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Working for your family’s business can be a very rewarding experience, if it functions well. When it doesn’t, the experience can be extremely challenging.
“When it works, it is an opportunity to create a valuable family legacy and for families to stay connected for generations,” says Doug Baumoel ’78, founder and principal of Continuity Family Business Consulting. “A connected, extended family with significant resources can produce extraordinary opportunities for individuals and have a significant impact on society.”
Working in a family business, he says, differs from working in a non-family business because “your role in the family business is very much connected to your identity.”
“These roles, including all the power, money and relationships involved, are not as negotiable as they would be in a non-family business,” Baumoel continues. Speaking of his experience in his own family’s business, “The big surprise was how strongly we were each invested in our positions, ideas and roles. When it works it can be great. When it doesn’t, it’s tragic.”
The most challenging aspect of running a family business is managing conflict.
“While large family businesses can be more complex, the issues that smaller family businesses face can often be more urgent for the stakeholders. Stakeholders in smaller family businesses can’t hide within a complex organization or rely on an independent board of directors to help them through an impasse. They are on the front lines, dealing with each other on every issue every day. Emotions and relationships are exposed to potential conflict daily,” he says. “In addition, families of larger family businesses typically have some degree of liquid wealth, perhaps even generational wealth, that can provide a level of security for all stakeholders. Families of smaller businesses are less likely to have such a cushion and, therefore, conflicts and strategic errors can be existential threats to the family and the business.”
While large family businesses can be more complex, the issues that smaller family businesses face can often be more urgent for the stakeholders.
Baumoel, who earned a bachelor’s degree in electrical engineering, shared his insights during a recent return visit to Cornell to moderate a panel at the inaugural 2015 Families in Business Conference held by the Smith Family Business Initiative (SFBI) at Cornell.
Baumoel’s experience includes leadership roles in his own family business, another family business, non-family businesses and now, being a consultant to family businesses.
“I come from a small family business. My father started an industrial instrumentation company in the basement of our home in 1963. It grew substantially and I spent much of my career as the leader of the second-generation in the business,” he recalls. The Baumoel family hired family business consultants to help resolve their conflicts but 20 years ago the field “was still in its infancy.” Baumoel decided to take the lessons he learned and forge a new career as a family business consultant.
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“Pure and simple, [conflict] is the core challenge for families that work or own [a business] together. A family that can manage conflict well has a good shot to get everything else right,” Baumoel says. “If they can’t manage conflict well, they get stuck—or worse. I think of family businesses like a building resting on a foundation made of stone. Each stone is a ‘best practice,’ a policy, or a process. The ability to manage conflict well is the mortar that holds it all together.”
Family businesses are the backbone of our economy . . . yet only recently have leading business schools begun to offer programming and coursework that address family business.
Efforts like the Smith Family Business Initiative are important because family businesses are so ubiquitous, both in the United States and overseas. According to the SFBI website, 77 percent of all new business ventures established in the United States are founded with significant involvement of family in the business. Family-controlled firms now make up 19 percent of the companies in the Fortune Global 500, up from 15 percent in 2005.
“Family businesses are the backbone of our economy and are even more prevalent throughout the rest of the world. It is the most common of all business structures, yet only recently have leading business schools begun to offer programming and coursework that address family business,” says Baumoel. “I think the SFBI is positioned to make a difference, not just for the Cornell community, but I believe that by drawing upon the resources that Cornell has across the entire university, the SFBI can impact our understanding of all aspects of family business.”
“Studying engineering at Cornell infused in me an ability to think in systems. I spent several years deconstructing what went wrong for us, and why the family business consultants we hired . . . weren’t able to help,” recalls Baumoel.
Baumoel read everything he could find on family businesses and took additional courses to broaden his knowledge of family systems and dispute resolution.
I spent several years deconstructing what went wrong for us, and why the family business consultants we hired . . . weren’t able to help.
“What I came away with was a different way to look at family businesses,” he says. “Over the next few years, I developed this view into a robust methodology that has fueled the growth of my practice.”
Baumoel says he “could not have made sense” of his experience with his family’s business without the skills he learned at Cornell.
“You can’t go through four years of engineering school and not know how to break things down to their component parts and figure out how to put it back together better,” he says. “Although I got my MBA at Wharton, and got a great business education there, it is what I learned at Cornell that really helped me re-engineer [my] approach to family business that formed the [intellectual property] of Continuity Family Business Consulting.”
Baumoel advises student entrepreneurs who expect to go into a family business to “think multi-generationally.”
“Remember, a family business requires more than just learning about entrepreneurship and business management. It’s also about family dynamics and psychology, wealth management, ownership transition planning, and, especially, conflict management,” says Baumoel. “An MBA is just the beginning of the journey.”
The Smith Family Business Initiative at Cornell was established to support and strengthen businesses that are family and privately owned. Founded in 2014 with a generous gift from John and Dyan Smith, the initiative provides education, networking, and research for family business owners, successors, and students from across the globe.
Learn more about Cornell’s academics, mentors, and campus resources that help support entrepreneurs.