Many executive education programs focus on building tools for effective management and leadership. Owners of closely held businesses, however, have a different set of concerns—specifically, how to be a strategic and purposeful owner.
“Strategic ownership over a longtime horizon is difficult.” said Peter Boumgarden, Koch Professor of Practice for Family Enterprise and director of the Koch Center.
“In a world of quarterly returns, thinking with time horizons of decades or more requires a different set of skills. While many owners have refined their ability through experience over time, having the opportunity to learn from others on this same path and simultaneously be informed by what we know from the research on best practices can be incredibly powerful.”
The course will work with owners to build competence and capability. It will focus on bringing together owners from different sectors and sizes, and then helping them work to define their unique purpose of ownership. With this purpose in mind, the group with work together and with faculty to build ownership competence specific to this goal, and to then think about how they might work to craft a portfolio aligned with this objective with an extended time horizon.
In Boumgarden’s view, the best way to approach the course would be to come as a team, mixing family owners with senior leaders and members of the board.
“It takes a village to do this work well,” he said. “Most of the organizations who would benefit from this course have a bundle of individuals—family and nonfamily, owners and employees—who must coordinate how they approach building an organization for sustainability. The value is crafting owner competence as a collective.”
The organizers encourage teams of two to three from the same business to register, and those teams will receive tuition discounts on the $2,200 course. The course is designed for single owners or senior leaders of a closely held business and leadership teams. A team could consist of two family members and a board member, for example, or a senior nonfamily leader.
“By the end of the program, you’ll be better positioned to create long-term value for the firm in the position you are capable of—that of a strategic business owner,” Boumgarden said.
Click here to watch a short video about the course.
Evan Dalton, head of digital marketing for WashU Olin’s Boeing Center for Supply Chain Innovation, wrote this for LinkedIn. It is republished here with permission.
The MSOM Distinguished Fellow Award is widely regarded as the highest honor that can be bestowed upon a research scholar in the field of operations management. This rare distinction, akin to a lifetime achievement award, recognizes outstanding scholarship and research accomplishments throughout one’s career.
This year, the award has been given to Panos Kouvelis, Emerson Distinguished Professor of Supply Chain, Operations, and Technology and director of The Boeing Center for Supply Chain Innovation at WashU Olin Business School. According to the MSOM Society of INFORMS, “The award was created to recognize individuals for significant research accomplishments and exceptional scholarship in the operations management field through sustained research excellence in their activities.”
Kouvelis has had an illustrious career in operations management research thus far, with eight books and more than 135 refereed journal publications. He has been ranked in the top three for operations management research in several categories, including total number of published papers (#3) and publications in Manufacturing & Service Operations Management (#1). His work has also been recognized with a 2016 Fellow of POMS Award and a 2020 published laudatio in Production and Operations Management honoring his career.
MSOM Distinguished Fellows are selected by their professional colleagues via a nomination process. A couple of Kouvelis’ peers had the following to say about his research contributions:
“[Panos’] earlier work was definitely more manufacturing planning and scheduling in nature…but then he has broadened his work to cover global supply chain designs, facility networks, supply contracts and multi-party coordination, and the interface between marketing and manufacturing. This is a very ambitious coverage, but Panos was able to produce very high-quality outputs in all these areas.”
“In supply chain risk management, he has worked on the integration of operational hedges and financial hedges. … In supply chain finance, he has worked on the integration of operational and financial decisions, and especially the role of short-term financing of inventories on the efficiency of supply chains. … he is among the few operations management scholars to integrate trade finance instruments … and other hedging devices.”
“I am deeply humbled and honored by this recognition,” Kouvelis said. “I would like to thank the award committee, my professional friends who nominated me, and the MSOM community for giving me an environment of inspiring ideas, intellectual challenges, research rigor standards, and the venues to disseminate my work. I am proud to be a member of the MSOM community, and to have had the opportunity to contribute to the field of operations management research in my own small ways.”
Pictured above: Kouvelis honored at the MSOM conference in Munich in late June 2022.
