Family Business Audiocast | Episode 15 | Prof. Massimo Baù | Jönköping International Business School
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About Our Guest:
Prof. Massimo Baù serves as a Senior Associate Professor in Family Business and Ownership at the Jönköping International School in Sweden and is the Director of the Centre for Family Entrepreneurship and Ownership. Recognized as a Fellow of the Family Firms Institute, Massimo is deeply engaged in both Scandinavian markets and broader international discourse related to family enterprises, family firms, and ecosystems. He also holds pivotal roles as Research Director and Board member at the International Family Enterprise Research Academy and participates actively in the Family Firms Institute. Massimo's teaching portfolio encompasses subjects such as family business, entrepreneurship, design thinking, and research methodologies, emphasizing his comprehensive approach to education in the field.
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[Transcript]
R. Adam Smith: [Intro] Welcome to the Family Business Audiocast on LinkedIn. I am R. Adam Smith, creator of this audiocast series. As an entrepreneur, investor, founder, investment banker, and board leader the last 25 years, I am fortunate for my many experiences within the family firm industry.
A warm thank you to our live audience on LinkedIn today – and for those listening in the future.
A brief comment on why I created this broadcast: private companies are a passion of mine, having grown up in a family of entrepreneurs, and having engaged for two decades in deals, strategic transformations, investments, and boards, with an array of fascinating family enterprises, family firms, and family offices. I founded this series to offer a useful platform for listeners to hear from veterans, academics, and leaders in the vast family firm ecosystem. Whether you are a family business owner, building, running, or advising a family office, or just expanding your family office activities, I hope these conversations are useful and enlightening. And now, it is time to turn our attention to our accomplished guest on today’s episode.
[01:00] I am very pleased to host today my friend, Massimo Baù. Massimo, welcome to the audiocast today.
Massimo Baù: Thank you so much. Happy to be here. And thanks for the invite.
R. Adam Smith: It's great to have you here. So, we're going to kick it off in a couple of minutes with him, but I would like to share a little bit on his illustrious background briefly. Massimo is a Senior Associate Professor in Family Business and Ownership at the Jönköping International School in Sweden, and also Director of the Centre for Family Entrepreneurship and Ownership. He's also the Research Director and member of the Board of the International Family Enterprise Research Academy, also involved in the Family Firms Institute, also a member of the Academic Advisory Board of the Boards Impact Forum, and co-founder of the European Family Business Centers. He also is on the faculty of the Family Business Institute at the Grossman School of Business University of Vermont, [02:00] and also a member of the Scientific Committee of the National Center for Family Business at Dublin City University. Earlier, he obtained his PhD in Business Administration from the University of Italy, writing a thesis entitled, "Family Embeddedness and Entrepreneurial Entry."
He teaches on family business, entrepreneurship, also creativity, design, thinking, and research methods, and covers a wide range in the academic realm. He's also a Fellow of the Family Firms Institute, which is the leading association worldwide for family entrepreneur professionals. He's a member of the Board Impact Forum, as I mentioned, and he's very involved in the Scandinavian market as well, and just all-around an extreme expert in this space of family enterprises, family firms, family ecosystems. Wonderful to have him here today.
Massimo, how are you and where are you today?
Massimo Baù: Thank you so much. I'm very good. [03:00] I'm sitting in my office in Jönköping in Sweden. So I would say it was a work day like many others, but exciting because quite a lot of discussion taking place today about the future of family business education, and other activities we are doing in the center. In one year, we're going to celebrate 20 years anniversary and that has occupied quite a lot of discussion in this period.
R. Adam Smith: Massimo, why don't we dig into some of the topics today with your involvement in family business and all of your academic and board posts? Why don't we start talking about the unique aspects and lessons you've gained from collaborating with a whole wide range of family business organizations in the world?
Massimo Baù: I think that the main learning is the fact that families can be very different. At the same time, they generally share quite common issues, quite common problems. And the starting point for [04:00] approaching those problems often pass through a curiosity that is leading to education and an interest toward education in the topics that this family are facing. So, somehow, everything that we are at the end doing when we are scholars working in family business, when we work with family companies, is trying to stimulate this curiosity, this interest in collecting information, discussing information, finding ways to answer questions and stimulate the right questions in the discussion. And this is true at very different levels because family business members can have different roles, they can come in in different ways, and they can have, of course, different experiences as they have different ages in the moment in which we are in dialogue with them.
