Do you plan to run your parents’ business someday?
Ritch Sorenson hopes you’ll heed his family’s story and consider the new family business major at the University of St. Thomas.
The undergraduate major is believed to be one of two in the nation, said Sorenson, academic director of the 20-year-old Family Business Center in St. Thomas’ Opus College of Business in Minneapolis. The other he cited is available at Stetson University in Florida.
In a land of Cargills, Daytons, Carlsons (who have their name on that other business school across town) and countless moms-and-pops, it makes sense to pay attention. So, why hasn’t such a major taken off in the past?
“There’s been a bias in business research and in academia toward public corporations, and the structure and management of public corporations, probably because their practices tend to be highly professional and a good model for people,” said Sorenson, Opus Endowed Chair in Family Business. “It wasn’t until the late 1980s that a group of consultants who had been in academia said, ‘You know, we’re running into the same problems and the same issues and the same advice … over and over again when we’re working with businesses owned by families. This ought to be studied.’ “
Now he thinks there’s a solid, growing body of research and demand from family businesses to launch a major. “Family business owners understand this business information is available and they want their children to have access to that.”
A difficult lesson
Sorenson learned the importance of succession plans the hard way.
“My father was a second-generation owner in a bank, and one of the reasons I’m interested in this area of study is that prior to his death we hadn’t really discussed the transition of ownership to our generation,” he said.
Although informal discussions had occurred, the elder Sorenson hadn’t prepared his children for succession and his retirement. Shortly after his retirement, he died.
“As a result of his death, there was an interest (among board members) in selling the bank, but because we weren’t majority owners we didn’t have the option of keeping it,” he said. “If we had been better prepared, we might have been able to arrange to buy the bank ourselves and had the influence to keep it — in my view.”
The Family Business Center has served as a resource for area family businesses, offering seminars and a family business-management course to business students. The new major will include a core business education plus several courses on family business and management, one of which involves bringing in members of the family business. Students also will be required to take family psychology, sociology or communication.
Whose values guide decision-making?
“The assumption that a lot of people make is that because we’re related, we’ll somehow get along and everything will work out,” Sorenson said. “Even though they’re related, that may exacerbate the problem because sometimes a family relationship can make you feel more or less inclined to openly express how you feel about things — positive or negative. But if you don’t have a good decision-making system in the family that clarifies values and policies then there’s always a lot of uncertainty about whose values you’re going to use in guiding the business.”
One of his surveys of family businesses, which drew 400 respondents, found that when families have “formal planning meetings” they’re “much more likely to collaborate than make decisions on the fly.”
“I know it seems ironic that as a family you need to formalize things,” he said. But by the time children become adults they have developed their own set of values and independence, he explained. “They really need to re-establish the family relationship as adults.”
Preparing future “strong, active owners” of family businesses is good not only for the company but also for employees and the community, he said.
“Family businesses are concerned about maintaining income for the long term, so their decisions influence it to be organized for the long term,” he said. “They tend to have low debt orientation, they tend to have CEOs that have a long tenure, and those businesses tend to invest more in developing employees. And because they’re concerned about people in general because of the family, they tend to be involved in the community, some devoting up to 10 percent of profits.”