The long-term stability that family businesses bring

The long-term stability that family businesses...

Creating a sustainable and successful business is a challenge given the financial and social factors at play in today's economy. Shaky foundations and uncertain business times tend to negatively affect society as a whole, and with so many businesses struggling to keep afloat it is little wonder that there is a general sense of uneasiness in the air.

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It's therefore interesting to note, according to European Family Businesses (EFB), that family businesses play a major role in bringing stability and a sense of control to the marketplace. According to Roger Pedder, President of EFB:

"The contribution and stability that family businesses bring to our society is now being recognised and there is a positive curiosity about the features which make it a successful form of organisation."

The family approach to business thinking

In his introductory comments to the Families in business for the long term (PDF 780 KB) EFB brochure, Pedder comments on the long-term thinking and approach of the average family business. He indicates that family businesses tend to have a strong sense of corporate citizenship, understanding the relationship that needs to exist between business and community.

In addition, Pedder suggests that family businesses tend to operate more conservatively in terms of financial structures, and have a propensity to be rewarded in the long term for their choices not to operate with the more "shaky and speculative" structures.

"Family businesses are able to think and plan for the long-term. They can take a longer-term strategic perspective, which is not always possible in other models of business. This means they can take decisions that are right for the long-term even if that means sacrificing some short term profitability." – Hugh Clark, Clarks Shoes

Family business and employment opportunity

Employment is one of the major contributions that family business in Europe makes. According to a 2008 study by the European Commission, family business employment accounts for just less than half of all jobs. Employment opportunity and the ability for individuals to secure some form of income is often a key indicator of economic stability, and is also a key factor to ensuring prosperity for a nation.

"Family firms are crucially important for Europe. They make a significant contribution to Europe’s GNP and employment, and tend to be great innovators, with a longer-term vision. They also tend to be firmly rooted in their regional and national culture, displaying the sort of European values that we all share." – Jose Manuel Durao Barroso, President of the European Commission

Interestingly, the EFB notes that "family businesses reinvest profits responsibly preferring equity as opposed to debt financing", in addition the organisation notes that family business owners tend to be considered more "responsible", as they plan for the long-term and keep "stakeholder interests, including employees, customers, shareholders, local communities" at the centre of decision-making processes.

Responsibility and strong value sets differentiate family business

These approaches and tendencies ensure a sense of stability and control not only for the family business in question, but also for the marketplace as a whole. The notion of family values and a strong commitment to family-held ideals is another contributing factor to the long-term stability that family businesses bring. Often non-family businesses don’t have the same level of employee buy-in or engagement, and there is a tendency for a lack of a company-wide code of conduct.

Without a shared sense of purpose and value, employees find it difficult to feel the same degree of commitment and necessity to deliver at a consistent standard. EFB notes that family businesses often garner the support of their local communities because of their high sense of moral conduct, and an ongoing sense of "social responsibility".

Encouraging entrepreneurship and economic recovery

Throughout the EFB's brochure: Families in business for the long term, it's noted that family businesses play an important role in building and developing future entrepreneurs; "productivity, competitiveness, job creation and sustainability are part of their DNA", the EFB comments. It is further noted that this trait of fostering entrepreneurship can be of great benefit to the European economy during the time of crisis, as it greatly facilitates recovery and recuperation.

Whether it's through instilling an understanding of strong family values, incorporating community into the business practice and process, or delivering a new wave of entrepreneurial spirit, family businesses play a meaningful role in delivering long-term stability to the market.

Families that understand the importance of the role their business plays can garner further support and implement more effective measures to ensure sustainability and success in the future, while non-family businesses may too benefit from insights relating to the stability ensuring mechanisms applied by European family businesses.

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