R. Adam Smith: I'm thinking, how has the family business education evolved the last decade, [05:00] especially involving entrepreneurship and the entrepreneurial fabric of the family enterprise, and then also on the governance side. I’m interested in your thoughts on the evolution the last five or ten years.
Massimo Baù: I would say that family business education evolves substantially across years. It will look most probably — ten years ago there were very few institutions, there were very few schools that were having family business education, that were having a family business course, and this number of organizations has been growing through time.
On the other side, in a large part, it has been a bit an approach of one size fits all, or one course fits all, and this may be something that has been substantially changing in the last five years, where an attention toward targeting different types of groups and different types of roles and different types of stages of their life are looking for receiving [06:00] education connected to family business. On the other side, I will say also that the type of content and focuses has been substantially evolved. So we can actually discuss in two different ways.
When we talk about the individuals that are taking and looking for family business courses today, I would say that we can observe that we have, of course, the next generation group. And the next generation group is the one that we generally meet in universities, that we are meeting in class and we are building a lot of dialogue and consideration with them. In our case, for example, here in Jönköping, we use with them two different tracks.
One is an entrepreneurship track where the focus is really on the entrepreneurial perspective, entrepreneurial background, the cohabitation, the coexistence, the relationship between individuals that are sharing entrepreneurial [07:00] activities. And on the other side, there is the track that looks more on managerial focus, where the complexity goes more into more structure organization, older families, etc.
But then, actually, we identify other types of groups that we are working with in education. We are running programs with doctoral students, so we are having two doctoral courses in family business plus a full program. We are also working with different ages of family business members in executive education.
I will say that most probably the most interested in education as a target group is the one that is most probably in the face of completing their succession. They are in the face of being between in the range of their forties and they are starting to think about, how can I make this passage smoother for my next gen and how I can create the better conditions for them?
R. Adam Smith: Right.
Massimo Baù: Maybe one additional aspect is the fact that [08:00] family offices, family wealth, look, I think, for more and more space into education. And that somehow changes a bit the focus that we are having when we talk with the participant to the course because we are not any more focusing on one single business, we are looking more into a constellation of businesses, or even more into an investment perspective.
R. Adam Smith: Right.
Massimo Baù: And that leads us to the point of impact and sustainability that are, of course, the big topics that we are very much pushed to discuss with our participants nowadays.
R. Adam Smith: Yeah, we will address that towards the end of the call. I agree with you.
In the meantime, in terms of succession, which is quite a vogue topic today, we spoke about succession extensively with some previous guests you know in the industry, including [09:00] Guillermo Salazar, Christina Wing, Ron Diamond, and of course, Alfredo De Massis. We talked about succession moving into the minds of family businesses and family offices and family enterprises in the world. And clearly, it's quite a substantial issue, not only financially but also in terms of governance, in terms of culture. You have specifically written a great deal about the entrepreneurial context of the family office and researching different processes. I want to highlight some of those research areas that you do and maybe comment on them.
First, you talk about family dynamics and the influence of family members on the actor's decision of entry and exit into the entrepreneurial process. Actually, we spoke about this earlier with Matt Hughes from familybusiness.org, which is quite interesting. Secondly, you focus on the academic [10:00] entrepreneurship and factors enabling new startup and ventures and technology transfer. And then lastly, the family office collaborating with other firms, which also leads us to the topic of the multifamily office and the development of that entity as a more complete and advanced organization.
Talk a little bit more about this entrepreneurial adventure and what you see in the market today for the family offices and family firm.
Massimo Baù: Well, there are different perspectives that we see and we see that families are reflecting on how to evolve, how to mature in their own role and activities. We know the fact that family offices are expensive as an organization and they need to be properly managed. They need to have a combination of competencies that [11:00] provide solid support for the investment decisions that the family is going to do. We should also reflect about how much in prior when we look about larger families, and we even go to the direction of multifamily offices, the different family members outside, most probably the inner circle represented by the elderly generation, feel involved and feel connected to the family office in their organization, that the family connects to, because those are all aspects that somehow push towards a reflection about how the family office can better serve the family that they represent.
