Whenever I say that I am a Family Business Advisor, some people automatically assume that I must be a family therapist and others conclude that I am a business strategist. While I belong to neither of these two noble professions, the response is representative of the nature of family businesses (FBs). FBs are a truly hybrid organizational form, encompassing two separate social systems—family and business, each with its own characteristics. In business the focus is on skills and profits; in families it is on self-esteem and emotional well-being. Parents give children unconditional acceptance and love; bosses give raises based on performance appraisals. Families are governed by generational authority; in business, it is the position that is the source of power. In business planning, considerable time and energy are expended in surveying the external economic environment; families make decisions based on their internal circumstances.
Some business owners view the dichotomy as irreconcilable and declare that theirs is a “business only” approach, seeking to appease non-family managers while living in the doghouse at home for not appointing Mom’s favourite child to a senior position. In other businesses, “family first” is the mantra and the organizational chart resembles the family tree but the owners lament that they cannot attract and keep outside talent. Both positions are unsustainable and there is no need to make a choice. Family businesses can outperform non-family businesses in a number of areas. Indeed, some of the oldest and most respected firms in the world remain family businesses. Statements like these often-prompt people to challenge the definition of family business. Is a publicly traded but family controlled business a FB? What about businesses owned by family members but managed totally by non-family members? What degree of family management and/or ownership earns the business the prefix of family? These questions do pose a quandary for family business researchers who cannot seem to agree on any one definition to the extent that the argument prompted some FB scholars to treat a business as a family business if the business identifies itself as one.
Despite the semantics, it has been ascertained that worldwide over 70% of small and medium enterprises are family businesses, as in owned and managed by family members. In America, for example, FBs employ 80% of the workforce and contribute over half the GDP. While statistics for the Caribbean are less readily available, my own experience is that FBs dominate the islands’ industries and are a formidable presence on the stock exchange. Many FBs in the region have made at least one transition from founder to sibling team ownership and management where family members occupy key positions in the companies. It would appear that local FBs are yet to evolve towards the family enterprise model more widespread in Europe, where families own but do not manage the companies.
FBs are a positive force in the world economy and the reason is the benefit derived from family involvement in the business. It is precisely the intersection of the two systems that gives rise to a unique set of resources—termed “familiness” in FB lexicon–that yield distinctive strengths in family business. The family human capital that is employed in the FB has tacit business knowledge gleaned from conversations at the dinner table and from tagging along to work with Dad, during school vacations. Family owners and managers operate as stewards of the business for their children and grandchildren. Their timeframe for business survivability is generations. FBs have patient financial capital and are not driven to produce short term results to satisfy unknown investors. The bureaucracy in a FB is usually not complex and employees have easy access to the decision makers. This leads to ready responsiveness and creative, flexible strategies so necessary in today’s fast moving business environment. In FBs enduring family values are reflected in the business and the business identity is central and stable, providing confidence during times of transition. For these reasons and more, FB non-family employees are generally loyal and committed to the business and the family. It is not uncommon for me to encounter long standing FB employees who have known and loved the current family member managers since they were toddlers.
The average life span of businesses is said to be around 75 years yet there is a growing club of family businesses that have existed for over 200 years, Les Henochiens –named after the biblical Enoch who is said to have ascended into heaven without dying. There are regrettably though, too many instances where as the family grows, conflict escalates and the family and the business fall apart. These are the stories that more often serve as fodder for front page headlines in local newspapers and could contribute to the aversion some people feel towards family businesses. This may account for the reluctance of some businesses to identify themselves as FBs, although that is changing and family ownership is now being touted in advertisements and tag lines worldwide.
But I do not want to sound like a Pollyanna here. Just as FBs have special and positive features, they have challenges and as is so often the case in life, their strengths can also be their weaknesses. Family involvement, if not properly structured, could result in some negative consequences for FBs, especially as both the family and the business experience chronological growth and progression.