Olin’s central course on family business is “Ownership Insights: Strategic Leadership of the Family- and Employee-Owned Firm.” In this course, Spencer Burke, Eugene F. Williams Jr. Executive in Residence, and I (Peter Boumgarden) have spent the last few weeks identifying the choices owners face in their business and their respective impact on firm performance.
Plan for the transition to the next generation (Transfer)
Use effective communication to build trusted relationships (Communication)
Structure governance to make great decisions together (Decide)
Create an ownership strategy to define success (Value)
In this blog post, I want to show how this framework translates into teaching our students to understand the consequences of ownership decisions in the family firm.
Ownership choices and value constellations
One of the things I most appreciate about Josh’s tool is the clarity by which he brings out the potential choices in play for owners of organizations.
Amongst all of these five choices (design, transfer, communicate, decide, value), what I get most excited about with private enterprise is the possibility of intentionally defining value—or success—in different ways than those in other ownership forms. Our course, in particular, seeks to extend this work by formally filling out all the influences on ownership choices, from changing demographics and its impact on the family tree and succession to differences in cultural psychology across regions and how it shapes what is considered fair in different spaces. You can see the full framework below.
One of the critiques of family business as an ownership form is found in research by Nicholas Bloom, Raffaella Sadun, and John Van Reenen. Using the World Management Survey (WMS) as a tool, the researchers argue that family businesses with family CEOs are less well run than many other ownership forms in the market (dispersed shareholders, private equity controlled, etc.). A great deal of the power of this work is that companies that are independently scored high on these 19 dimensions empirically perform better on many measures of company financial performance than companies who score lower.While I like this research a great deal, if you dig into the “World Management Survey” items (here is a survey from retail, for example), it also becomes clear that these are not value-free items. Let’s look at three examples in particular to illustrate the point, with the item identified first, and the description of the top score identified after:
CONSEQUENCE MANAGEMENT – Top Score: A failure to achieve agreed targets drives retraining in identified areas of weakness or moving individuals to where their skills are appropriate.
TARGET INTERCONNECTEDNESS – Top Score: Corporate goals focus on shareholder value; they increase in specificity as they cascade through business units ultimately defining individual performance expectations.
RETAINING TALENT – Top Score: We do whatever it takes to retain our top talent.
Many of us can see why companies like this might perform well and perhaps be the kinds of companies we might want to invest in or work for. But, for the sake of argument, let’s consider another company wedded to a different set of values along these exact dimensions.
CONSEQUENCE MANAGEMENT – “At Company X, we set clear goals for our people but build in a care for people when they don’t perform at expectation, knowing that circumstances sometimes sit outside one’s control.”
TARGET INTERCONNECTEDNESS – “As owners of Company X, we desire strong shareholder performance, as that is in our financial interest. That said, we want to ensure that multiple stakeholders of the business, from you as employees to the communities we sit within, matter a great deal. As such, if we add value for those other groups and this sometimes occurs at the expense of shareholder value, we will still consider that a good year.”
RETAINING TALENT -”We want you to perform well here. That said, we know that this might not be the fit for your forever. As such, if this company is not the best place for you, we want you to know that we care about you enough to want to find the best fit for you moving forward, even if that place is not here.”
I bring up these points of comparison not to suggest that the latter is a better way of performing, but rather to show how you could see an owner setting up their business like this and thus defining value in a very different way. In many ways, our economy functions in healthy ways when it is represented by companies reflecting a wider plurality of value positions, and not all of the same ownership model (private, public, PE owned, family owned, employee owned, etc.)
The lived philosophy in family and private enterprise
We have seen many of these differences reflected in the comments from class speakers, someof whom have already shown up and others to come in the next few weeks:
This summer, I was on a long run with a good friend, Chris Bolyard. Located in the Maplewood neighborhood of St. Louis, Chris’ butcher shop, Bolyard’s Meat and Provisions, is one of Food and Wine’s Best Butcher Shops in America. On the run, Chris and I got to talk about whether he would ever open multiple shops or grow his enterprise outside of St. Louis. We had a few mutual friends who had done similar things with their restaurants, so you could see what might be appealing. While Chris didn’t outright say he wouldn’t do those things, it became clear that this was not a fundamental priority for his business. He saw the strain this would have on his family, his lifestyle, and perhaps even his ability to keep the same quality standards across the operations.
