Back to school for confidence
Family executives make the most of advanced education By Ann Meyer
9/5/2005 - Ever since he can remember, Steve Hester was soaking up knowledge of his family's business, Hester Decorating, a Skokie-based painting and decorating company.
As a teenager and young adult, he helped by doing odd jobs in the office. But back then, he had no intention of making the painting business his career.
Hester still doesn't like to paint, but after trying other business opportunities, including launching his own golf products company in the '90s, he has developed a new appreciation for the 70-employee company his father, Tom Hester, built from the ground up 37 years ago. So much so that he went back for an executive master's degree in business administration at Northwestern University's Kellogg School of Management to gain the tools to move the company in a new direction.
"I wanted to improve the way we did things," he said.
While generations ago most family business executives were self-taught, learning through trial and error, today's up-and-comers are likely to seek out more formal training, experts say. While they continue to learn on the job, studying business in an academic environment can broaden perspectives and boost confidence as they take on additional duties.
"Often what's lacking is confidence in being able to build the business as Mom or Dad have in the past," said Suzanne Lane, program director at Loyola University's Family Business Center. Formal instruction, whether in the form of a full-fledged MBA program or a specialized business seminar, can make a difference.
"We've seen more interest as far as next-generation leaders" in family businesses looking for formal business education instead of "learning vicariously" from the older generation, she said.
Lloyd Shefsky, clinical professor of entrepreneurship at Kellogg, founded the Center for Family Enterprises at the university six years ago after determining that about 5 percent of Kellogg students come from family businesses, often as they are groomed for leadership positions.
"I've jokingly said to the dean, `We ought to tilt our admittance policy, because these are the ones who are going to be CEOs.' The fact is, they've come to learn how to run a business," Shefsky said.
Advanced education can help them succeed at the highest levels. Often the next-generation leader in a family business "is living in a shadow of the founder or whoever is running the company," Shefsky said. "You can go talk to Dad or Mom or Grandpa, but the truth is, to get out from under the shadow, you have to feel you are at least as good or better" than the older generation, he said.
What's more, the credential of an advanced business degree can help eliminate what some refer to as "the silver spoon syndrome," Shefsky said. "Some students fear that if they allow anyone to know they're from a family business, they'll be known as spoiled brats," he said. "But if they've given up two years to get an MBA, they're anything but spoiled."
Still, family business executives don't always feel compelled to complete a full MBA program. Area universities, local chambers of commerce and other business groups offer weekend and evening seminars and conferences aimed at providing practical business tools to working executives.
The payoff to a family-run company in having an academically trained executive can be substantial. At Hester Decorating, sales are expected to hit $7 million this year, up from $5 million in 2003 when Steve Hester began the MBA program.
Much of the sales gain has come from a new commercial decorating division Hester launched while in Kellogg's weekend program. The company had used a scattershot approach to nabbing new business, but Hester learned the importance of focusing on a particular market segment.
The company began turning down opportunities that didn't fit its quality image, and now the high-end decorating firm has developed a following among upscale condos and banks, Hester said.
What's more, a cost-accounting class Hester took early on in his coursework led him to offer more competitive prices based on new overhead calculations, he said.
Hester doubts the company would be where it is today without his advanced studies.
"Rather than haphazardly saying, `This sounds good, let's try that,'" Hester said, he based his strategy on market research. Learning new business tools "helped speed up the process rather than making mistakes and putting the company at risk while doing this," he said.
Since launching the commercial division in 2003, Hester has expanded it to about 25 full-time painters. Sales in the division have climbed 20 to 25 percent a year in each of the past two years, he said.
Bill Birck, executive vice president at Reed Construction, a fifth-generation family business in Chicago, had a similar experience to Hester's.
"It gives you a leap ahead," said Birck, who once earned his living playing bass in a jazz band. Though he also spent three years as a broker at Morgan Stanley, Birck still refers to his notes from Kellogg Professor Steven Rogers' entrepreneurial finance class to help manage his family's business.
Reed Construction, which Birck's great-great-grandfather launched in 1893, for decades had been approaching business development the same way, largely by word-of-mouth referrals. Now Birck's business acumen is bringing new focus to the company. By segmenting the market and looking at ways to better serve its client base, Reed has lured new customers in specific areas, such as health care.
Birck said a class on health-care management gave him a better understanding of the challenges facing that industry. "It gave me a sense of, here's what their needs are so we can help tailor to them," he said, noting that the strategy has led to new hires and new business.