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.
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
8.
9.
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
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)
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.
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
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."