All posts by John L. Ward, Ph.D.

John Ward is a co-founder of The Family Business Consulting Group, Inc., and is co-director of The Center for Family Enterprises at Northwestern University’s Kellogg School of Management (Chicago, USA) where he is Clinical Professor of Family Enterprises. Ward teaches and studies family enterprise continuity, ownership, governance and philanthropy.

Capital Market Theory and the Family Business

John Ward
John Ward

The most recent HBR has the theme, “Are Investors Bad for Business?” (excerpt). Extraordinarily respected Clayton Christensen of HBS talks of how bad capital market theory is for innovation and job creation. Finance rations capital to a short term bias presuming capital is scarce. But it isn’t, Christensen asserts.

Family business capitalism sees the world differently. Families see capital as limited, but also embrace the long-term view. Families don’t decide as much by IRRs as by future scenarios. Limited capital sharpens the commitment, persistence, and agility necessary for sustainable success.

For years I’ve thought that shareholder capitalism couldn’t escape its fundamental assumptions and elegant, even if wrong, orthodoxy. With Professor Christensen leading a different thesis I’m heartened we maybe see things differently. While that’s good for society, it also lessens the competitive advantage of business families. Or, maybe, business families are so innately good at this thinking that they are protected by years of experience.

It’s ironic. Just as the share value capitalism theory is facing critique by advocates, business families are losing confidence in their inherent advantages. They are increasingly being told by family business researchers that they compromise shareholder value too much for family continuity and comfort.


Questions Students Ask Most

by John L. Ward

For the past few years we’ve kept track of the questions most often asked by MBA students who come from business-owning families. Would you suggest any other pivotal questions?

  1. Should I join my parents’ business? Culturally, do I have a choice?
  2. When should I join the family’s business – especially if it’s a large business or large family?
  3. Can the family business fit my dreams? Can I bring my personal passions to the business?
  4. Will I be encouraged to grow the business or struggle with resistance to change?
  5. What will it be like to work with siblings? Can we have a sibling partnership based on meritocracy?
  6. How can I best engage my family in sensitive continuity planning topics?
  7. What wise tips are there for developing a business together with my spouse?
  8. What business school courses are the best to prepare me for working with my business-owning family?

Case Study: Heineken as a Family Business

by John L. Ward

I had occasion to hear a talk by the Chairman/CEO of Heineken, Jean-Francois van Boxmeer.  So much of what he said reaffirmed our observations and experiences. First, some context, then our shared views.

  • Heineken is about 150 years old and controlled by the fifth generation of the Heineken family. They are the third largest beer company in the world.
  • The family has often relied upon non-family management, but always participated actively as owners. Mr. van Boxmeer started with Heineken immediately out of school. He held positions in Africa, Poland and Italy and proudly announced he had never looked for a job elsewhere. He’s been CEO/Chair since 2005 – 8 years already.
  • The Heineken family has voting control but only 25% of the economic interest via a holding company owned 51% by the family that controls 51% of an operating company. The rest of the shares are publicly listed.
  • The company’s core brand represents 17% of revenues. Otherwise they have more than 250 local brands around the world, 28 of which are long-term partnerships that represent 25% of all sales.


  • Mr. van Boxmeer was asked of the advantages and disadvantages of being a family business. The disadvantage he quickly noted was the “constraints of the balance sheet – especially in an industry where you must grow or die.” On the other hand, numerous advantages:

―   Patience and the long-term view.
―   The “nerve” to courageously hang in during tough times.
―   A special spirit of passion for the business.
―   The people like working for a family.
―   The long nurtured capability to work with partners and to integrate   acquisitions into the Heineken culture.
―   Long-term value is more important than share price.
―   Market share is more important than earnings.

  • What does it take to successfully integrate acquisitions?

―   Clear direction
―   Mix people up
―   Get rid of the 10% who don’t buy in
―   Use people’s strengths

  • What about the culture?

Culture is what you do, not what you say in a brochure. The key Heineken values are

―   Passion for quality*
―   Enjoyment*
―   Respect*
―   Integrity*
―   Entrepreneurship
―   Demanding of results

The first four (*) we note are commonly distinct for family firms. It’s interesting to note the seeming contradiction of “enjoyment” and “demanding of results.” Maybe not a contradiction?