And in this sense, I think you can connect a bit also all the discussion about investing and divesting, entering and leaving, what the art of the family is, where are the [12:00] aspects in which the family wants to make an impact, and to what extent the attention goes to which type of impact is the focus on the financial return, is the focus on impact investing, and these are all elements of differentiation and elements that can somehow should be put in the agenda of a family office, which is reflecting about how to better answer to the question the needs and represent the values of the family that they are actually working with and working for and part of.
R. Adam Smith: There's lots to unpack there of course. So let's talk about the areas that you think in the family enterprise market that are not adequately researched in the world today. What area do you think that the academic community and also the [13:00] practitioners should be focused on that is not adequately covered?
Massimo Baù: That honestly is a million-dollar question because I would say that the field is constantly evolving. It is a field that is looking for answers that are more and more detailed, answers that are more and more somehow representative of the different instances that can, at the end, be configured as family companies. The main complexity in the family business field is the fact that we talk about family business, but we are describing an extremely heterogeneous group. We are describing a group that is represented by a multiplicity of ownership forms. One among others, for example, we are conducting an extensive project that investigates the role of [14:00] family foundation here in the Scandinavian context where I operate. So, the different types of ownership configurations, the ownership transitions, the way in which these ownership competencies are built and are transferred, are preserved, and are further developed. This, of course, represents important aspects that require more and more research.
Surprisingly I will say, if I have to put one topic among others, the topic of ownership that, apparently, from maybe a legal perspective might appear to be a very solid, very well-known, investigated aspect is one of those that business literature has investigated the least. A large part of the literature has been just building knowledge, theories, and models [15:00] around the concept that firms are led by managers. Family business has been making a strong claim on the fact that it's what managers are representing and acting on behalf of the ownership group, and the ownership group is the family. And surprisingly, the role of the owners and the way in which an owner manifests their own desire, their own ideas, and approach the companies — but more in general when we look about family offices, the general family wealth — it's something that is surprisingly under-investigated and in which a lot can still be done with very strong implication for practice, with very strong implication for family offices, for family business consultant, etc. Because at the end, it’s in the [16:00] control of the decisions that are made, it’s in the control of the configuration of the boards, that we can really find the ultimate essence of what a business is doing and the decisions that are taken.
R. Adam Smith: Thank you for that. So, perhaps tell us about the European Family Business Center, which you co-founded, and starting that network. Perhaps the last question you raised about thinking more thoughtfully about the family enterprise and where it's going as an organization led you to form that network. So, tell us a bit about the EuFBC and what it is, and what ideas you try to bring to the table, particularly within the European context. And then it'd be interesting also to hear thoughts of the different contexts of the European market for the family firm versus the American context.
Massimo Baù: The idea behind EuFBC [17:00] was to answer to a specific problem in a specific moment. EuFBC was created during COVID. It was a time in which we didn't have a clear idea about where we were going with the future of academia, with the future of the world, and it was fundamental to try to create a platform that was allowing to keeping ongoing strong research connections that were already existing between scholars, but to bring them to the next level. It wasn't initially started with this intent, so being a sharing platform for keeping alive the research that was conducted in Europe on family business and through time it has been just growing. Even after COVID, more scientists have been joining. Currently, there are 21 family business research centers in Europe that are part of the network and the number is still growing. The main purpose is to create [18:00] a sharing platform that, across the year, allows to connect and to explore.
Scholars normally participate to conferences during the summer, and that is the moment in which you get an idea, an overview, about what your friends, your colleagues, in other institutions are currently investigating outside your network. But an initiative of this kind, it's a way to create a platform that connects about 300 family business scholars in Europe in a sharing of research, in a sharing of discussion, in a mutual support that creates a common identity, but at the same time also an opportunity for getting a constant outlook about what research is currently conducted at different institutions, and what are the hot topics that are ongoing in the different regions of Europe as well.
R. Adam Smith: Thank you for that. That's quite a substantial [19:00] organization and there are many in Europe. I think in the US there's perhaps less when you look at Tiger 21 and Fox and IPI. There's more traditional organizations, but in Europe, it seems that there's many different niche family firm networks and groups that have been expanding. And, do you see the family business industry essentially consolidating a bit, either at the thought-leadership level or at the multi-family office level? What do you see going on in Europe right now?
Massimo Baù: I see that there are some different instances that we can observe, and I think that Europe is a very broad context to be just reassuming one single answer. I think that I can say that from the [20:00] position where I am here in Scandinavia, what we see is that there are a lot of small to mid-sized family firms that are currently — where the family are currently actually selling their properties, that are selling their companies actually to some local investment groups that are consolidating networks of former family businesses into new groups that generally count around 40 to 60 companies that receive shared support.
