Academic journal article Entrepreneurship: Theory and Practice

Essay on Practice: Advising Family Enterprise in the Fourth Decade

Academic journal article Entrepreneurship: Theory and Practice

Essay on Practice: Advising Family Enterprise in the Fourth Decade

Article excerpt

Researchers and advisors in the field of family business have focused on a sequence of topics over the 30 years since the first dedicated conferences and the emergence of Family Firm Institute, Inc. (FFI) and family business review. This essay reviews the issues that have received the most attention from family business advisors across this time period (succession, governance, and intergenerational family dynamics). Then the author proposes a particular focus for intervention in the coming decade--family human capital utilization--and discusses four areas of consultation that may be increasingly valuable to client families.

Introduction: The Evolving Focus of Family Business Advisory Services

Consultants have been at the heart of the family business field since it began to consolidate in the early 1980s. There were 30 participants at an organizing meeting at USC in 1985--a small group of family therapists, business consultants, legal and financial advisors, and university faculty, most of whom also "moonlighted" as consultants. Since then, the numbers have exploded: Family Firm Institute, Inc. (FFI) now boasts 1,600 members, 75% of whom identify themselves as service providers. It remains a loosely coupled assemblage, relying primarily on the professional standards of each disciplinary group to provide a baseline check on ethics and competencies. While some would argue that this creates a "buyer beware" risk for family clients, others would say that the market works remarkably well at quality control. Nevertheless, as in any professional service group (especially those that draw from an eclectic mix of practitioners), there is much to be gained from experience-sharing, self-reflection, and analysis of the work of advisors. This essay hopes to be a contribution to our collective dialogue on what family business consultants are asked to do, how they respond, and how that changes over time.

The First Three Decades of Family Business Consulting

As the field of family business has matured, its core research topics and most-utilized interventions have also evolved. In the early years, those who called themselves "family business specialists" primarily focused on succession planning: how control of operating family businesses could be passed successfully from founders to a second generation (Handler, 1994). That topic fit well with the advisors' traditional disciplinary work (tax and estate planning for some, management or intergenerational family dynamics for others), and it gained impetus from client demand. The aging post-WWII generation of entrepreneurs who had built successful businesses wanted smooth transitions to one or more of their children. The classic articles and books of the first era were about founders, nepotism, selection, and operations, beginning with personal and anecdotal essays by experienced senior advisors (Danco, 1977; Levinson, 1983), and gradually adding a systems perspective (Herz Brown, 1991; Hollander & Elman, 1988; Kepner, 1983; Lansberg, 1988; Tagiuri & Davis, 1982/1996). The title of John Ward's book at the end of the decade, Keeping the Family Business Healthy (1987), characterizes the field's early years.

In the 1990s the focus shifted to governance. The business world was beginning to question the performance of corporate governance in general (Jensen, 1993), and was soon to be shocked by the dramatic stories of governance failure in industry leaders such as Enron. At the same time, business families began to realize that the transfer of control from founders to siblings and cousins was more complicated than they expected, requiring not just leader succession but infrastructure for owners. As family business studies became more differentiated from entrepreneurship, both scholars and advisors gave more attention to the rising generations, which almost always included an expanding network of family shareholders who did not work in the company. …

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