The Institute for Family Business at Baylor University

Review of Business, Summer-Fall, 1991 by Nancy Bowman Upton

The Institute for Family Business at Baylor University

Family businesses are the predominate organizational form in the United States. A number of programs have been developed to assist families manage their firms. The University-affiliated program can play a critical role in both the areas of practitioner research and professional development. This paper discusses the development of such a program and the contributions it makes to the continuity and success of family-owned firms.

It is estimated that over 90 percent of the businesses in the United States are family-owned or controlled; they contribute over half of the GNP and are responsible for a significant proportion of wages paid (Dyer, 1986; Ward, 1987). These firms range from the well-known "mom and pop" business to a third of the Fortune 500. Many of these businesses are facing what has been termed a "succession crises": they were started by an entrepreneur sometime after WWII and now face a leadership transition. What will happen to them? Will the owner sell or quietly close his/her doors? One option, obviously a popular one, is that of retaining family ownership and management. The entrepreneur's legacy, in the form of a viable business, can be passed to what has been described as a "reluctant" generation (Blotnick, 1984). The opportunities and challenges that management succession provide are enormous, emotional and open to conflict. It is within this milieu that a service industry has developed; that of serving the family business.

Interest in the family business has skyrocketed as evidenced by the creation of publications devoted to the specific concerns of the family-owned firm (ie., Family Business Review, Family Business). Additionally, seminars, workshops and programs have been developed by public and private institutions to educated the family business personnel and the consultants who serve them. The number of professional consultants who now specialize in family business has grown phenomenally. For example, membership in the Family Firm Institute, the national organization for professionals serving family businesses, has grown from less than 100 in 1987 to close to 1000 by 1991. This university-affiliated program can play a special role in the development of knowledge about family business as well as the dissemination of that knowledge.

The Institute for Family Business in the Hankamer School of Business at Baylor University was founded in response to the interests of its alumni and students, a significant number of whom were involved in the management and transfer of family-owned firms. Further, approximately 60 percent of the students in the Entrepreneurship program not only grew up in family businesses but also saw them as a vital part of their own career path. Their needs led to our response. Formal design of the Institute began in 1987 when a Board of Advisors, consisting of founders, successors and key non-family executives of family businesses, met to identify the needs of family firms and the most effective way that the University could meet them. It was decided that the Institute for Family Business would provide positive leadership in the areas of research, education and professional development. Research

An integral part of any academic endeavor is quality, practitioner-oriented research. In reviewing the body of research which relates to family firms it was found that extremely few empirical, comparative studies of family firms had been performed. While a great deal has been written about families and about business, there has been little written which integrates the two. What had been published about family business was exploratory in nature and while making a significant contribution, it was only a beginning. We determined that our research would question the "common knowledge" or generalities of family business ownership. Statements concerning family business abound and are taken as truths. For example, characterizations of family business founders are usually negative. Many have written that the family business is emotionally driven which leads to ineffective management. Front page headlines of family business disputes, such as those of the Bingham's, Campbell's or Sebastiani's have led to blanket statements that families in business together are headed for trouble. One of the purposes of academic research is to question belief systems. And so the Institute asks: "Are these generalizations true or are they myth?"

For example, anecdotal literature suggests that the family firm is controlled by an egocentric individual, the entrepreneur, who refuses to "let go" of the firm thereby ensuring its demise. While the popular press has publicized this image, our research into the psychological characteristics of the entrepreneur as well as into the family business founder has revealed another type of person (Sexton and Bowman, 1985). The entrepreneur is a moderate risk-taker with a high level of energy and self-esteem and an ability to tolerate uncertainty. In general, they do not like a lessening of control, but the family business founders interviewed by the Institute saw delegation and successor training as an opportunity to strengthen their legacy (Bowman-Upton 1987).