Entrepreneurship and the Family Business Management MBA

This article is sponsored by the European University Business School.

Family businesses represent over 70% of all business entities and account for over 60% of non-government GDP. Conservative estimates indicate that over 50% of private sector jobs fall into the category. It follows, therefore, that a substantial percentage of MBA students will subsequently be involved in this sector.

The importance of this sector of business in the local, national and global, economy cannot be overlooked, says Christine Clarke, academic dean at European University’s Barcelona campus.

What does a candidate learn in the family business management course to help them with the practical side of running a business?

Traditionally, MBA courses, generally following the Harvard Business School approach, have focused on ‘big business’. However, with widespread growth in MBA candidate enrolment, course content needs to adapt to the realities of the nature of the businesses these candidates will be running. The implications of the above statistics indicate that a substantial percentage of MBA students will be involved in family business management and will therefore need the tools to do this effectively.

While 37% of the Fortune 500 firms are family-controlled, the vast majority of family-controlled businesses will experience the difficulties of moving from a one-person general management approach to a professional management approach.

A family business management course addresses this by introducing candidates to key management areas that create opportunities and also to the challenges which are unique to businesses that are run by families.

Such a focus allows candidates to explore and analyze business continuity challenges and best management, family, and governance practices for family-owned businesses.

These challenges include analyzing opportunities and failures; 75% of businesses do not carry on to the second generation. Analyzing the reasons for this can help prevent this happening to the students’ own family-owned businesses. Opportunities for the acquisition of existing companies are also be highlighted by analysis of this kind.

Succession planning is a central issue; around 67% of family businesses do not have a succession plan for key positions. Governance, the role of the board, taxation issues, financing are also explored given their importance and peculiarities in family business management.

Family businesses are characterized by challenges that threaten their continuity, but managed effectively they are able to develop distinct core competencies that can result in unique competitive advantages.

How can a niche MBA degree such as this encourage entrepreneurial skills?

In a recent PriceWaterhouse Cooper survey of family businesses, 69% of respondents from 35 countries indicated that they believed themselves to be more entrepreneurial than other types of business. Indeed, in the small-to-medium business category, finely honed entrepreneurial skills are essential for success. The nurturing and development of these entrepreneurial skills therefore plays a key role in a family business management course.

Any family business is frequently faced by issues of scale. Over 50% plan to expand abroad. Entrepreneurial skills are necessary for this; seeking an opportunity and pursuing it in a speedy fashion. Risk management skills are necessary to get this right; indeed risk-taking is a consistent necessity in the family business management arena.

How can a good MBA program balance both theory and practical business management skills in a comprehensive manner?

To be effective and provide candidates with the right kind of business management skills required in the field, the focus of a good MBA program should be on pragmatic, action-oriented management, governance, and family/business leadership skills. A good course will be delivered with live and written cases, discussions, simulations and study/consultation experience with family businesses.

A theoretical base is an obvious starting point in any MBA degree but candidates need to be able to put that knowledge into context. By focusing on cases, the theory becomes clearer and case solving provides a forum for realistic research, develops business management skills and analytical skills and pushes candidates to provide realistic, effective solutions. It also provides a framework for an inclusive, integrated approach, taking multiple perspectives into account.

As many candidates already have a background in family business, their contributions and experiences enrich the learning process. Personal experiences highlight the challenges faced by such business, underpin the relevance of the core issues dealt with and highlight the importance of developing entrepreneurial skills and leadership.