draw from in times of conflict.”
Shipley says she works on styles of communication, including helping young people understand their own way of communicating and the communication preferences of their partners. Also beneficial is training on generational differences in attitudes, values and behaviors.

“This helps increase understanding and reduce judgment,” Shipley explains.

When it comes to educating future company directors and/or trustees, family offices can help with the basics, like understanding a trust document and the duties a director or trustee owes to the organization or trust beneficiaries.

“A clear understanding of the role of a board member and how the board will interact with the ownership group and management is essential to the success of a family business over generations,” Trammell says.

The tricky part
Much harder to impart are the social and emotional qualities that wealthy children will need to lead a worthwhile life, experts say.

Indeed, some, including Willis, believe there can be too much emphasis on financial matters.

Children need opportunities to develop self-worth, confidence and resilience. This can be tough if “the world looks at you as if you don’t have the right to have problems,” Shipley points out. “Growing up in the shadow of success can be paralyzing.”

Willis remembers she was “irresponsible, fickle and spoiled,” into young adulthood.

By contrast, Jeanna French, whose father founded the J.L. French Corporation, an aluminum die casting company, grew up without expectation of great wealth. Indeed, she says, there were periods when it looked as if the business wouldn’t survive. French was in her late 30s when the business was sold and her family experienced a liquidity event.

“I think we were lucky because we were old enough,” says French, whose family is a client of Vogel Consulting’s family office services. “We already knew the value of money. We’d paid bills and been out in the world.”

The way French sees it, family offices can help family members realize each other’s strengths and remain a cohesive unit. A family office can serve as the outside, unbiased adviser and counselor.

“Future generations need to be armed with both a technical understanding of investments and with the softer skill sets: communication, conflict resolution, delayed gratification and gratitude,” Trammell says.

By helping to develop such life skills, family offices can guide the next generation to fulfill its potential.

“Wealth is not there to be on easy street. You want them to self-actualize,” Vogel explains.

Clyne puts it this way: “If Pitcairn could do one thing for every family as they navigate their family’s dynamics, it would be to help them facilitate a dialogue around their values and mission. It’s foundational work that will benefit the family long into the future.”

Agre believes that helping heirs develop a strong sense of themselves is the underpinning of any good educational effort. “Know thyself. That is foundational to everything else.”

One way to achieve that is by nurturing individual talents. For example, Agre coaches Vermeer family members in sports, and there he learns their strengths and weaknesses. “You can give all kinds of advice on technical matters, but you can’t buy intimacy and can’t buy trust,” Agre says.

When children get older, a trusted family office member can be the neutral third party serving in the role of a wise aunt or uncle. “Having an outside voice helps,” Shipley says. “Professionals can say same thing as parents, but it comes across differently.”

While a family office can help launch children into the real world, parents should remember there’s no standard model when it comes to wealth education. Programs can be as unique and varied as families are.

“There’s no ‘every-family-ought-to-do-this’ rule,” Vogel says.                                                                  

Maureen Milford is a frequent contributor to Family Business. She last wrote about the pros and cons of debt.

 

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Forty-one years ago, Renato Tagiuri and I were looking for a framework to categorize the issues, interests and concerns voiced by Tagiuri’s executive students, most of whom led family companies. It was 1978, and I was a first-year doctoral student. Tagiuri was a faculty member in a Harvard Business School executive program and had invited me to be his research assistant.

Over the next four and a half years, we interviewed family company owner-managers and surveyed hundreds of executive students on various family business topics. We met almost daily in the lounge of Humphrey House on the business school campus to discuss our projects and findings. We would diagram one situation after another, try to explain why this issue or that problem came about, and how the family influenced the business. Almost nothing in the literature guided this exploration. The only conceptual model of a family business system at the time was a two-circle framework, which recognized the influence of family and business on each other and the need for alignment of goals and interests.

This model always felt inadequate, whether we were discussing a fledgling retail operation owned and run by husband-and-wife founders or a late-generation manufacturing empire owned by cousins with many non-family executives.

Two circles became three circles
One day in the fall of 1978, I reviewed a couple of cases and Tagiuri took out his pen and drew two circles to represent the family and the business. “That’s part of it,” I remember saying, “But in this system, they are fighting over getting shares in the company. Some of the family members are owners and some are not, and the two circles don’t account for that.”

Tagiuri thought for a moment. “Would this work?” He sketched a third circle overlapping both of the first two, and labeled it Ownership.

And that was it. That would work — beautifully. The Three-Circle Model not only fit every case we could think of, but also helped us understand the perspectives, goals and concerns of everyone involved. The addition of the ownership circle brought to attention issues that were not explicitly recognized by the first two circles. Succession had to do with passing leadership and ownership. Some tough situations were resolved through buyouts of owners. Capitalizing a family business sometimes required bringing in outside owners. Linking the family, business and ownership circles now fully defined the family business system.

