The stock market has tanked. Retirement funds are even worse. Things look bad, but there is a bright side for family firms. Resiliency, optimism and a penchant for long-term strategies have been identified as characteristics of family firms for decades. These are attributes that can assist family firms in the current situation – and the stability of family firms in the short run will have an effect on the worldwide economic picture over the long haul.
Family enterprise is the backbone of the world and the U.S. economy
• One-third of all Fortune 500 companies are family businesses and comprise 78 percent of the jobs.
• Two-thirds of all the companies traded on the New York Stock Exchange are family businesses.
• 80 percent of the world’s businesses are owned by families.
Family businesses have good track records.
• More than 30 percent of all family firms survive to the second generation.
• One-third of the S&P 500 companies are family firms and, according to BusinessWeek and The Journal of Finance, they outperform the nonfamily firms.
Family businesses have unique traits
• Optimism: 86 percent of family-controlled companies believe the family business will be controlled by the same family in five years. Studies show that optimism is an important factor when facing a crisis of any kind. (American Family Business Survey 2007).
• Loyalty: Blood is thicker than water.
• Vigilance: No one watches your money like you do.
• Competitiveness: According to the 2007/2008 PricewaterhouseCoopers study, more than 86 percent of family businesses surveyed say that their top investment priority is IT infrastructure.
• Innovativeness: Although financially conservative, have shown ability to discard the old and create new products and services.
• Nimbleness: families who have lived and worked together for years can move quickly and family members are flexible in the many roles they play.
Family businesses have readily available work forces
Changing demographics and attitudes toward improved work/life balance and disenchantment with corporate world are continuing to change the family-business picture.
• Co-owner: CEOs (husband and wife teams) of family businesses increased from 8 percent of family business in 1997 to 14 percent in 2002. Current estimates are that more than 3 million U.S. small businesses are owned by couples.
• Business ownership among women is growing at nearly twice (17 percent) the rate of all businesses (9 percent).
• Nearly half of all privately owned firms are at least 50 percent owned by women.
Money isn’t everything
• Experts who work with employees at family businesses say that money alone doesn’t make happy employees. Employees polled rate appreciation, respect, trust and individual growth above salary as factors that make them happy on the job.
• Families whose name is on the door report that their company is much more than just a job. It’s a legacy, a commitment to the community and the employees and their families who work there.
Look to the future: don’t forget to get advice – even in a down economy.
• Develop your board of directors: A survey of U.S. family businesses found that having a board of directors was one of the most significant factors affecting the company’s success.
• Reassess your management practices: Get focused on what you can control and not distracted by fear and pessimism or wasting time on things you have no control of.
• Review and renew your family and business strategic plans, asking: Where can we cut costs? If this means layoffs, as hard as they are, they must be done.
Plan for the upturn, and it will happen
• Develop a succession plan that includes transition of both leadership and ownership.
• Establish a family council, a structure used by more and more family businesses to provide a forum for open effective communications, to educate about the rights and responsibilities of ownership and to establish a conflict-management procedure.
• Improve family cohesion. In the 2007 American Family Business Survey, interpreted by researchers at Kennesaw State University and underwritten by Mass Mutual and the Family Firm Institute, family unity was cited as critical to family-business success. •
Jane Hilburt-Davis is a family-business consultant and president of Key Resources LLC, a Boston-based consulting firm. Judy Green is executive director of the Family Firm Institute, also based in Boston.
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