  • What he looks for for cultural fit in new hires?

―   Integrity – doing what’s best for company (what we often describe as “doing the right thing”).
―   Competence, of course.
―   Empathy.
―   Low ego – the credit belongs to customers and employees.

  • A classic cultural contradiction he noted was to balance local culture and company culture. This, he feels, is another special capability of Heineken.

In sum, the long-term view, strong DNA-based culture and special dynamic capabilities define Heineken, even as a listed company and even though the family only holds governing roles.


How Parents Influence Wealth of Their Children

by John Ward

That wealthy parents beget wealthy heirs is well researched and proven.  In fact, parents in the top quintile of wealth and the bottom quintile are very likely to have children of the same wealth category through their adult years. The top fifth has one year’s earnings of net worth; the bottom fifth has but six weeks of net worth. Curiously, the gap is the same in Sweden – the land of perceived equality – and the USA – the land of perceived inequality.

But, until now, there hasn’t been a study explaining exactly why that’s true[i].  There are theories that the next generation inherits a leg up and those that believe the next generation learns certain approaches to money.

What do you think?

  1. Kids of parents of wealth earn more in their lifetime.
  2. The next generation creates wealth by investing in homes – as their parents did.
  3. Kids from wealth learn to do riskier and higher return investing – just like their parents do.
  4. The next generation benefits from inheritance bequests.
  5. The next generation benefits from lifetime financial gifts from their parents.
  6. The next generation follows the lead of their parents with better education.
  7. The heirs learn to save more money from their parents.

The answer:

1, 2, 3, and 4 are true in that order of influence. 5, 6, and 7 have no influence on children’s wealth accumulation. Purchasing homes sooner and investing in high return ways are the two most discriminating factors of heirs of wealth. In conclusion, what’s learned at home about how to manage money is more important than the passing of wealth from one generation to the next. (Unfortunately the same holds true for the poorest of the next generation.) Parental example is what really matters.

[i] Now there is, by researchers Peter Lundgren of Stockholm School, Thomas Jansson of Sveriges Riksbank, and Todd Sani of the Wharton School.


Family Business Innovation: Doing Less; Doing it Better

by John Ward

A recent academic article[1] explored what’s known about innovation in family firms. My conclusion is: Family firms do it less and do it better.  (The article focused on technological innovation – not ownership or leadership or management innovation where one might find the more special family business particularities.)

Family firms innovate for diversification and long-term security.  They do less R&D and less globalization.  They do less because of an aversion to risk, because there may be family-owner conflicts of investments in innovation, and because they see fewer outside opportunities due to their more internal perspective.

On the other hand, family firms do what they do better and more successfully.  Family ownership provides stronger and more long-term oriented project leadership and more solid commitment of resources. There is also a more long-term patience for the benefits of innovation. And, because of inherent frugality, there is more productivity from innovation initiatives. Further, family firms assess innovation opportunities faster and with the perspective of the greater good — altruism – rather than local selfishness.

One particular capability of family firms is their managerial “ambidexterity.” All these advantages are stronger if ownership is more concentrated.

Much more research is called for in other forms of innovation – such as administrative and ownership innovation.

[1] “Research on Technological Innovation in Family Firms: Present Debates and Future Directions”, Alfredo De Massis, Federico Frattini and Ulrich Lichtenthaler, Family Business Reivew, March 2013


The Ford Family as Owners

by John L. Ward

Friend and colleague Amy Schuman urged me to read American Icon: Alan Mulally and the Fight to Save Ford Motor Company (by Bryce Hoffman, 2012). It’s a compelling and captivating story of a dramatic turnaround. It’s also a great family business story.

The family business topic I want to focus on is the role of the Ford family as owners and governors. There are 13 fourth generation cousins with 30 members of the next generation ascending.