The model may seem elementary, but for four decades now academics, business families and their advisers have been sketching these three circles to gain insight into the workings of family business and business family relationships. All family business systems can be described — and each one uniquely described — using the three circles.

The diagram also framed our definition of family companies: A family company is one whose ownership is controlled by a single family and where two or more family members significantly influence the direction and policies of the business, through their management positions, ownership rights or family roles.

The Three-Circle Model explained
The Three-Circle Model shows three interdependent and overlapping groups: family, ownership and business. An individual in a family business system occupies one of the seven sectors that are formed by these overlapping circles. An owner (partner or shareholder) will sit within the top circle. Family members will occupy the left-hand circle, and employees of the family company the right-hand circle. If you fill two roles, you will be in an overlapping sector, sitting within two circles at one time. If you are a family member who works in the business but has no ownership stake, you’re in the bottom-center sector. If you are a family member who owns a stake in the business but is not employed in the business, you’re in the left center sector. If you are a family member who works in the business and is an owner, then you’ll sit in the center of the three overlapping circles. Non-family members who are owners or employees (or both) are represented in the three right-hand sectors.

With the Three-Circle Model, one can depict seven distinct interest groups (or stakeholders) with a connection to the family business. Moving in a clockwise direction from the bottom left:

1. Family members not involved in the business, but who are descendants or spouses/partners of owners.
2. Family owners not employed in the business.
3. Non-family owners who do not work in the business.
4. Non-family owners who work in the business.
5. Non-family employees.
6. Family members who work in the business but are not owners.
7. Family owners who work in the business.

Each of the seven interest groups identified by the model has its own viewpoints, goals, concerns and dynamics. The model reminds us that each sector has legitimate views that deserve to be respected, but these views also must be integrated to set future direction for the family business system. The long-term success of a family business system depends on the functioning and mutual support of each of these groups.

Changing the game
Sitting around the conference table in the Humphrey House lounge in the late 1970s, Tagiuri and I had no sense that we were inventing a game-changer. For starters, there wasn’t really a game to be changed; the study of family business was in its infancy. There was almost no documented conceptual thinking on these systems. Through doodling, we were simply trying to develop a useful tool to organize our thinking. From those doodles came a model that has, decade after decade, allowed for consistently deep analysis of family businesses.

Here are six often-noted impacts and consequences of using the Three-Circle Model.

1. Family business members, students, academics and advisers worldwide have witnessed the transformative power of the Three-Circle Model. It clarifies and explains issues to be resolved, different perspectives of individuals involved and why challenges exist. Whenever I’m in a classroom helping MBA students get their arms around their system for the first time, my students will later tell me that when they saw the three circles, it all made sense.

2. The three overlapping circles or subsystems indicate that what happens in one circle influences the others. If one circle, say the family, is in conflict or stuck, it can pull down the performance of the other circles and stall the development of the entire business. A high-performing business, meanwhile, can create pride in a family and build unity in the ownership group.

3. The circles visually raise questions that beg for answers. The Three-Circle Model helps not only to identify where in the family business system issues are occurring, but also to diagnose why issues have occurred or spread from one circle to another.

4. The neutrality of the model can defuse tensions in the family business system by illustrating the power of roles; a systems-oriented approach can alleviate some of the blaming that often goes on. People have told me that relationship tensions just made more sense after they saw where their relatives were located in the model.

5. The Three-Circle Model explicitly recognizes the several interest groups or constituencies in the family business system. It becomes apparent that every group in the system has its own, legitimate interest in the family business, and all groups must be respected, responded to and integrated in some way into company policies and decisions.

6. The model teaches that the needs of the three circles, and of each interest group, evolve and change over time. Families should not only address their current challenges, but also prepare for likely future challenges. Fortunately, the development of each circle over generations is fairly predictable (see Generation to Generation: Life Cycles of the Family Business, by Kelin E. Gersick, John A. Davis, Marion McCollum Hampton and Ivan Lansberg, Harvard Business School Press, 1997).

Withstanding the test of time
When so much in business, technology, wealth, family and society has changed and continues to change, how can a 40-year-old model still help us understand and manage issues in current family business systems?

Part of the reason why the Three-Circle Model has withstood the test of time is its adaptability. The model, for instance, readily incorporates new definitions of “family”: In-laws, blended families, divorced couples, adopted children, domestic partners and whoever is called a member of the “business family” through ownership all have roles within the model.

Likewise, the ownership circle can accommodate many scenarios. If a family business goes public or invites a private equity partner, the model accommodates that ownership change. If the company issues different classes of stock (voting and non-voting), and holds some of the shares in a trust, the model accommodates that.

In addition, the business circle of the model may represent one business or multiple businesses, holding companies, joint ventures and more. It can even describe a situation where the business family has sold its operating company and is managing their financial assets as an entity (sometimes in a family office). The family is in a different business, but managing their assets is still their business. The “business” circle can be labeled “family office,” and the model still works.