Chris’ north star is on product quality and serving his neighborhood customers over and above rapid growth and expansion. To take it a step further, even if he did move to multiple locations, it is clear that Chris does not aspire to be Tyson Foods. So, would it be fair to compare Tyson Food to Bolyard’s Meat and Provisions? No, for in many ways, these two are running in fundamentally different races.
Ownership strategy to define and drive value
The trap that a family business center like ours needs to avoid is believing that our mission is to tell our audience a set of sugary truths we think they want to hear. This belief might lead us to make claims that are empirically hard to justify (“Family ownership of any form is the best ownership form in the world, in all times and all places”) . As a research based institution, this is not a path we should or will follow.
At the same time, the challenge for many business schools in the world is we too often have bought into an overly narrow, quantitative, and academic view of value (“shareholder value”, “ROIC,” “IRR,” “professionalism”) and have a hard time seeing what other constellations of value choices can be just as compelling. At the Koch Center, we hope to explore some of these distinct concepts of value and the strategic implications of organizing around such structured purposes.
There are significant challenges for most family businesses: the incentives of family shareholders, the challenges of maintaining family harmony through different business ups and downs, a family which grows faster than a business, fairness in succession of ownership, control, and management, amongst others—many of which we address in the course and the programming of the Center. With that said, what is compelling about the closely held business, whether family, employee or privately owned, is the opportunity to define a distinct set of values, and then organize a strategy and structures around such ends. Doing this well is hard work. At the Koch Center, we hope to contribute to this important task through a mix of academic clarity and educational expertise for those within and outside the halls of Washington University.
Data scientists from WashU Olin have developed a process for flagging suspicious transactions across 100 pharmaceuticals—a process with a stunningly high level of precision and one that can immediately take aim at curbing the country’s decades-long opioid epidemic.
Working with a US Drug Enforcement Administration database that tracked six years’ worth of pharmaceutical transactions, the five researchers developed an “anomaly detection” system that could flag future suspicious shipments with 100% precision.
In other words, as the researchers noted, when their process says a transaction is suspicious, it is. Basically, their anomaly detection system doesn’t flag a transaction unless it’s sure—which does mean some bad buys could sneak under the radar if they don’t meet the system’s criteria.
“The signals of anomaly detection are very strong for these egregiously suspicious buyers,” the study’s authors wrote. “This renders our algorithm very valuable for practical use.”
Built to guide the fight
The system was conceived as a tool to help deploy limited resources as authorities tackle illicit trafficking in narcotics.
“Having 100% precision is a very important feature of our (process),” the research team wrote in its paper, under review with the Journal of Marketing. “We are willing to sacrifice some recall (and increase false negative errors) in order to enable the practical adoption of our proposed algorithm.”
Organizers of the first commission under the Bellwether grant focused on the opioid epidemic that’s killed half a million individuals in the US in the past two decades, according to the Centers for Disease Control. In July, the federal government reached a $26 billion settlement with the country’s three major drug distributors and pharmaceutical giant Johnson & Johnson for their roles in the epidemic.
The team “trained” its anomaly detection system by using a recently released DEA database called Automated Reports and Consolidated Ordering System—or ARCOS.
That database tracked millions of prescription drug transactions—their manufacture and distribution—spanning 2006 to 2012. By zeroing in on opioid transactions, with the guidance of a smaller database of known illicit transactions, the research team identified patterns of behavior across 40 different criteria. The scholars also developed a standard they called “morphine milligram equivalents”—or “MME”—to create reliable comparisons among various opioid transactions.
Ultimately, they found that seven criteria were enough to create an extraordinarily precise tool to flag suspicious transactions. For example, when looking at “average MME purchased per transaction,” suspicious buyers purchased almost 10 times as much as legitimate buyers. When they looked at “median MME purchased per transaction,” suspicious buyers purchased almost 20 times as much.
In the context of the research team’s detection and alert system, members of the Olin Brookings Commission will likely investigate proposals that affect public policy affecting the trafficking of illicit narcotics. Some of those policy areas could include:
data sharing and cross-agency communication;
revised and modernized data reporting;
funding sources and spending needs for system maintenance;
response guidance when transactions are flagged.
