Family Businesses: A Sophisticated Look

Written on 28 March 2012.

Global MBA Family Business Event

When you think of a family business, what do you think of? Some people think of small family factories, others think of small restaurants and some think of multinational businesses. Regardless of what you thought before, you probably had no idea just how important family business is to almost every economy on the planet. For example, did you know that in Finland 91% of the businesses are family operations? Now, Global MBA participants do.

Recently, two EDHEC professors whose research centers around family businesses spent an evening educating MBA participants on the topic. This included the sophisticated governance mechanisms that help ensure the long-term success of family businesses along with the families involved.

The rationale behind the family business conference was simple–in Europe and in most other places around the world, family businesses employ millions of people and account for a huge amount of global output. For example–in Sweden, over 60% of the labor force works for a family business. In order to help MBA participants understand the nature of these organizations, Prof. of Strategic Management Isabelle Mari and Prof. of Entrepreneurship Lorraine Uhlaner presented MBA participants with a sophisticated way of looking at family businesses.

MBA participants learned that family businesses often operate under the purview of governance tools like family charters, family councils, or other formal governance structures about which anybody working for a family business should know. MBA participants also gained insights into the relatively unknown ownership structures operating inside family businesses. Many of these businesses–which are generally very secretive about their ownership structures–will operate things like internal stock markets, family constitutions, and investor relationships that are very different than those in non-family businesses.

Family businesses can certainly be sophisticated and complex. Prof. Mari offered Global MBA participants a chance inside her doctoral research into the Bonduelle family business, teaching them real-world insights into the complex web of ownership, family and non-family directorships, and business lines of one of France’s oldest family businesses. For family businesses to stay the course of time for many generations, both the family and the business work hard to both create value and keep the peace inside the family. Mechanisms for governing the business, for clearly stating how family members should relate to the business, and for ensuring that relationships with investors, bankers, and principals are all aligned are paramount. Family businesses are sophisticated entities, and now MBA participants have the knowledge to make an intelligent approach to any business situation involving a family-run operation.

Written by: Davis Jones

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