How about a fourth circle?
I have, over the years, tinkered with adaptations and additions to the three circles. I played with the idea of having a fourth circle of wealth holders, for instance, since the holders of family wealth sometimes differ from the owners of the family business. But, ultimately, nothing seems to have the sticking power of the original Three-Circle Model.

Simplicity is central to its efficacy. Models that keep working must be simple enough to describe most of what you need to describe, and the Three-Circle Model does that.

Admittedly, even the Three-Circle Model has its limitations. It’s a helpful tool, but it’s not the only tool you need.

And what about the future? In some regards, things will change: I think, for instance, we will begin to map systems in three dimensions. I can see three intersecting spheres representing a family business system in three-dimensional space. This could allow some breakthroughs in understanding. But, as it stands, the Three-Circle Model has remained essential over the past 40 years, and I see no convincing reason why it won’t remain essential for the next 40.                         

Professor John A. Davis leads the family enterprise programs at the MIT Sloan School of Management. He is chairman and founder of the Cambridge Family Enterprise Group, a global advisory, education and research organization for family enterprises (JohnDavis.com). For permission to reprint or cite this article, contact Dina Dvinov at ddvinov@cambridge-institute.org.

For more comments on the Three-Circle Model by John Davis, visit the YouTube channel of the Cambridge Family Enterprise Group.

 

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Since Family Business launched the Transitions conference series in 2010, thousands of attendees have heard hundreds of family business members share their stories in honest and candid ways.

The idea behind Transitions, says Family Business publishing director David Shaw, was to “bring the magazine to life.

“We wanted to focus on having families as speakers to share successes and failures. The conference strives to give families solid takeaways to take back with them and implement themselves.”

The first conference, held in Celebration, Fla., in 2010, hosted just 93 participants. The concept caught on quickly, and a West Coast event was added the following year.

Charlotte Lamp, an owner of Port Blakely, a forestry and land development business based in Seattle, was a speaker at the first Transitions West conference. There, she got the idea to start a family education program from another family business that had operated in the same industry, Laird Norton Company.

“Their education program is called ‘Norton University’; we call ours ‘Eddy Academy.’ I stole that from them,” says Lamp, a third-generation member of the Eddy family, which bought Port Blakely in 1903. “Theirs is a little different, with the idea of educating the children in particular.” Eddy Academy includes programs for the family’s teenagers, college students and adults.

“You get an idea and you go and adapt it to your own family,” says Lamp. “Those ideas floating around are some of the best part of the Transitions conferences.”

Transitions’ panel format enables attendees to hear multiple business families’ perspective on relevant topics, she notes. “That’s where the ideas start flowing.”

Over the years, Port Blakely has covered the expenses of family members attending Transitions. After one conference, family council members proposed revisiting the family’s values. Lamp had previously suggested doing so, but what inspired the Eddy family to create an updated values statement was hearing other families talk about the power of family values and the process of committing them to writing, she says. That work is ongoing, with Lamp playing a significant role.

Members of the Eddy family have shared their stories by serving as Transitions panelists and being a part of the pool of family business members willing to offer advice to attendees as well as to the conference planning team.

One early Transitions participant was a fan of the concept and reached out to the Transitions team with suggestions on how to make the event even more interactive than it was at the outset. Ross Born, CEO of Just Born Quality Confections — and a speaker at the debut Transitions conference — suggested assigned seating for general sessions, with attendees changing tables throughout the event. The rotation enables people to meet as many other business families as possible. Without table seating assignments, many families would sit together throughout the event and miss the opportunity to learn from others.

One of the familiar faces attendees are likely to sit with is Howdy Holmes, the third-generation CEO of Chelsea Milling Co., the Chelsea, Mich.-based maker of “JIFFY” corn muffin mix. Holmes, who also spoke at Transitions’ debut, has missed only one Transitions conference held in the United States since then.

Before taking the helm of his family business in the 1980s, Holmes read books and papers about family companies and the dynamics and pitfalls of family business ownership. There had been conflict in his family, and the studying had helped.

“I was experienced — I was a veteran by the time Transitions came into its own,” Holmes says. “My intent was to validate a lot of the things I experenced. That was the case — has been ever since.”

He says that through networking at the conferences, he hopes to validate other family business members’ experiences, because “you know damn well the other person understands what you’re saying. That is very cleansing and reassuring.”

Speakers at Transitions have included executives at family firms that are household names: Deborah Marriott Harrison, global officer, Marriott Culture and Business Councils, Marriott International; Todd Simon, senior vice president, Omaha Steaks; Louie Gentine, CEO, Sargento Foods; Peter Booth Wiley, the now-retired chairman, and Jesse Wiley, now non-executive chairman, John Wiley & Sons; and Cindi Bigelow, president and CEO, Bigelow Tea.
The conference has grown steadily and now draws around 275 registrants. It won’t get much bigger than that, and the size limit is intentional, Shaw says.

