on the home front
|© Nathan Mandell
Lloyd Shefsky brings his experience as an
attorney and entrepreneurship expert to his work in
by Matt Golosinski
business is an arena where entrepreneurial MBAs can make an
impact, say Kellogg School experts. But negotiating the risk,
reward and relationships of family ventures demands special
expertise.Good thing the Kellogg
Center for Family Enterprises feels at home handling the challenge
Shefsky thinks entrepreneurs are...well, a bit nuts.
professor of entrepreneurship and co-director of the Kellogg
Center for Family Enterprises also calls them his heroes and
says they are often responsible for the "quantum leaps"
that lead to huge value creation. He agrees with economist
Adam Smith who considered these risk takers the engines that
drive the business world, including some 60 percent of the
U.S. economy in terms of employment. Shefsky talks about entrepreneurs
the way baseball fans revere Ruth and Koufax.
they're definitely crazy," insists Shefsky. "Maybe
a good crazy because they're motivated by an extraordinary
passion, but these are people who can do without sleep, do
without friends. They're focused on their business and the
dream of making it real."
this drive to "create something out of nothing,"
is what Shefsky believes defines entrepreneurs, whether or
not they are working to establish and grow a family business.
It's a passion that can blind, he says, and lead to a single-minded
pursuit of the extraordinary.
don't do balancing acts; managers do balancing acts, assessing
risk and reward," says Shefsky, who, along with his colleague
John Ward, Kellogg School's thought leader in family business,
runs the 4-year-old Center for Family Enterprises (CFE). Both
professors have seen the entrepreneurial dynamic at work in
family business and are among the Kellogg faculty whose research,
teaching and consulting includes analyses of how the entrepreneurial
mindset impacts the family business dynamic.
|© Nathan Mandell
John Ward, an internationally recognized family
business scholar, leads a discussion at a recent Kellogg
School conference on the subject.
that some controversy surrounds the question of whether successor
generations are particularly entrepreneurial.
business heirs have typically grown up in very comfortable
conditions, leading some to propose that they can't have the
same entrepreneurial hunger as their parents," Ward explains,
acknowledging that family sponsored entrepreneurship can diminish
as a business grows successful, and often more risk-averse,
under strong leadership. Still, he contends that successor
generations benefit greatly being around entrepreneurs most
of their lives.
been most impressed by the entrepreneurial drive and imagination
of those Kellogg students coming from business-owning families,"
says Ward, clinical professor of family enterprise.
imagination, however, can lead some to focus on reward to
the point of "absurd optimism," forgetting the risks,
entrepreneurs, the glass isn't simply half-full; there are
waves crashing over the top," he says.
the entrepreneurial field
This optimism may have had something to do with the Internet
boom, especially its more improbable ventures.
of the 1990s, in fact, many confused entrepreneurship with
an activity more familiar to the inside of a Las Vegas casino.
For others, the Internet was synonymous with entrepreneurship.
say Kellogg experts, entrepreneurship encompasses a wide range
of initiatives — from high-tech ventures to barbershops.
scholars and students are exploring family business as an
arena receptive to MBAs looking to test their entrepreneurial
skills. Kellogg School Dean Dipak C. Jain contends that MBAs
and family enterprise leaders should capitalize on what he
sees as important, and underappreciated, partnerships.
family businesses certainly do employ graduates of top schools
like Kellogg, we believe there remains considerable untapped
opportunities for each group," says Jain.
for business schools today is to create new markets attractive
to MBAs, Jain says, adding that a tight economy exacerbates
the plight of those looking to step into lucrative roles immediately
after graduation. One way the dean believes Kellogg can meet
this challenge is through renewed attention on entrepreneurship,
redefining it to include sectors such as family business,
whose entrepreneurial potential is sometimes disregarded by
intends to continue developing a rapport with family business
by creating custom executive education courses for their leaders,"
Jain says. At the same time, these firms can work with Kellogg
to design project-based curricula. MBA students would engage
in projects with these companies, just as they have done with
these two groups are not total strangers to each other —
especially at Kellogg where the CFE has played a major role
in advancing the family business curriculum, including the
Family Enterprises and Solutions offering. Shefsky notes that
this class has the most participants of any family business
course in any business school in the United States. In addition,
according to Ward, Kellogg is home to a unique executive program
called Governing the Family Business. (The next session for
this offering is Oct. 8 to 11.)
the Kellogg School is in the vanguard of family business research.
Robert A. Lisak
Cindi Bigelow '86 (right) with (left to right) sister
Lori, father David, and mother Eunice.
is a dearth of teaching cases on family business ownership
and continuity. Proudly, we have written more such cases in
the past three years than any other business school in the
world," says Ward, whose reputation as a family business
scholar is founded by his extensive publications — some
three books, an influential series of booklets and dozens
of articles — on all aspects of the subject.
Ward indicates that the CFE's annual New Ideas and Best Practices
Conference attracts top international family business leaders.
The invitation-only event tackles a number of challenges confronting
family enterprises, including managing generational transition
and strategic change.
the achievement associated with the Kellogg Center for Family
Enterprises, Dean Jain would like to see more entrepreneurial
MBA candidates take a serious look at the Kellogg family business
program. He also thinks family business leaders should turn
more frequently to B-school graduates looking to put their
managerial insights to work in an environment that's often
more intimate and willing to take calculated risks.
