Why is Family Business Important - and what is Cornell doing about it?
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The document summarizes information about family businesses and the Smith Family Business Initiative at Cornell University. It provides statistics showing family businesses make up a large percentage of businesses globally and often outperform non-family businesses. It then discusses some of the resources and research supported by the Smith Family Business Initiative, including welcoming a new professorship in family business.
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Why is Family Business Important - and what is Cornell doing about it?
- 1. Why Family Business? Dann Van Der Vliet The John and Dyan Smith Executive Director of Family Business June 9, 2017
- 2. Or more importantly… Why family business at Cornell?
- 3. Quiz What is a family business?
- 5. Succession Checklist Definition of a family business? • Ownership control (>15%) by family or partnership of families • Strategic influence by family members on the management of the firm • Concern for family relationships • The dream (or possibility) of continuity across generations Poza, 2007
- 6. GLOBAL Report on Family Businesses • Large numbers & contributors to jobs / economy / society – Latin America / India – 90-98% – US / Germany / Spain – 80-90% • Large, Medium, Small size – Think Wal-Mart, Ford Motor Co. and S.C. Johnson – Also think Collegetown Bagels, Saranac Brewing, Triphammer Wines • Out-perform non-family enterprises – Especially in the first generation – Second generation some do, some do not. 70% would like to pass their business to next generation BUT next gen is not always interested OR capable OR prepared to work in the founder’s business – WHY? Source: Babson STEP Project
- 7. 7 Family Business Mortality Many reasons why businesses don’t continue from one generation to the next 1st Gen 2nd Gen 3rd Gen 4th Gen 100 75 50 25 0 • Sale of the business • Loss of family interest • Unpredictable challenges • Industry changes • Missed opportunities • Mismanagement • Succession problems • Family conflict • Family norms challenge business norms
- 10. Entrepreneurial Resources Provided by the Family Ernst & Young Coming Home or Breaking Free 2011 Knowledge about how to lead a business Provision of contracts Introduction to networks Coaching/mentoring related to entrepreneurial activities Industry-specific knoweldge Physical resources (infrastructure, facilities) Favorable and negotiable conditions (debt and equity capital) Equity Capital Access to distribution channels Debt Capital No Family Business Family Business
- 11. Ahead of the game
- 12. The Family Business 3-circle model Family Business Ownership Source: Tagiuri & Davis (1982)
- 13. The Family Business 3-circle model Source: Tagiuri & Davis (1982)
- 14. The “Blurry Circle” model Business OwnershipFamily
- 16. 16 Evidence shows family companies outperform public companies Founder-stage family firms are 19% more valuable than non-family firms3. Family businesses generate higher… • annual shareholder return • annual revenue growth • income growth • return on assets …than non-family firms4. Family businesses employ 50-60% of the workforce in industrialized countries2. Publicly traded family firms significantly outperform non-family firms in earnings and stock performance: 5.5% more profitable 6.65% better return on assets1. Family-run companies are valued 10% higher by the stock market than non-family companies1. 1 Anderson, Ronald and David M. Reeb, Founding family ownership and firm performance: Evidence from the S&P 500, Journal of Finance, June 2003, vol. 58, no. 3 2 Financial Times, Family companies are ready for the worst, October 30, 2001 3 Amit, Raphael and Belén Villalonga, How do family ownership, management and control affect firm value? Evidence from the Fortune 500, 2004, working paper 4 BusinessWeek, Family, Inc., November 10, 2003
- 17. Not so gloomy • Families are able to positively affect the resource inventory and usage of their firms (Arregle, Hitt, Sirmon, & Very, 2007; Habbershon & Williams, 1999) • Apply a long-term perspective allowing for unique strategic positioning (Zellweger, 2007) • Have less agency problems and higher firm values (Anderson & Reeb, 2003) • Drive new entrepreneurial activity (Kellermanns & Eddleston, 2006; Nordqvist & Melin, 2010)
- 20. Succession Checklist ENTER: Smith Family Business Initiative • Founded: September 2014 • Gift from John (MBA ‘74) and Dyan Smith
- 21. Succession Checklist Holistic Program Outreach Inreach Scholarship Source: McCann (2000)
- 31. Research Wesley Sine – Professor of Management and Organizations, presented his research on “The advantages and challenges of family funded ventures in Jordan” at the upcoming Academy of Management Conference in London, as well as the International Academy of Management and Business Conference in Dubai. The research was funded in part through a grant offered by the Smith Family Business Initiative.
- 32. Cornell Family Business Scholars Cornell Faculty Fellows • Lourdes Casanova - Senior Lecturer of Management, Academic Director of the Emerging Markets Institute • Stephen Gal - Senior Lecturer of Management • Wesley Sine - Professor of Management and Organizations • Edward Staehr – Senior Extension Associate, Executive Director NY Farm Link • Michele Williams - Assistant Professor, Department of Organizational Behavior, Cornell ILR School Family Business Academic Scholars • Matthew Allen - Associate Professor of Entrepreneurship, Babson College • Joseph Astrachan - Wells Fargo Eminent Scholar Chair of Family Business, Kennesaw State University • Christine Blondel - Adjunct Professor of Family Business, INSEAD • Kimberly Eddleston - Professor of Entrepreneurship and Innovation, Northeastern University • Greg McCann - Senior Professor of Family Enterprise, Stetson University • Former Director of the Family Enterprise Center • Carol Wittmeyer - Associate Professor of Management, St. Bonaventure University Family Business Practitioner Scholars • Eric Allyn - Former CEO & Board Chair, Welch Allyn • Doug Baumoel - Founder, Continuity Family Business Consulting • Ann Dugan – Senior Managing Director, Family Office Exchange • John Engels - Founder and President, Leadership Coaching, Inc. • Holly Isdale - Founder, Wealthaven
- 33. Succession Checklist In July 2017, we welcome Margarita Tsoutsoura, PhD, as the first John and Dyan Smith Professorship of Management and of Family Business.
- 34. Succession Checklist It’s about time
- 36. "My name is on the door every morning when I come to work."
- 37. Succession Checklist Upcoming June 9 Why Family Businesses Matters – Cornell Reunion 11-17 Global Emerging Leaders in Family Enterprise July 19 Upstate Owners Forum – Ken Blanchard October 12 Upstate Owners Forum 26-27 2017 Families in Business Conference 2018 March Family Business Case Competition April NYC Family Enterprise Forum
Editor's Notes
- Nearly 21 different definitions of family business in a recent review of 250 research articles
- The graduating class of physicians two years ago had just 1 percent decided to own a practice. The rest of them chose to work for corporations, citing the difficulties of ownership.
- Minutes 45 Show why this matters
- We interviewed 2400 family business managers and owners in 40 countries to find out. Average number of employees: 12,000 • Average sales: US$3.48 billion • Annual average growth as a percentage of profit: 8% • 62% report they are highly or extremely entrepreneurial • Their top three planned investments are IT systems and controls, production capacity and human capital
- SC invested $30 million to amp up its family brand. Said 5th generation CEO Fisk Johnson : CEO Says 'Family Company' Image Gives It Consumer Trust Advantage "As a private family company, we believe we are different and we are proud of that difference," said SCJ Chairman-CEO Fisk Johnson in an interview. "We hold ourselves to a higher standard. We work hard at nurturing a culture of caring and doing the right thing for the long term. One of the reasons we're able to do that is, as a private company, we don't need to worry about next quarter's earnings or what Wall Street analysts say or whether an activist is going to come after us."