“We want to keep the conference intimate, someplace where people are comfortable sharing their stories and are able to network with each other and build relationships,” he says.

Kyle York, a third-generation family owner of York Athletics, a lifestyle shoe maker based in Boston, formed a powerful relationship in 2014 when he met Jay Bush, a family owner of Bush Brothers & Co., the Nashville-based maker of Bush’s Best Beans.

Bush was in the audience when York spoke about his generation’s commitment to steward the business in a way that would provide a comfortable life for his retiring parents. York says the plan resonated with Bush, who sought him out after the session.

“[Bush] said he was inspired by my story about letting my parents transition out,” Kyle recalls. “You usually only hear about the other side transitioning in, he said; he hadn’t thought about helping the previous generation.

“We kept in touch, and he’s now a member of our board of directors and he invested in the company. He’s now like family to us.”

The conference is at its best when people are able to make connections the way York and Bush have, and when conversations are plain-spoken and straightforward, Lamp says.

“It’s just like the tone of the magazine is more qualitative than quantitative,” she says. “It’s not research-y jargon, it’s readable for a normal person.”

Shaw says making this vital information accessible is one of the goals of the conference. Another is to stay relevant as new generations take over their family businesses.

“The goal is to continue to keep things fresh,” he says. “One of the things I would love best — what I’m looking forward to — is to see the NextGen come back as business leaders, bringing the future generation. If that happens, we will have succeeded on all fronts.”

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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If you’re just beginning to investigate how to manage issues at the nexus of family and business, you may have encountered some terminology that’s unfamiliar to you. We provide some definitions and explanations here.

This glossary is adapted from a longer version that is distributed to attendees at Family Business Magazine’s Transitions conferences. The version presented here also includes some additional definitions.

Board of advisers/Advisory board: A group of experienced businesspeople who provide advice to the business leader but do not have voting authority or fiduciary responsibility.

Board of directors/Fiduciary board: A group of individuals elected or appointed to represent the shareholders’ interests and oversee the company strategy. The board of directors has voting authority and a legal fiduciary duty to shareholders. Directors have a duty of loyalty (a responsibility to act in the best interests of the company) and a duty of care (a responsibility to make decisions in good faith and in a prudent manner).

Buy-sell agreement: This document specifies matters such as how a shareholder may sell stock, who is eligible to buy it, under what circumstances stock must be sold (such as in the event of a divorce or termination from the company), how the stock will be valued and how the company would fund the purchase of stock from an exiting owner. These types of agreements help ensure that company ownership remains in the family.

Entitlement: A person’s belief/attitude that they should be given special opportunities and benefits without having earned them. This is too often seen in wealthy children who consider themselves to be special and to merit material possessions and extraordinary consideration because of their heritage.

Family: Each family must decide for itself who may have access to certain information, attend family events, serve on the family council and the corporate and foundation boards, and own stock in the family business. Are the founder’s lineal descendants the only ones granted some or all of these privileges? Are in-laws included? Domestic partners? Fiancé(e)s? Stepchildren? Adopted children? Ex-spouses? Many families include a “definition of the family” among the documents in their family constitution.

Family assembly: A formal gathering of family members to discuss business and family issues. This meeting, usually held once or twice a year, is generally open to all members of the extended family.

Family constitution: A set of documents that record the family’s values, hopes and goals as well as a framework for how to achieve them. The constitution provides guidance on the activities of the family, the business, the enterprise, the family office and more.

Family council: A formal governing body that represents the family. It makes decisions on issues that overlap the family and the business and makes recommendations on behalf of the family to the board.

Family enterprise: The various businesses and shared investments, including real estate, owned jointly by family members. A family usually begins with a single legacy business and then, over generations, diversifies into other investments, often selling their family business.

Family governance: Agreements and shared activities that organize the family to remain aligned in support of their ventures and investments through multiple generations.

Family office: A private wealth management advisory firm that serves ultra-high-net-worth families. A single-family office serves one family. Multifamily offices serve multiple families. Family offices can also manage non-financial issues, such as travel and household arrangements.

Family values: In a family business context, these are statements of what the family and their company stand for and believe. Families typically uncover and enshrine family values over time. Documenting and distributing the values to all stakeholders creates behavioral guides for decisions, brand development and family development. Some families create separate statements of family values and business values.

G1, G2, G3 etc.: Refers to the generation of family ownership, starting with G1 as the generation in which the family business was founded. Members of G2, for example, are the children of the founder. G3 members are the third generation, a group of cousins from several family branches.

Genogram: A graphic “map” of the family tree, highlighting “entries” and “exits” (births, adoptions, marriages, deaths and divorces) and representing relationships such as birth order. A genogram can also include data about roles in the family enterprises and causes of death, as well as notations about whether relationships are close, conflicted or distant.