  • For the longest time the G4 cousins have met quarterly – mixing a social and business briefing agenda. They never voted; they always worked for consensus.
  • For decades they believed that their role as owners was to provide unity, stability and long-term commitment.
  • Where there was conflict it was not from company issues but from old resentments over perceived fairness in family matters.
  • In their meetings, as controlling owners, they discussed
    • Confidence in the CEO;
    • Contingency plans if the CEO or strategy didn’t work out;
    • Significant debt decisions;
    • Dividend policy;
    • Maintaining control of the company.
  • Bill Jr., as executive chairman, took on several roles:
    • Emphasizing company innovation
    • Fighting off cultural complacency
    • Providing institutional memory
    • Identifying CEO candidates with the board
    • Managing family owners relations
  • Other family members
    • Served as cultural ambassadors with dealers;
    • Visited locations;
    • Participated in local philanthropy.

Family business owners will find even more value in the book. Founder Henry I was a classic example of “founderitis.” He also had a magnificent vision and social purpose. His son, Edsel II, was overwhelmed by his father’s inability to let go. Subsequent generations had to work hard to earn credibility and fight off perceptions as “rich dilettantes.” Bill Jr., now chairman, received invaluable, trusted coaching from independent directors who themselves understood family business – especially Hocksday of Hallmark.

Then there’s the bulk of the fantastic book telling of Mulally’s turnaround strategy and his philosophy of management.

Enjoy. I’m quite sure you’ll embrace the stories.  Thanks, Amy.


Classic Dilemmas

by John L. Ward

Classically, families transitioning from sibling parents to successor cousins face the challenge of transferring wealth and power by common rules shared by all the branches or by each parent deciding what’s best for their children. The questions where parent/branches could disagree:

  • At what age should next generation receive dividends, income?
  • At what age should next generation receive stock and voting rights?
  • At what age should next generation attend board meetings as observers?

Parents, of course, have the right to disagree on what’s best for their children. On the other hand, equivalency facilitates transparency and goodwill among the families.

As with all dilemmas, what to do is a matter of respectful balance. One family said it well:

“We coordinate and set uniform policy as much as possible


respect that parental privilege comes first.”

That reminds us of a family seeking to balance the family-first or business-first dilemma. They speak to it in a paradoxical way:

“The business always comes first – but for the family.”

Please share any dilemmas or paradoxes you face as a family in business.


Work-Life Balance: Who Would Choose Work?

by John L. Ward

Commentary on work-life balance has been fueled by the recent pronouncements of Sheryl Sandberg (COO Facebook) and Marissa Mayer (CEO Yahoo).  A recent article by Laura Vanderkam in USA Today urged using the term “work-life fit” instead. She notes that focusing on balance sets up a false choice. Fit provides an insight where work and life can be the resolution.

We often blog about managing dilemmas, balance and paradoxes, as family business leaders must have those capabilities. The example of work-life fit is very instructive.


Knowing Your History is (Psychologically) Valuable!

by John L. Ward

Emory University research professor Marshall Duke and colleagues show the value of children knowing the family history. The benefits?

  • Better functioning family;
  • More resilient children;
  • Higher self-esteem of children, and
  • More self-confidence and self-competence for them.

This happens, they argue, because knowing your family’s history provides:

  • Meaning beyond the self, which brings feelings of strength and stability (intergenerational self);
  • Stronger belief that one is able to influence one’s destiny (locus of control);
  • A security from a longer perspective on time (anchoring).

They recommend:

  • Tell family stories over dinner…
  • …especially stories about the parents before the children were born, and
  • Relate where grandparents came from and what their work was.

Business families have remarkable and compelling stories to share with their children, for great value to the family and the business.


What is the Role of Family on Board?

By John L. Ward

  • Share personal perspective fully, while assuring the independent directors have dominant “air time”
  • Express “informed consent” (as best as possible)
  • Represent ownership – values, vision, goals, board evaluation
  • Monitor and champion family owners’ values, vision and goals
  • Motivate independent directors
  • Motivate management, especially CEO
  • Support/champion decisions of the board
  • Assess confidence in governance system
  • Serve as cultural ambassador; be visible (reasonably)
  • Provide link with family as needed for owners’ input
  • Support reputation of firm with stakeholders