Family Business  

06/08/2015

RENEWAL IN FAMILY BUSINESSES: OPEN-HEART SURGERY

We caught up with Dr Thomas Zellwegger, Director of the Center for Family Business at the University of St Gallen, Switzerland, on the fringes of a family business conference organised in May with the Family Business Network. We asked him about some of the challenges facing family businesses.

Dr Zellweger, you are the Director of the Center for Family Business at the University of St. Gallen. Can you tell us a little about what the institute does and its research?

We have three areas of activity. Firstly, there is teaching in our three core subjects: entrepreneurship, managing family businesses and corporate succession. Secondly, we provide further training and knowledge transfer services for representatives of family businesses, mainly in the form of seminars and discussion groups. Our third area of activity is research, which focuses on four themes: strategic management in family businesses, corporate succession, entrepreneurship, and innovation and governance in family businesses.

We are meeting in the context of the family business dialogue conference on renewal. Why did you choose the theme of renewal?

For two reasons. Firstly, we live in a very dynamic world that is constantly changing, driven by digitalisation and globalisation. For us, this raises questions about how family businesses deal with those changes. That brings us to the second reason: family businesses are particularly well equipped to deal with change, but also have to tackle very specific challenges, making this a very topical issue in the current environment.

Why did you organise the conference?

As a university, it is important to engage in dialogue with practitioners, rather than remaining in our ivory tower. So we seek active conversations with the companies that we study. We want to combine theory and practice in order to reinforce our conclusions, but also to identify topics that are relevant to industry.

What do you want to achieve with this conference?

We want to provide family businesses with a platform to compare notes on family business-specific issues that cannot be discussed elsewhere. The conference is a unique opportunity for business owners to exchange information with their peers. We hope that people will learn from one another and also discuss the content with representatives of the university.

How important are family businesses for the Swiss economy?

In terms of the numbers, 88% of companies in Switzerland are owned by families. Many are small and medium-sized enterprises (SMEs), but some large companies are also family-owned. So these companies form the backbone of the Swiss economy but also embody the human dimension of our economy.

Constant renewal and evolution are vital if family businesses are to survive. What are the challenges currently facing family businesses on that front?

Renewal happens at several different levels. At a company level, the real challenge is to handle rapid changes. The owners of family businesses often have very traditional ideas about company management and strong sentimental ties to the business and their employees. So owners need to be willing to recognise that competition requires constant adjustments and the courage to make changes.

At another level, change has to be addressed in terms of the family and ownership through changes to the family business structure down the generations. This involves adaptability and governance solutions that reflect the family's involvement in the company. There need to be clear rules on ownership structures, directorships and family members who work for the company. Making the right structural changes is often key to the survival of family businesses.

How have the challenges evolved in recent years?

To be honest, the challenges are very familiar: namely how the company and governance structures deal with change. In recent years, however, the pace of change has accelerated dramatically. There is now a more urgent need to address these issues. Family-owned businesses that deal with the issues efficiently and establish clear structures are the only ones with a chance of surviving.

Succession planning must be a key issue for family businesses. How important is succession planning in your research?

Corporate succession is a key research priority. It is a fascinating and multifaceted subject that can be tackled from a range of different perspectives – for example, by looking at corporate strategy, the legal context, taxation issues and governance. We try to consider all these parameters in order to structure the succession planning process, define success factors and then derive practical operational guidelines from them.

In family businesses, sentimental considerations often play a major role. How is this reflected in your research?

We see the emotional aspect as one of the most exciting factors in researching family businesses. These companies effectively have two hearts: there is the rational, financial beating heart, which understands that success is essential for survival. But there are also soft factors, such as preserving the company's identity and reputation, personal relationships with employees, or the family's desire to retain control of the business. All of these important, non-financial aims have a significant influence on the company's business strategy.

How can you and the Center for Family Business provide practical support for family businesses?

There are a number of ways in which we can provide support. Firstly, through the results of our research, which we try to keep very practical. Then there is the further training that we provide for family businesses and lastly, through selective coaching within individual companies.

What is it about family businesses that interests you personally?

I am fascinated by the fact that the sector is not just affected by technical issues, but by people – their wishes, goals, hopes and fears. We work closely with people, instead of focusing purely on abstract, purely technical business plans. At all times, we have to reconcile two parallel worlds – one driven by business and one driven by emotion.

Thomas Zellweger is the Director of the Center for Family Business at the University of St. Gallen, where he also lectures on family businesses and entrepreneurship. He studied at the University of St. Gallen and the Université Catholique de Louvain in Belgium. Thomas Zellweger spent two years working in investment banking before completing his PhD at the University of St. Gallen in 2006. He has been a research fellow at Babson College in Boston, visiting professor at the University of British Columbia in Vancouver, Canada, and is currently a visiting professor at Witten/Herdecke University in Germany. His research has been published in leading journals and he has won several international awards. Thomas Zellweger is a member of the Board of Directors of three family-owned SMEs. He advises family businesses on governance and ownership strategies. He is married and has two children of primary school age.

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