Independent directors/board members: Members of the board of directors or board of advisers who are not family members, company employees, advisers or consultants paid by the company, or close associates of the CEO or other key stakeholders.

Married-in: An in-law; i.e., someone who has married into a business family.

Owners council: Shareholders of the family business (or a representative group of shareholders) who meet to discuss their vision and goals for the enterprise and relay that information to the board with one voice.

Shareholder agreement: A document that codifies issues such as who may own shares, how voting rights are determined, under what circumstances dividends are paid and how disputes will be resolved. It often includes a buy-sell agreement.

Stewardship: The careful and responsible management of something entrusted to one’s care; an attitude that one’s inheritance should be preserved and passed on to others, rather than used up.        

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.        

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If you hope to maintain business ownership and wealth across multiple generations of your family, you’d be wise to develop a strong family education program. While there is no “one-size-fits-all” template for a family to follow in designing and launching an educational program, there are common content and logistical decisions families need to work through. The following topics are a good starting point for addressing your family’s particular needs.

Why is a family education program so critical?
Open communications, trust and information sharing are important to the health of all families but particularly those with shared business and wealth assets. Here are some of the key benefits of having an established education program:

• It is a uniting factor for the family and strengthens connections across family members to their shared history as business owners. This becomes more critical as the family moves into the third generation and beyond. Later-generation family members likely didn’t all grow up together, and some feel less connected with the business.

• It ensures all family members have a strong foundation of knowledge about the family and the business.

• It provides a meaningful way of physically bringing the family members together for the purpose of learning.

• It keeps enthusiasm for the family business strong and encourages direct family participation with the business (whether that means employment, board participation, committee participation, etc.).

• It provides a platform for the family to move forward together and is a means of being deliberate about the family’s future as business owners.

What should a family education program include?
There is typically wide variation in educational needs across the family; not everyone requires the same level or depth of information on the different issues and topics. As the family looks to build out more formal programming, it can be helpful to determine what information is necessary for all owners. Individual family members with direct roles in the enterprise, of course, will need education and training related to those roles.

A diagram similar to Maslow’s Hierarchy of Needs can be a good way to visualize and break down the different levels of educational requirements and responsibilities across the family. 

At the base of the triangle are the foundational issues and topics that all family members should know and understand. This includes things like the family history, history of the business, current health of the business and issues of top concern for shareholders. The center layer may include more in-depth details on family and business issues that are important for members who are active on the family council (or other subcommittees) to know. At the top are specifics that may pertain only to family members working in executive positions within the family business as well as those who are family representatives serving on the company’s board of directors.

Whether broad or individual, there should be a level of consistency in the educational options and expectations for family members. Particularly for family members seeking specific roles in the family business, the more uniformity there is in terms of training requirements, hiring and standards for promotions (or disciplinary actions), the less a family will be open to accusations of favoritism or nepotism. That’s not to say changes cannot be made over time, but having defined processes and logic behind those decisions goes a long way toward preventing conflict and hard feelings.

What are the logistical decisions involved?
The logistics of a family’s educational programming are just as important as the topics in terms of ensuring long-term success and helping (or hurting) participation levels. No matter how fantastic your program is, if you are hosting it on an inconvenient date or choose a location that is hard for most people to travel to, it will flop.

To avoid tripping over logistical landmines, get input up front from family members on key elements like dates and locations. For more detailed decisions, it can be helpful to have a committee of family members, whether the family council or a subcommittee, to determine issues such as:

• How often will the family get together for educational programming? Given geographic dispersion, time availability and flexibility across the family group, etc., what is realistic?

• How will topics and speakers/teachers be chosen?

• How will related expenses be handled? Cost decisions may include whether and how family members will be reimbursed for travel to educational events as well as the source of funding for expenses such as a consultant or educators to lead programs, special equipment or materials and childcare for attendees.

• Who should be invited to participate in which parts of the program? Direct descendants only? In-laws?

• At what age can children begin to participate in different educational sessions?

• What are the family expectations for participation, and how will that be communicated?

Family members will be more accepting of these decisions if the logic behind them is communicated. There is less pushback when people feel there is a process in place, particularly if they have a way of participating in that process either directly or indirectly. Again, you will likely need to do a little trial and error to find what works best and make changes as your education program evolves, but helping people understand the reasoning and goals behind decisions goes a long way toward building trust and confidence in your programs.

What are key elements of successful, enduring family education programs?
Getting an education program started and creating enthusiasm and interest across the family for it to continue involves more than selecting a date, time and topic. There are many ways to make programs more enticing and exciting for family members—and thus increase the chances of long-term participation and success.

Define the goals. Family members will be more inclined to participate in your education program if you clearly define and communicate what you hope the program will achieve. Don’t leave it to people to draw their own conclusions—tell them the purpose and how they play a role in the success. 

