‘It’s the American Dream’: Polsky Exec Talks Family-Owned Businesses, Innovation, and Education
Family businesses are the engine that runs the economy, says Polsky executive Dan Sachs, who speaks to the importance of supporting those contributors.
We caught up with Sachs, who is the executive director of education and programs at the Polsky Center – and the son of a family business owner – ahead of a workshop next week that will address the challenges of running a family business, working with family members, and finding the balance between scaling and legacy.
>> To register for E2: Leadership Dynamics within a Family Owned Business, click here.
Jamie Shah, MBA ’13, and Jessica Shah, SSA ’10, will lead the workshop, which takes place on Monday, February 15.
Polsky: What are the specific needs and challenges of family-owned businesses?
Dan Sachs: There are two facets that are principally unique to family-owned businesses. One is often people who are in family-owned businesses come up through the business, in the most traditional bricks and mortar sense. It’s somebody whose, let’s say, family has a small company that makes cakes. You, as a child of that family business, learn the business from being involved in it, by working in the business. That’s true regardless of what the business is. You could be in real estate. I had a student whose family business was apartment management. The son came up through the family business and learned the trade that way. That’s most traditionally how people in family businesses learn all the skills involved in the business. It makes sense because it’s right there in front of you. You just jump right in; it’s in your blood, so to speak.
The challenge is that to innovate and to think progressively about how a business could evolve, it helps to have the influence and understanding of evidence-based research on how best-in-class entrepreneurial ventures operate, generally, and then be able to apply knowledge to the particular challenges of your family’s business. So, the programming and education that are provided at Booth, for example, give you the scaffolding, the mechanisms you might need to be able to help not just perpetuate a family business but to help it thrive, to help it grow, to help it evolve over time. It’s very difficult when you’re in the thick of a business to appreciate that the importance of that kind of experience, if you haven’t had the opportunity to see outside of the family business. So, that’s one facet where family business education can be invaluable.
The other facet is that through education and the programs, for example at the Polsky Center, learning about what it means to be a leader and to manage people and processes on your own, independent of the family business model that you’ve lived in, can be very helpful. There are lots of different ways to run a company and seeing other models of how companies operate in conjunction with understanding the unique dynamics of your own family business organization can be constructive, as well.
So, there’s one other challenge of being in a family business: you’re not just in a business, you’re in with your family. We all have special ties to our family that may or may not coincide with our ability to navigate a business culture. Being in a position to, again, see that from the outside through a different lens and understand the research and the knowledge that’s collected more broadly about how family members manage their relationships within a business can be very helpful when trying to grow and move from generation to generation within a business.
To me those are the unique aspects that exist in a family business versus starting a business or going into a business that’s already existing and moving into a leadership role. Because, often, whomever is the family founder, got to a position of success, however that’s measured, by doing things a certain way based on criteria that worked for him or her. That’s phenomenal, but often there are opportunities for improvement, for change, for new ideas. Having structure around those new ideas is helpful.
Polsky: What are your thoughts on family-owned businesses navigating between scaling and maintaining its legacy?
Sachs: From my perspective, for what it’s worth, I think the challenge is establishing credibility as a next generation founder. Any entrepreneur has to have a certain level of confidence to start a venture or to shepherd a venture. In the case of the family business, there may be a multi-generational culture, especially if there’s been a legacy of success. Establishing your own credibility takes time and takes a certain level of sophistication to communicate your ideas effectively. It can be extremely challenging – building that trust between generations. That’s not that different in any organization but families have a lot more baggage.
One of the principal keys that helps people excel in any company is their ability to create reciprocity and trust within the work environment. It’s simply more immediate in a family business because you have direct access to the founder/CEO if you are part of the next generation.
On the other hand, if you work at IBM and there are multiple layers, you have to work your way up through those layers building reciprocity and trust along the way. In a family business, you can short circuit a lot of those layers, but it doesn’t mean that you’re not still obligated to build that connection. That’s the challenge, is building that relationship and establishing credibility and recognizing that it’s not bestowed upon you, but it’s earned. In some family business circumstances that I’ve seen, that can be more difficult than you might think.
Polsky: What are some resources for entrepreneurs who aren’t in business school but have to learn their family business? What are things that they could be doing?
Sachs: There are a lot of business affiliation groups. Of course, you can listen and learn from family business success and failures online, and you could take a virtual class. The one area that’s always been valuable to me that I think is often underappreciated and easily dismissed is building a network of like-minded people who are facing the same challenges.
There’s a lot to be learned from your peers who are going through the same thing or have faced similar challenges. It’s easy to think that your situation or your experience is unique, that what you’re going through or the challenges that you have to manage are unique. Certainly, there are aspects that are unique; your family is unique. But the human condition is not that unique. There are parallels to the challenges we all face in business. So, finding affinity groups can be powerful medicine to help you with the challenges of your own family business, or any organization where you want to have an impact.
Polsky: What are some of the other challenges that face family-owned business?
Sachs: I think the challenge in most businesses in general, whether they’re family businesses or not but family businesses may be more susceptible, is innovation. Let’s use the model of a property manager for apartment buildings in Chicago. You’ve got 10 properties that you’ve been managing for the last 25 years, 1000 units or so, and you’ve been doing it the same way and have made a good living on it. There are new technology and apps to help tenants pay their rent and get additional services that, when you started your business, you didn’t have. Whether or not you’re willing to adapt and innovate to provide some of the tools that competitors may provide as new entrants into the market, the risk is that you’re no longer a preferred vendor.
That’s not necessarily unique to family businesses, but in a family business sometimes it’s harder to generate that kind of innovation because you don’t have a corporate board or the same kind of incentives that you might have in a traditional business. It’s beholden on you as a leader to be willing to be flexible. Some leaders are, and some aren’t.
Polsky: How does the programming here help address some of these challenges and support entrepreneurs, those in the family business space and beyond?
Sachs: I think the Polsky Center is the bridge between the evidence-based research that happens at Booth and the practical realities of running a business or a startup. What we do at the Polsky Center is to provide you with the tools you need to learn how to increase your odds of success as an entrepreneur, tilt the scales in your favor.
That’s important because it’s an advantage you can only get by participating in programs like the one we’ll have on Monday, among the other opportunities that exist at Polsky. As I said, the uniqueness that Polsky offers is acting as that bridge between academia and practice. We’re not just an accelerator. We’re not just about launching businesses. We’re helping you learn about entrepreneurship across a spectrum of tools to develop the skills you can use to succeed wherever your journey takes you.
There’s a lot of reason to get excited about family business. It’s the engine that runs the economy – employing over 60% of the US workforce and accounting for about 65% of GDP. It’s important to be able to support those contributors as best we can. After all, it’s the American dream.
// This workshop is part of a larger event series put on by the Polsky Center, called Entrepreneurship Essentials (E2). The series is designed to help entrepreneurs launch their startups successfully. Throughout the winter, these workshops will cover topics ranging from defining core values, HR 101, marketing strategy, competitive analysis, and more. To see a full list of events, look here.