Very often these groups are even created by former family owners who actually liquidated their own businesses and with the money that they received by selling, they created a new investment vehicle in collaboration with other former family business owners. So, [21:00] they are currently not family businesses, but they are certainly family wealth vehicles, and this is where somehow we can recognize a difficulty sometimes to discriminate what is the family business level, or is the family wealth level, or is the family office level. What we see in other regions of Europe, I mean, you look at —
R. Adam Smith: Actually, that last point, that's why I like to use the term “family enterprise” because ultimately the family office can be really just a structural element of the family firm. And, as some people say, for example, the gentleman at Denton's who's often talking about family offices, he likes to refer to “the business of the family” as opposed to “the family business.”
Massimo Baù: Yeah, the issue with the definition of [22:00] family enterprises sometimes is that you still remain connected to the business units that are controlled by the family or to the type of investment that the family is doing. But in the moment in which the family starts investing with minority shares on multiple businesses, etc., the boundaries of a definition can become extremely, extremely confusing. I will say that currently, we don't have in literature a definition that really would fully represent the entire complexity of the phenomenon because, exactly as I was saying before, the heterogeneity of the phenomenon is so broad that somehow we always feel the need to give a label and then to explain what we mean by that label.
R. Adam Smith: Got it.
Massimo Baù: From another perspective of Europe, I will say that you have all the Eastern European countries, those that are on the other side, experiencing the first succession process in their own history. And that [23:00] actually represents incredible, vivid scenarios and settings where entrepreneurial firms are actually transforming into family enterprises. And you see really the family members that are entering into the play into the later generations experiencing for the first time this type of transformation. It's something that you can find similar in the Chinese context from many aspects. Then you have actually Southern Europe and Central Europe where you have more consolidated family groups that have been going through across several generations and where you can easily find entities that can count even 300 family members, as we well know, [24:00] kind of similar to a setting in the US. I will say that what we observe most probably is that the dynamics are evolving in a bit different way in different regional contexts in Europe, and different types of ownership models have been adopted more or less in different types of settings.
R. Adam Smith: Right. Thank you. In my last interview with Highness Sandor Hapsburg, we talked about the core mission of the family firm in general can be quite challenging to pin down, but in his view, as with governments over time, the family firm essentially has a core mission to survive and to maintain its legacy, essentially keep the music going. What do you think of that?
Massimo Baù: I like very much how it's described. I think [25:00] that when we look at family, we always look about overlap of different levels. There is the individual level and there is the organizational level and then, of course, you can go to a business level. But when we just look about the family, the family is the sum of several individuals. They are a lot of family members and sometimes, as we know, these numbers can really reach three digits. And when we talk about what are the goals, what are the values, it's not obvious that everyone in the family shares the same goals and values. It's a constant process of alignment, it's a constant process of conversation, it's a constant process of consolidation and transformation. We are somehow binded to the memories of the past, we are binded to the learning that [26:00] we receive growing up in a family. At the same time, we might actually develop in a different way interest and focus.
Even setting just the priority between financial and non-financial aspects, the way in which we can perceive sustainability as something that should lead all of our action or should come later on. These are all aspects that somehow are a constant tension between family members and this tension can be very relaxed or can actually reach levels of extreme difficulty.
So, what I think is that it's very much connected to the degree and the quality of communication that exists among family members and the capacity of having a constructive dialogue about this. Because those are the elements at the end that can configure [27:00] unity in a family or can actually create all these types of disputes that make harder and complex to identify a common point of view that is not just imposed by voting powers and control of shares.
R. Adam Smith: Wonderful. Let's talk briefly about innovation and then we're gonna open up for the first time to a guest of the audiocast live and I'll get back to that in a couple of minutes. Talk about innovation in the family business community. We have some guests here that are quite involved in the technology innovation space, particularly Adriana and her partner/colleague Phil Straszler, very involved in technology, and some others here as well. And we've covered also the challenge of advancing entrepreneurship and more complicated [28:00] sort of risky activities within the family firm. It can be maybe a human capital challenge, it can be merging acquisitions, buying too many companies, or maybe incorporating a lack of technology or too much technology.
