Key learnings from the best family businesses
Family-owned businesses generate a lot of economic activity. In Canada, they employ seven million people and represent 50% of private gross domestic product. Fun fact: family businesses provide 55% of all charitable donations greatly contributing to Canadian society.
Most of the economic contribution comes from medium and large companies with annual sales ranging from a few million to billions of dollars. Globally, more than 30% of large companies are family-owned. At their core, high-performing family businesses have a few competitive advantages that make them well-positioned for growth during an economic recovery:
Culture of trust fostering employee engagement, faster decision making and a longer-term perspective on value creation
First, the family identity brings with it a culture of trust and togetherness, which fosters employee engagement within the organization. The last few months have been challenging for businesses, increasing pressure on key employees and making growth targets more difficult. Organizations with engaged employees are 22% more productive than their counterparts and have lower absenteeism and turnover, which will facilitate the organization’s recovery and future growth.
Second, privately owned businesses have more leeway when it comes to decision-making than public companies, as they are not subject to as many regulations and often have a less rigid corporate structure which enables nimbleness. This agility has been a key success factor during the crisis and will remain crucial for the foreseeable future as companies must innovate in order to become architects of the new normal.
Third, private companies are not subject to the short-term demands of the stock market, allowing them to take a long-term perspective in their decision-making process. This allows them to take on lengthy projects with a longer return on investment. It also allows them to innovate and think outside of the box, which can result in advancements that fuel growth for years to come.
Most companies (family-owned or not) can learn from the best performing family-owned businesses:
Build a culture of trust to foster employees’ sense of belonging
Decrease complexity and improve accountability to make faster and better decisions (maybe through a good strategic planning process)
Invest in longer term initiatives that could increase their competitive advantage
Boston Consulting Group. Family Businesses
Baldoni, John. 2013. Employee engagement does more than boost productivity. Harvard Business Review