Brown Brothers Harriman: Tell us about your background. What drove your interest in working with family business owners?
Michael Preston: I never thought much about it, but I was born into a family business, which my father ran. It was only later that I realized I was self-taught about family businesses.
While I was attending New York University for my MBA, I was speaking to one of my professors – Peter Drucker, a well-known management expert – about the courses that I had enjoyed, and he recommended a career in management consulting. After graduation, I got a job at a large consulting firm and worked there for 28 years. I had a diverse set of clients during my career – I once tried to count, and it totaled over 100 – but many of the experiences were with growing family businesses. That’s where I learned to build on being born into a family business.
While I was working in consulting, I wrote a book with a couple of other partners called “The Road to Success: How to Manage Growth,” which focused on helping companies, particularly small and medium-sized businesses, navigate growth. In writing the book and summarizing my experiences, I started to see a pattern, where many of the owners, many of which were from family businesses, had strong personalities, with mixed results that could be both good and bad.
I was teaching continuing professional education courses to my staff at the consulting firm, and I had the idea to turn my book into a course and teach full time. My wife and I had dinner one evening with the vice dean of Columbia University, and she said she wanted me to teach the course at Columbia Business School. Things evolved from there, and I taught the course – Managing the Growing Company, which helped students navigate the complex personalities and attitudes in business – from 1998 to 2015.
During that time, I started to realize that the students in my classes were from family businesses, which I knew about through my consulting work and personal experience. That’s when the lightbulb went off. I created a course called Family Business Management and started teaching it in 2008. Fast-forward, and thanks to support from the administration, there are now six family business courses and a Family Business Club, which has between 150 and 200 students from family businesses each year. In 2015, we launched our Family Business Program to help prepare the next generation of family business owners for success.
BBH: You touched on the personalities in family businesses, and they usually tend to have complex dynamics. How do you prepare your family business students to manage that?
MP: Seventy percent of the world’s businesses are family businesses, and they have been dealing with many of the same issues over the course of time. I’ve tried to build my course and work with my partners, Patricia Angus1 and Daniel Wolfenzon, to develop our curriculum such that it positions students to learn to deal with those issues. For example, we have a course on conflict in family business.
There’s more to it than that, though. I also teach my students to create a three circles diagram plus a genogram, which are early steps in analyzing dynamics in the family and the business. In addition, we talk about the professionalization of both the business and the family. To address that, the students need to deal with questions related to the “family business” as well as the “business of the family.” For example, I work with them to conduct a SWOT analysis on the family business and then one on the family to identify the strengths, weaknesses, opportunities and threats for both. Through conducting analysis, listening to guest speakers and talking to one another about issues they are confronting, many students begin to see that they’re not alone in the challenges they are facing. To have my students have this realization in a classroom that is a safe space where they can compare notes with each other is significant.
Once they have their three circles diagram, genogram and SWOT analyses, we look at the increased professionalization of the business and the growth curve, which goes from small and medium-sized businesses up to very large businesses. We consider questions like: How do you evolve as the company grows? What are the complexities at different growth stages? We talk about how to structure and begin to build a proper organization with better systems, management and records.
Then, we look at the professionalization of the family, which has a similar growth curve, with the different generations plotted out. As time goes on, there’s a multiplier effect, and that is what leads to many of the issues inherent in family businesses. When you get to the third generation, not everyone may understand the business’s values or be interested in participating in it, or they may not all get along.
If they understand these dynamics on both sides of the equation – the family business and the business of the family – they can see through the common triggers that can cause the issues.
One of the best learning experiences for the students is the final paper in the class, where they are required to speak to their family about the family business. Often, they set up an hour to speak to their parents, who think they already know everything about the business, and two days later they’re finally done talking. The parents didn’t realize their children didn’t know the history and story of the business, and the children had no concept of the struggles and turmoil.