Pictured at top: top row, Seethu Seetharaman, Michael Wall, Anthony Sardella; bottom row, Annie L. Shi, Chenthuran Abeyakaran.
Peter Boumgarden, Koch Center’s director and Olin’s Koch Professor of Practice of Family Enterprise, wrote this for the Olin Blog.
When it comes to our mission of supporting family business leaders as they pursue new ways to thrive in the emerging economy, we can learn a great deal by looking at WashU Olin’s model of being data-driven and values-based. But living this theory in practice means flexing a muscle that is often under-developed in many organizations, family businesses notwithstanding.
So what does it mean to have an eye toward relevant data while simultaneously being shaped by a guiding set of values? At the Koch Center, one way that we do this is in our unique approach to combining data and design in our engagement with the broader business community.
Inaugural data+design dession: Balancing continuity and change
On October 29, the Koch Center hosted the first of our new “data+design” series. Each of these sessions is organized around a particular strategic challenge for organizations. Our first event focused on how family and private enterprise balance a commitment to continuity with the past alongside the need to change to match any number of emerging realities.
Approximately 50 leaders from around the region participated in a session designed to leverage some of the university’s best offerings, particularly a rigorous approach to data built upon a strong research foundation. Unique to this model, we asked each participating leader to fill out an assessment that mapped their organization across several distinct dimensions before our time together. This battery of assessments included a modified version of the “World Management Survey,” a measure of business uncertainty, and an evaluation of how much they have changed over the past year and must change over the year ahead.
While it can be helpful to get objective numbers on these items, the data+design format enabled us to provide each attendee with a customized report that contrasted their self-assessment with all other attendees. Indeed, much of the value can come through this comparison. It is one thing to know you self-assessed at a “3.5” out of “5” when it comes to your company’s talent strategy, but a whole different level of insight if you know others in your organization scored this same item lower, and the average across a set of peer institutions was closer to 4.
With comparative data in hand, the group came together on October 29 and heard me present a set of research-backed framings on what kind of balance is especially high-performing. One study in particular from McKinsey & Company indicated that firms that maintain a relatively robust refresh rate in their product/service portfolio outperform those who do not change enough and those who change too frequently. This refresh rate of approximately 10-30% change over a decade they called “rivers” in contrast to the static “ponds” (less than 10% refresh) or overly dynamic “rapids” (over 30% change). Simultaneously presented with data about where their organization stands alongside a guiding framework to guide our discussion, and we were off to the races.
Extending rigorous measures with design and values
But back to Olin’s guiding framing, even rigorous data without a precise understanding of values runs into limits. After all, it is one thing to know your organization’s metrics compared to your peers, but the leader still has to make clear tradeoffs on what they are optimizing toward and why.
For example, core value commitments will inevitably shape whether one prioritizes progress on this dimension and how one goes about operationalizing this commitment. For example, how do leaders balance accountability with grace? What kind of patience is required as people move to aspirational performance standards? Critical considerations for building this into practice are not always easily captured in the data alone.
And so, the discussion pushed forward with designing potential futures with data in one hand and a set of guiding values in mind. The “design” part of “data+design” came in by our use of forcing mechanisms to have those present consider more than one potential future for these design challenges. “Want to professionalize your approach to growth and innovation? Let’s see if you can identify four different routes in this direction.”
In this approach, we used a modified version of the “Crazy 8’s” design prompt to push people to generate four different alternative futures. In doing so, we encouraged leaders to expand the number of strategic options too many of us consider—which Dan and Chip Heath have found is unfortunately often only one.
Generating progress through the power of data and design
Generating creative routes forward for family businesses will require creativity. In so much as this ownership form is commonplace across the country and globe, approaching questions of strategy and structure with fresh eyes holds the potential for a transformative effect for the families who lead the operations and the broader global economy.
As a university, one of our goals is to support this creativity by bringing elucidating frameworks and the precision of empirical work while at the same point leveraging the teaching function to push our thinking in ways we would not have considered previously. For us, this work requires leveraging the power of data while also operating up to the generative power of design fueled by close attention to both leader and firm values.