There’s a fundamental stability in family businesses, from the smallest mom-and-pop corner shop to the large enterprises playing a powerful part in the economy, which is not always apparent in other companies. While they don’t always perform as well as competitors during times of plenty, when times are tough, they are ready to pull through and survive.
This is because the owner of a family business has longevity front of mind, rather than a meteoric business performance hike. The CEO of another company might be more inclined to take big risks because at the end of the day, the company is allowed to fail, they are not invested whole-heartedly in the company, but rather in their career. The company is always separate to an outsider – but for a family business, the lines are blurred.
A family business owner owes it to the family to look after the business as if it’s another member of the clan – and this leads to some interesting characteristics.
In times when the economy is booming, capital-driven companies are enjoying the luxuries that profit provides, but also hedging bets that could land them in trouble come a recession.
Family businesses, on the other hand, tend to view profit and perks more holistically – saving for a rainy day when the profits are high and quickly being able to scale back when times get tough. This more balanced way of viewing profits allows a family business to be less affected by outside forces.
Family business owners also have a different view of what “perks” are in the business. While a CEO of a non-family owned business needs rewards for a job well done, a family member CEO will see it as their obligation to bring the wealth back into the business, and into the hands of the family themselves. Keeping the business thriving is more important than the latest sports car.
Family business owners are personally invested in the performance of the business, and in turn the stability of the business. The average family business would forgo chasing the highs by rather opting for a lower, steadier performance. The family members are after the long term success of the business, which can often be forgotten in the heady rush of short term highs in other businesses.
Most family businesses are also so closely entwined with so many of the family members that the business is afforded a very stable support system over time. The business success and decisions are not all on one or two people’s heads, but are rather made by a Family Council with both professional and personal factors in mind.
A high staff turnover makes it difficult to instill a sense of community and shared goals in a company, meaning that rather most who come in are after their own means first and those of the company second. In a family business though, most employees are family members and the rest are simply brought into the fold – ensuring that everyone works for the greater good of their work ‘family’.
Businesses that aren’t family-owned need to learn how to create a sense of community around their employees in order to earn their personal investment in the company – making them want to stay and grow.
This article is based on the experience and insight of KPMG professionals who work with family businesses.