Get buy-in early and often. Just as you want family members to feel a sense of ownership of a multigenerational business, you want them to also feel ownership of the family education initiatives. People get excited about things they have had a hand in developing. Measure and take feedback on a regular basis. Survey family members on what they’ve enjoyed so far, what they want to learn next and their suggestions for change.

Identify a leader. Look for a family champion to head up the educational initiatives. Seek out someone who is really energetic and has the time and dedication to move things forward. He or she can and should work with or establish a committee to spread out the work. If this doesn’t exist in the family, consider hiring an outside consultant to take on this responsibility.

Go for easy wins. Early success is critical. Start with topics that are universal—things that all family members have in common. One example is the shared history of the family and the business. This could incorporate storytelling from the older generations and pictures of the family and business. These are things that unite people and are fun to learn about. Don’t dive in with prickly or controversial topics. It’s important that family members’ initial experiences be positive. This will boost enthusiasm for the program and encourage future participation. Learning together takes practice. Once family members are used to the format and process and recognize value in coming together, you can think about tackling tougher issues.

Embrace variety. Different family members have different learning styles and preferences. Lecture formats might not be helpful to (or appreciated by) teens and kids. Too much reliance on interactive media or video clips might be off-putting to older generations. Try to find a balance of formatting options and think about what works best for a particular audience on a specific topic. For the broad topics that everyone needs to learn, provide breakout options geared toward different age groups and/or learning styles.

Don’t reinvent the wheel (on format or content). Family education need not be a do-it-yourself project. There are many professionals who can help with curriculum development and direct teaching, and there are also people who are experts at event planning. Also, never fear repetition. If the family really loved a particular location, consider going there again. If a certain topic was really meaningful to family members, it probably bears repeating. Don’t be afraid to reprise programs, particularly around detailed or technical issues.

Connect between in-person events. Look for opportunities to support your education initiatives beyond direct meetings. Skype calls on special topics, postings of family videos, family newsletters, a private family website, announcements about special classes at university programs or industry forums—all these things keep the interest and energy going.

Make it fun! Pair learning with family outings and activities—a tour of the factory followed by bowling and pizza, a session to meet with the family trustee followed by a campfire s’mores party. Also memorialize your family meetings with “swag”—T-shirts, beach towels, hats. These items build a sense of community and are a fun, low-cost way to generate ongoing good feelings about your family gathering every time someone uses that item in the future.

Given all the advantages, it is well worth the investment of time and money to get a family educational program going. It can seem daunting, but the important thing is not to get overwhelmed and discouraged by the details. Find a working starting point and begin. If your family needs assistance in getting started, seek our professionals to guide you in the process.

Remember to keep in mind that family education is not a one-and-done exercise; it’s a long-term commitment. Your programming will evolve over time to reflect the changing needs ofthe family.

Anna Nichols is director of communications at Altair Advisers LLC (anichols@altairadvisers.com).

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.
 

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As business families seek ever more effective ways to cultivate their next-generation leaders to meet tomorrow's challenges, many turn to educational institutions to deliver a robust business education—and to equip young people with the skills and insights to manage the opportunities and demands facing family enterprises.

Faculty members have long observed that, while a significant number of the students in their business classes have direct experience in family firms, there are few opportunities for drawing out those insights. Sadly, these students' perspectives, sure to enrich the classroom experience, too often remain untapped.

In surveys conducted at St. Bonaventure University and peer institutions, up to 40% of student respondents say their parents own a business. When asked whether other family members—grandparents, aunts, uncles, for example—own businesses, even more students respond affirmatively. These firms range from very small companies to multinational behemoths with revenues in the billions of dollars. What a rich source of insight that's begging to be highlighted by on-campus structures!

Equally unfortunate is the shortage of opportunities to help students network with their peers from other business families. Research shows that networking significantly bolsters future leaders' growth as effective stewards of their own enterprises.

Formal education for future family business leaders

Students who have experience in family firms—either working in their own family's business or holding jobs in companies run by other families—often have valuable experience to contribute in the classroom or in other educational settings. It is fascinating to hear the recollections of those who grew up in a family business.

One young man told me he was 9 years old when he realized that family vacations also included opportunities for his father, a real estate developer, to tour potential sites.

Savvy families understand the benefit of formal education for their next-generation leaders and seek to immerse their children in a rewarding academic environment. Where it exists on campus, family business programming helps students explore their family business heritage; develop skills for managing the challenges facing family firms; and network with others who have family business expertise. These experiences are open to students who have a passion to go into family business as well as students who are pursuing other passions but may become family business shareholders, employees, suppliers or advisers.

Several institutions offer robust, academically sanctioned programming—majors, minors and courses. A larger number of institutions offer minors in family business. Still more offer executive education programs tailored to shareholders and next-generation leaders.

