Governed Learning in Family Enterprises

by Paolo Morosetti

The Case of Merck

The Merck family's enduring success over 13 generations offers multiple insights into effective learning and development strategies within family enterprises. By examining their initiatives during childhood and adolescence, for example, we can appreciate the systematic approach they employ to achieve their objectives.

From childhood, family members participate in regular gatherings such as annual Family Days, informal Fireside Chats, and the Merck Family News Magazine. These initiatives are designed to integrate young members into the family enterprise, foster strong relationships, and instil a sense of belonging and responsibility. All of this happens in a very informal and engaging way to capture their attention and interest. These events cultivate a deep-seated commitment, progressively familiarising the youth with simple family, ownership, and business discussions, thereby rooting a genuine emotional connection to the family's legacy.

During adolescence, formal education is introduced through the Merck Next Generation (MNG) program, which provides a foundational understanding of ownership and governance. This program progresses through increasingly advanced levels, offering real-world exposure through initiatives such as factory visits and hands-on learning experiences. Participants may also attend the Merck Family University, a prestigious program designed to develop leadership and governance expertise through intensive, interdisciplinary modules. Complementing these internal efforts, external opportunities such as internships and peer-to-peer learning events broaden participants' perspectives. The ultimate aim is to prepare family members for future roles in the family, ownership, and business domains.

Triggers for Acceleration in Learning and Development

The Merck case illustrates how a learning and development strategy can be designed around the stages of development of maturity, from adolescence to adulthood. Each stage has its specific characteristics and needs, which in turn inform tailored initiatives.

While investment in learning and development is instrumental for resilience and longevity, certain situations require these efforts to be viewed as strategic tools to propel the family enterprise to a new level or navigate periods of change. Three key triggers for acceleration include:

Overcoming Family Inertia: Learning and development initiatives help families overcome emotional and conservative tendencies, enabling progress in transitions related to family, ownership, and business, which might otherwise stall.
Adapting to Change: With the scale and speed of change increasing in family, ownership, and business contexts, learning and development are critical instruments for equipping families with updated attitudes, agility, knowledge, and competencies. These capabilities are essential for navigating exponential change and growing interdependencies.
Transitioning to a Family Enterprise Mindset: Moving from the traditional notion of a family owning a business to the broader concept of a family enterprise—a family engaged in multiple initiatives and co-investing in diverse businesses or asset classes—requires a significant mindset shift. Learning and development enable individuals and the family system to bridge this gap, ensuring family involvement remains a strategic advantage.

The absence of proper learning and development is often cited in literature as a significant cause of failure in transmitting a legacy across generations. As the saying goes, families must pass on the fire, not just the ashes, to future generations.

Conceptually, learning and development can be seen as tools for managing the qualitative part of family wealth, which includes human, social, intellectual, and spiritual capital. These complement the family’s quantitative capital, comprising various shared asset classes and investments in one or more businesses.

Too often, the focus on building great businesses and accumulating quantitative capital overshadows the importance of qualitative capital—an essential driver of resilience and longevity in family enterprises. Learning and development are intended to prevent this dangerous situation.

The Need for Governed Learning

Learning and development cannot be left to erratic or uncoordinated initiatives, even in small and medium-sized families. A systematic, forward-looking, and organised approach—a governed approach—is essential for success.

The discipline of "governed learning” emphasises coordination in defining the "when," "where," "who," and "how" of learning and development [Cheng et al. 2021]. It also considers the various stages of maturity to design tailored initiatives rather than simply copying and pasting what other families are doing. For instance, while the Merck case is inspiring, it cannot be replicated without proper contextualisation. Families should assess their unique needs and dynamics.

Governed learning requires institutionalisation. This involves at least creating a family learning curriculum and appointing someone to oversee the process, ensure accountability, and measure impact. Borrowing from business world, this role could be likened to a Family Chief Learning Officer (CLO). For most families, this is not a full-time role due to size and complexity. In some cases, it can be undertaken by a family member; in others, it may be outsourced to a competent third party.

Families must recognise that the return on investment in governed learning is not immediate but accrues over the medium to long term. Hence, families should avoid unrealistic expectations. As the popular saying goes, learning and development is a “journey.”

Furthermore, embarking on this journey requires genuine individual commitment to self-reflection, along with awareness that the process may induce stress and anxiety due to the changes it advocates. In family enterprises, these initiatives can ignite emotional interplays, which must be integrated into the process with competence and wisdom.

Institutionalising Learning and Development

If the family learning curriculum and the role of Chief Learning Officer are two basic mechanisms to institutionalise a learning and development in the organization of the family enterprise.

Family Learning Curriculum

Learning and development opportunities are multifaceted. Conceptually, interventions operate at two levels: individual and group (family). In larger families, the group may be further divided into subsets, such as households or branches.

Activities can also be categorised into two types to achieve a balance in the curriculum:

Horizontal Development: Adds more "content" to the container by teaching new skills and concepts.
Vertical Development: Expands the container itself, increasing individual capacity through socio-emotional growth.

A golden rule is to co-create the family learning curriculum, avoiding a top-down approach. A collaborative process ensures shared solutions and fosters genuine enthusiasm and engagement from all stakeholders involved.

Don’t forget that learning and development initiatives often need sponsors among family, ownership, or business members who view these investments as vital to ensuring the system's long-term sustainability.

The Role of the Chief Learning Officer (CLO)

A family enterprise should consider appointing a CLO to guide learning and development. According to James E. Hughes Jr. [Hughes Jr at al. 2021], the CLO’s responsibilities include assessing and growing the family’s qualitative capital. Key questions for the CLO include:

Are individual family members flourishing?
Is this family a learning organisation?
Are family members able to make effective joint decisions?
Is there a shared vision for long-term prosperity?
Are family members integrating inherited quantitative capital into their lives?

The role of the CLO should not be confused with that of the family business advisor [Stewart C. (2023)]. While a family business advisor addresses specific issues by providing expertise, the CLO engages continuously to help craft and implement a learning strategy.

The CLO is in charge of a process, and their capability is not only in "doing," but also in connecting specialised third parties who can contribute to the family business curricula. Furthermore, the CLO should have coaching capabilities to help individual members in self-reflection and self-development.

The two roles, hence, require different skills and aptitudes, and it cannot be taken for granted that a family business advisor is the best solution to cover the role of the Chief Learning Officer.

In Closing

Although systematic and governed learning is essential for the evolution of a family enterprise, the benefits can only be realised through a well-conceived strategy and the institutionalisation of processes within the organisation. Strategies and action plans should account for the stages of development and maturity, from adolescence to adulthood, while the decision-making process should adopt a co-creation approach to ensure stakeholder buy-in. If the strategy proves effective, the family enterprise will preserve and enhance its qualitative capital—a crucial driver of resilience and longevity—alongside its financial and industrial capital.

Photo: Credit: iStock # 2009641270

References:

Cheng, C.Y.J., Au, K., Widz, M., & Jen, M. (2021). The Governance Marathon: Dynamic Durability in Entrepreneurial Families Amid Disruptions. Boston, MA: 2086 Society & the Family Firm Institute.
Hughes Jr., J.E., Massenzio s., Whitaker K. (2018). Family Wealth, Bloomberg Press.
Stewart C. (2023). The emerging role of the Chief Learning Officer, International Family Offices Journal.Governed Learning in Family Enterprises