So talk to us briefly about innovation within the family enterprise and what do you think is the most important element of that in today's world?
Massimo Baù: So, now speaking about innovation after that you had Alfredo de Massis as a guest before me, it feels a bit uncomfortable. But no, I will say, for me, I think that the critical aspect to consider about when we talk about innovation and family companies is the drivers of innovation, is actually, what are the factors that push the family to invest in innovation and to work into innovation? And those drivers are obviously related to [29:00] the return that is expected from innovation.
So — and this return is something that should build legacy, should build continuity, should give a future to the family enterprise. So, in this type of way of considering, I think that we are always dealing with a constant trade-off between the cost and the risks of innovation, the fact that innovation has a cost, innovation has uncertain return. We know in general that the more you invest in R&D, the more you can expect a return, but it's not an obvious formula. And this is not just a direct relationship, extremely simple as it might sound, as everyone that has been working with this topic also knows very well.
[30:00] So, I would actually say that it is a constant trade-off between our capacity of satisfying the need and the desire of the family today versus the capacity of creating the conditions for optimizing the future of the family and the business at a longer range. And in this type of dynamics is, at the end, the key for reflecting about innovation. Technically it's called a mixed gamble. It’s a discussion, it’s a decision between how much degree of risk we want to take today in order to be able to guarantee our future in a later stage.
Then, I will say that it's difficult today to separate a discussion about innovation from a discussion about sustainable innovation because I think that sustainability most probably is one of the keys of [31:00] innovation in the future, of course, with digitalization and several other factors. But at the end, again, it's not — maybe it's wrong to consider sustainability just an emotional choice that is done, because it can be a very rational decision on the one that is made because it's to the extent of creating the conditions for being profitable today and also in the future. And I think that this is the trade-off with innovation, this capacity of balancing these two dimensions.
R. Adam Smith: Wonderful. Thank you for that. All right, we're just going to open it up to the listeners to ask a question. We're going to have one question. So if anyone wants to come on stage, if you go to the bottom and raise your hand, I will select you and come on stage and ask a question to Massimo.
[32:00] All right, Mr. Kraus go ahead with your question.
John Kraus: Gentlemen, can you hear me?
R. Adam Smith: Yep, we're good.
John Kraus: Thank you so much. So, I just wanted to have a real quick question, right? So with family enterprises and family-owned businesses, right, there's often a disconnect between, say, like a family council and a board and things of that nature. Could you just touch real quickly on what you think the role of an independent board chair would be to facilitate those discussions between a family council and maybe a fiduciary board?
Massimo Baù: Thank you for your question. I think that when we are facing this type of discussion we are always dealing with a framework that was actually created by my supervisor, Matthias Nordquist, that explored the concept of actors and arenas. On the one side, we have actors, we have family, and we have non-family members, [33:00] and those are two types of actors because they have different access to information and they have different interests in the way in which they operate and make decisions.
And on the other side, we have different types of arenas, and we have formal and informal arenas. On the one side, we have the formal arena for excellence in the business, that is, of course, the board of directors, and we have a formal arena in the family that is the family council. And then, we have the informal arenas that are the corridors, the tables, the kitchens in which information are shared and discussed. I think that the non-family chair often has this type of difficulty in having access to the informal settings where discussion takes place in the family. And I think that the main aspect is actually to really try to help the family to understand what is the right place for having the right discussion.
Way too often, the discussion takes place in the wrong place. Part of the decision [34:00] are already taken, are already somehow pre-discussed, and people that are in charge of being active parts of the decision might remain isolated in the moment in which they are needed the most. And in that sense, most probably the main role of the non-family chair in that case is truly to help the family to learn this type of structure, the use of the different structure, and to create the conditions for maximizing the decision-making that is taken in the right forum with the right actors.
R. Adam Smith: Wonderful, Massimo, and thank you for that question, John — a good one on that topic. I'd like to thank everyone [35:00] today for joining the Family Business Audiocast and also our esteemed guest, of course, Massimo Baù, the Senior Associate Professor in Family Business and Ownership and the Director of the Center for Family Entrepreneurship and Ownership at the Jönköping International Business School, along with many other important posts that he has earned and founded along the way.
Thank you, Massimo, for joining today.
Massimo Baù: Thank you so much.
R. Adam Smith: This is R. Adam Smith signing off. Stay tuned for the next episode of the Family Business Audiocast on LinkedIn.
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