To find the right fit, students and families seeking family business programming should begin by targeting a few institutions and inquiring about all family business academic opportunities, including executive education; identifying and meeting with faculty who have family business experience; and investigating whether the institutions fund students' family business activities.

The obstacles

Unfortunately, despite the efforts of faculty members who advocate for developing more family business-centric programming, formal educational offerings are not widespread.

Family business topics often do not fit into existing business school academic departmental structures. Programs accredited by the Association to Advance Collegiate Schools of Business (AACSB) may lack the flexibility to offer credit-bearing family enterprise programming that meets stated "assurances of learning" focused on traditional business disciplines. That's ironic, given that few students will go through a business career without working for or with family firms.

Further, any academically sanctioned offering requires the approval of faculty, some of whom do not view family business as a true discipline.

In addition, the interdisciplinary nature of meaningful family business programming presents barriers. Familiarity with estate planning, for example, is vital to running a successful family business but isn't likely to be covered in detail in a typical business school curriculum. Topics such as family dynamics and communication, also key to the healthy family enterprise, may be best taught by psychology and counseling professors outside the business school.

Non-credit programming: An accessible option

Where family business-specific, for-credit education is thin or unavailable, students can find exceptional learning opportunities within non-credit offerings. Conferences and clubs are two examples.

Conferences bring together students from different institutions, owners from a diverse range of businesses, and academics and practitioners to discuss challenges, share strategies, learn from one another and build relationships.

In addition, family business clubs are available on a variety of campuses, in the U.S. and internationally.

Most clubs develop organically, starting with a few students who draw on their own networks, the campus' existing strengths, and the support of an adviser. Student government funds and donations from parents and others may provide financial support.

Clubs prioritize networking, extracurricular opportunities and other activities that expose students to the real world. Unconstrained by the demands of AACSB accreditation and internal academic approval processes, a club can freely focus on topics like family dynamics and communication.

Consider the mission of the St. Bonaventure University Family Business Club:

"To prepare students to be significant contributors to their family firms, start their own and/or serve family businesses as employees, customers, suppliers and advisors. Open to all students, the Club offers networking and educational programs to prepare them for the opportunities and daunting challenges unique to family firms. The Club fosters relationships with alumni, parents and friends who offer students business tours, talks, mentorships and internships. The Club is supported by an interdisciplinary faculty from across campus, all with relevant family business experience. They offer seminars, mentoring as well as service and research opportunities for students."

Starting a club

Student surveys should be conducted from all majors to help establish a club prospect list. Many students who come from enterprising families do not wish to enter the family business. However, when they attend sessions with peers, they come to understand that they can pursue their dreams and still contribute to the family enterprise by being educated stewards.

Faculty members who wish to support the formation of a family business club might meet with colleagues in and out of the business school to learn more about who has family business experience and interest. One of the best strategies to help advance the family business field is to seek out smart colleagues and get them thinking about how family business is relevant to their area. After I met with psychology faculty, for example, the psychology department developed a seminar in family business dynamics. A colleague in the finance department advises a student-run investment group, which now includes a fund that invests in family-controlled companies.

How to get involved

Those who are passionate about family enterprise are encouraged to directly support family business clubs on campus. Even modest efforts by a business owner can help next-generation leaders—along with the faculty who advise them—to build meaningful family business initiatives on campus. Simply offering to speak to students about your family business is a great place to start.

A tour of a family business—particularly one owned by a student's family—presents an excellent learning opportunity. At St. Bonaventure, the student-stakeholder helps organize the content and logistics. The other students research and discuss the business in advance.

On these visits, students learn about owners' passion and pride in their heritage. They learn about patient capital and long-term business perspectives characteristic of family business owners. They see concrete examples of investments and innovations. They meet employees who are not blood relatives yet are devoted to the family owners and are treated as if they are family. They learn how the family makes decisions, including when and how the next generation can join the enterprise and become shareholders.

A fifth-generation student, Taylor, lined up a visit to his family's pet food company, now being led and owned by the fourth generation. Following a tour and lunch, the fourth-generation leader gave a presentation to the club on the firm's future strategies, the family's governance process, and his wish for his sons to have opportunities in the business if they were interested. Taylor followed up that event with a meeting with his father; they worked out a plan for Taylor to participate in summer internships to help him understand more about the company strategy and culture. That solidified Taylor's desire to work for the family firm.

A foundation for success

Most family businesses require the next generation to have higher education credentials. Broad skill sets—including communication, critical thinking, mathematical reasoning and decision making—are important to help students develop credibility and the potential to succeed in complex family enterprises. Family business clubs round out the academic experience by giving students exposure to the real-world issues facing family firms.

Student participants in family business clubs learn the real-world issues facing family firms. They visit family companies and gain direct access to business owners who take time to share their knowledge. These students also develop an important strategy for family business success—a committed and empathetic peer network.

Carol B. Wittmeyer, Ed.D., serves as associate professor of management and founding Family Business Club adviser at St. Bonaventure University.