Jain explains, is to bring MBAs and family business professionals
together so each sees past the assumptions they might hold
about one another. Sometimes getting everyone to speak the
same language is the first step.
risks' for families and MBAs
Cindi Bigelow, for instance, is a little suspicious of what
she considers buzzwords. Like "entrepreneurship."
vice president at the Connecticut-based tea company that bears
her family name, Bigelow '86 is a third-generation member
of a firm famous for producing premier teas and related products.
Her company won the 2002 Ernst & Young Entrepreneur of
the Year Award for the northeastern United States.
says that entrepreneurship can be a "vague and scary
word" that hides more than it reveals. But she also says
her family's 400-employee company doesn't back away from taking
the smart risks that she believes lie at the heart of good
entrepreneurship. There are, however, differences between
how her firm approaches change and how a traditional entrepreneur
need to make sound business decisions even as we move quickly,"
Bigelow explains. "A stereotypical entrepreneur might
be more risk-tolerant and impulsive than we are."
says that the key to balancing tradition and innovation within
a family business — a tricky point for many —
is to "ask tough questions as a group" and welcome
the opinions of naysayers who force the company's leadership
to examine strategy more closely.
recalls the Sunday dinners with her grandmother Ruth —
the company's founder — and knew from an early age that
she wanted to be involved in the family business. Bigelow's
father, David, passed along his passion for the business to
her, inviting his daughter's opinion about the firm's products.
("Not that your opinion mattered much as a child,"
"absolutely" believes family businesses are viable
arenas for entrepreneurial MBAs. But she cautions that grads
must find the right family business, one practicing what she
calls "new entrepreneurship," which she defines
as a model that embraces flexibility, seeks fresh opportunities
and isn't afraid of asking challenging questions before running
with an idea.
this environment is critical," Bigelow says. "Otherwise
you're going to kill your MBAs."
'98 agrees. The vice president of revenue optimization at
Edmunds.com, a venture that since 1966 has built a reputation
as the leading provider of automotive pricing guides, says
entrepreneurs possess a vision that most others don't have.
see opportunities further out in time and have an ability
and interest in taking risks and making quick decisions,"
says Steinlauf, who along with his father, Peter, the firm's
founder, are the only family members at the 160-person company
based in Santa Monica, Calif.
Edmunds, he says, remains very entrepreneurial, since the
company is relatively young and still has the founder active
in the enterprise.
insists that family businesses can be "a great opportunity"
for MBAs interested in pursuing entrepreneurship, but says
that a lot depends on an individual's career ambitions.
you want to be CEO at a family business, then you need to
determine whether the family members have management capabilities,
or whether they're looking for an outsider to run the company,"
Stephanie Gallo sees definite opportunities for MBAs in family
businesses such as hers.
Kellogg School graduate is senior marketing manager at the
Sonoma, Calif.-based E. & J. Gallo Winery. She's one of
the third-generation family members in the business founded
in 1933 by her great-uncle Julio and great-grandfather Ernest
— who she says, at age 94, still goes to work every
we recruit, we look for people who are passionate and have
an entrepreneurial spirit. It's a critical part of being successful
here, and one of the things we believe keeps the company fresh,"
says Gallo. She adds that the firm has recently hired several
Kellogg School graduates whose marketing skills are adding
"immense value" to the enterprise. Her brother Chris
is going to Kellogg and will be part of the Class of 2005.
reveals that her grandfather always seeks diverse opinions
before making important decisions, and he and others in the
company especially value new insights. "Ernest will always
ask the most junior person in the room their opinion and listen
intently because they often have one of the freshest perspectives,"
says Gallo, who considers her great-grandfather an archetypal
entrepreneur, though one who began his business "because
he had no choice."
was a matter of survival," she says. "Ernest and
Julio were products of the Depression, and they had enough
foresight to realize that Prohibition would be repealed. They
had an opportunity to sell grapes, or else turn them into
a value-added product like wine."
went to the library and found two pre-Prohibition pamphlets
on wine-making, says Gallo. The rest is history.
Not all founders of family businesses are lucky to live as
long as Ernest Gallo. Consequently, succession represents
a major challenge for family enterprises, say Ward and Shefsky.
Succession is where they see clear parallels between entrepreneurship
and family enterprise.
entrepreneurs know when to step aside and let others manage
their vision, explains Shefsky. Stepping aside is not necessarily
easy for such founders, but they have an easier time doing
so than their family business counterparts who often have
great emotional investment in an enterprise, as well as obligations
as stewards from prior to future generations.
entrepreneurs do early on, says Shefsky, is bring a talented,
trustworthy partner into the venture, and then nurture that
manager until the individual understands the business and
the vision, and can run the company effectively. Of course,
the entrepreneur should simultaneously be trained to trust
and accept such succession.
Kellogg School experts help family businesses overcome the
succession hurdle? There's no one-size-fits-all solution,
according to Shefsky, but he advises clients to begin planning
lot of people hear this and think, 'I better bring my kid
in every Saturday and start teaching him the business,'"
says Shefsky. "But I'm not just talking about dealing
with the kids. Deal with yourself and get ready for succession.
Communicate your principles and define your business to your
kids so they understand and are comfortable. If they're not
comfortable, maybe you should pass the reins on to someone
else in the family, or to an outsider."
part, the Kellogg Center for Family Enterprises continues
to offer leadership that enables family businesses to meet
these complex challenges.
are humbled by the realization that many of our students are
certain to become CEOs of important enterprises," says
Ward. "We want to help them feel prepared for that path."