Family Business Management 101

Students enrolling in the University of St. Thomas Family Business Management class find that there’s an unusual requirement: Their moms and dads are expected to show up for class, too.

So one Saturday in early April, a father and son sit side by side in a classroom on the school’s Minneapolis campus. The father owns a major hog-farming operation in southwestern Minnesota with his brother; it employs 200 people in peak season. With his son’s generation reaching adulthood, he sees questions looming: Under what circumstances should other family members be hired? How should they be compensated? How will succession planning work?

All two dozen people in the classroom are similarly paired—parents and offspring. The course, open to undergraduates and MBA candidates, has operated this way for almost 20 years, says Professor Ritch Sorenson, who holds the university’s Opus endowed chair in family enterprise. “If you’re going to have any real impact on a family business system, you need the key participants learning and applying lessons together.”

The requirement tends to keep the class size small, Sorenson says, but only rarely is the problem getting parents to devote the time. More often, it’s that students are ambivalent about joining the family business, and fear that signing up and bringing a parent will be taken as an “automatic commitment.” Who’s bringing who to class is not always clear, Sorenson adds; many students are prodded into the course by parents who learn of it.

“I’ve had two or three students who went through a gut-wrenching process during the semester,” the professor recalls. One young woman, whose family owned a chain of auto dealerships, broke down in tears before finally deciding to join the business. Sorenson suspects that with job opportunities drying up in the recession, such decisions are becoming less difficult, but still tricky to execute.

Succession planning and estate planning are two common concerns that students and parents bring to the course. Another is governance, Sorenson says.

In this Saturday session, guest lecturer Mary Daugherty, an associate professor in the university’s finance department, recounts the history of a decade-long struggle to iron out governance issues in her own family’s business, a very large electrical-equipment wholesaler founded by her grandfather in 1919.