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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At the conclusion of our Transitions conferences my husband, Bob, has the pleasure and the pressure of summarizing more than 2 1/2 days of valuable content, providing tips and takeaways for attendees and their families.

The theme of Transitions West 2015 was "The Art of Family Business Succession and Governance." We kicked off the November conference with a panel on cross-generational communication strategies. Since each generation communicates differently, a variety of vehicles should be used, including family councils, retreats, education sessions, newsletters, websites and, of course, social media. "Meet them where they are" was the advice offered.

Two extraordinary retired chairmen, Phil Clemens of The Clemens Family Corporation and Jim Ethier of Bush Brothers & Company, offered their insights into the succession planning process. As Phil suggested, "you don't retire from something, you retire to something." His own "re-firing" has included family business consulting, board service, and charitable and civic activities. At his company, Phil established a mandatory retirement age of 65 and prepared well in advance for the transition. Jim's company had a mandatory retirement age of 70, but Jim emphasized that "you step down not when you're ready, but when your successor is ready."

A panel on non-family leadership included two non-family executives and a family business owner whose company has a non-family leader. The panelists emphasized the imperative of getting the best leadership, even though it may not be along bloodlines. The family business owner said his company's CEO was a "homegrown" candidate who shared the company's values. The non-family executives spoke of the need to provide incentive compensation, such as phantom stock, to ensure alignment with the company's goals. The takeaway from this panel was that you don't have to sell the family company if there is no family heir ready to step up to leadership.

In a session focusing on family employment policies, several panelists said outside consultants helped them create a policy that was true to family values, and made it very clear that promotion would be based on meritocracy. Each advocated working outside the company for at least two years, and pursuing graduate-level education. In terms of compensation, family members should be treated exactly like other employees and would be paid at a fair market value based on their job duties.

This particular group of speakers felt it important to have a non-family member mentor the next generation of leaders. In my husband's case, being mentored by his father, Milt, and by the non-family CFO, Chuck Fiero, proved to be both valuable and successful.

Our final panel addressed the role of effective governance in succession. The panelists underscored how both family and independent board members can provide key counsel on potentially difficult succession decisions. Independent directors bring an outside perspective and can help assess the capability and potential of future top managers. Whether there is an advisory or a fiduciary board, the outside guidance can help smooth the path to generational transition.

For over 26 years, we at Family Business Magazine have helped families govern, grow and manage their family companies. We are grateful to all of our conference speakers for sharing their perspectives, enabling us to provide practical takeaways.

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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In my mind, September will forever mark the beginning of the school year, although my children are grown and my days of being a student are long behind me. Some habits die hard. As we approach the new academic year, I reflect on the wisdom of experts who stress the value of higher education for the next generation. Many of these family business consultants have helped families create employment policies that frequently require higher education as a condition of joining the family enterprise.

One speaker at our Transitions conference said his family's policy specifies that anyone wishing to enter the family business must have a college degree and an MBA, and must have worked at least two years outside the family company. Many advisers recommend working outside the family business for two to five years. Others declare that it is best to have received a promotion at another company prior to joining the family business. The promotion can provide much needed self-confidence and helps establish credibility with the rest of the family and senior management.

In addition to established MBA programs all over the world, many U.S. universities now offer programs specifically geared toward family business. Take, for example, the well-respected family business curricula at Northwestern's Kellogg School, Kennesaw State University, UNC Chapel Hill, the University of St. Thomas, Loyola University Chicago and the University of Vermont. Stetson University, our partner in the Transitions conferences, was the first to offer an undergraduate major in family business. Harvard Business School's executive education division and the University of Chicago's Booth School of Business offer weeklong sessions for family businesses to bring multiple family members together for a dive deep into the critical issues. All of these programs, according to our education director, Peter Begalla, "emphasize family leadership, social intelligence and the character that it takes to lead and steward a family enterprise."

EDHEC, an international business school in Paris, has developed a Family Business Global Executive MBA. Designed for next-generation leaders, this program covers family business strategy, financial engineering and governance, and it culminates in a boot camp at the Royal Military Academy at Sandhurst. While not all families require military training, this exceptional program helps develop the next set of family business leaders. Kennesaw State's Coles College of Business offers an 18-month EMBA for Families in Business in which students meet for a six-day residency every other month. (The first residency is nine days.)

The University of Pennsylvania's Wharton School and Oregon State University were the first academic institutions to provide outreach to family firms. Today the University of Wisconsin-Madison, St. Joseph's University, University of the Pacific's Eberhardt School, Grand Valley State University's Family Owned Business Institute and Cornell's Smith Family Business Initiative, among many others, offer educational programming for family business owners. These programs help prepare the next generation for leadership in the family company. As long as the effort is made and the work is done, the value from higher education is priceless.

Education, according to an old Chinese proverb, "is simply the soul of a society as it passes from one generation to another."

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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