Thought Leadership

Three Reasons Family Businesses Need Education

Business-owning families all too often fail to adequately plan for the continuity of their enterprises — which can have disastrous consequences for all involved. According to Ivan Lansberg, who serves as an Academic Director in Kellogg Executive Education’s family business programs, when it comes to managing generational transitions, “Surprise is the enemy...” And many of the inevitable challenges associated with the change process can be managed much more constructively if the owning families are well informed about what they are getting themselves into. Education makes a huge difference because:

1. It heightens awareness of the fundamental issues, which leads to a better understanding of what might happen if nothing is done.
2. Education gives family-business stakeholders the language to frame their reality and solve problems in a collaborative effort.
3. Education breeds hope by helping the family to see unrealized possibilities that are within their reach.

Among the main reasons family businesses fail to understand the importance of education to their enterprises is that they’re uninformed about those benefits, Lansberg said. And one of the most important needs that’s overlooked is succession-planning. “I’m amazed by how families sometimes spend more time planning their vacations than they do handling the transition to the next generation,” he said. “Time goes by, and the family paints themselves into a corner where they need to make a lot of important decisions under duress, and that often has a bad outcome. A lot of business owners aren’t tracking that this is a key responsibility of theirs—educating their owners.”

The need for succession is inevitable given the reality of mortality. Yet too many family leaders deny that need until it’s too late, Lansberg added: “For a lot of families, the unfortunate outcome is one not unlike a Dickens tale, where someone dies, and the next iteration of leaders learn they’re going to be partners only when the will is read. That’s a terrible way to explore whether or not they want to be partners. They have it thrust upon them.”

With the need for education and its benefits established, then, how does a typical family business go about convincing those in power to address that need? It often starts with the chair of the family council, if not the chair of the board, according to Lansberg. “Sometimes it’s a non-family executive who realizes that his or her owners are not very well organized and wants to make a difference that way. But the most common for us is that families talk to other families who have attended programs such as ours or have gone to a conference. Another interesting thing is that a lot of the women in the families are interested in learning more. They see the dynamics and the challenges before the men do, quite often. I wouldn’t make a blanket observation, but frequently women’s holistic views of the world lead them to ask questions about the future. And if it’s not them, it’s their kids. In a lot of families, we find the next generation questioning seniors about the purpose of the company and why they do what they do.”

Overall, Lansberg said, the family-business leaders who remain open to learning and education are setting themselves up for the most promising future. “The most successful business families are naturally curious about family enterprises,” he said. “The subject becomes salient. And that philosophy is very much the driver of all of our programs at Kellogg.”

Ivan Lansberg is an adjunct professor with Kellogg John L. Ward Center for Family Enterprises Executive Education Programs. An organizational psychologist in New Haven, Connecticut, he is also co-founder and a senior partner of Lansberg, Gersick & Associates, a research and consulting firm specializing in family enterprise and family philanthropy. Ivan was a professor of organizational behavior at the Yale School of Management for seven years, and a Research Fellow at Yale’s Institute for Social and Policy Studies.

As an aspiring leader within family enterprise, you’ll discover how to establish your credibility and authority in the business community, among family shareholders, with the board and management team. As an established leader, you’ll explore the complexities of mentoring the next generation and of managing succession and letting-go. For all, the program can enable you to better manage the nuanced paradoxes that are characteristic of family business leadership.