Family run enterprises tend to outperform and outlast conventional companies, just two reasons we should care about their survival.
BUSINESS FAMILIES ENDURE
Family businesses are not only a backbone of the Canadian economy, experts say this truth and the fact that family-run enterprises typically outperform and outlast their non-family-run counterparts makes them worthy of support.
Family enterprises the most common form of business in Canada with 80 per cent of Canadian businesses family-owned and managed. They also produce 45 per cent of the GDP, create nearly 70 per cent of new jobs and employ 50 percent of the workforce.
The strength of family run businesses is not confined to Canada. A recent survey, for example, found that historically 50 per cent of the businesses that last for more than 10 years among the New York Stock Exchange’s top-500-performing stocks are family businesses. “Enduring is a good way to describe family businesses… which can last over many generations,” says Larry Munroe, partner, Grant Thornton LLP.
Because of their longevity, family enterprises serve as an important business model. One key trait is their adaptability.
According to David Simpson, executive director of the Business Families Centre at the Richard Ivey School of Business, successful family businesses retain their entrepreneurial spirit across generations.
“They tend to be a business family, not a family business,” he says, pointing out that just as Grandpa changed and adapted until he found what worked, so too do subsequent generations have to be willing to redeploy the family wealth where there is advantage to be had.
Lawrence Barns, CEO of CAFE, says families attend to how they succeed, not just success itself. “In other words, it’s about playing a role in their community,” he says, using the Ganong family of St. Stephen, New Brunswick as an example. Canada’s oldest candy company, the family has been making chocolate for four generations.
“They have an ethic: Yes we are a company in this community, but we are also a family in this community,” says Mr. Barns. “Even though this takes place out of genuine interest, if you look at it from the business side, it does generate brand loyalty.”
According to Mr. Munroe, a significant number of family enterprises are very wellknown. “Their name has huge customer and supplier loyalty and is synonymous with what they do.”
One mention of the name Molson (a family who pioneered brewing in Canada in 1786) or McCain (a company started by four brothers in 1957 that has transformed food manufacturing), and the point is well made.
The loyalty built by Canada’s successful family enterprises comes out of the friendships they form, as well. “Their customer bases are personally built,” says Mr. Munroe.
Much of that stems from the unique set of business values that family enterprises develop. “Family values – because they give a company a coherent vision and set of principles – tend to be the glue that holds these companies together,” says Mr. Barns.
“They see themselves as stewards of the family business for future generations. It’s about passing it on to the next generation in better shape than they found it.”
Another asset of family enterprises is their long-term focus.
“Family businesses are less driven by short-term, bottomline, immediate returns,” says Mr. Barns. “They are buffered from the market because there is less focus on share price and more of a desire to make decisions based on what they will do for the company when it is handed to the grandchildren.”
And, as the baby-boomer generation of family enterprise owners moves into retirement, these companies face a great deal of change. According to Mr. Simpson, a trillion dollars worth of family businesses will be changing hands in the next few years.
Thankfully, family businesses today tend to be less private and more open to outside consultation, not only to fill gaps in expertise where family members aren’t qualified, but also to help with transitioning.
Resources such as the Ivey Business Families Centre, as well as the Business Families Centre at the Sauder School of Business at UBC, are going to be essential.
According to Thane Stenner, managing director of Stenner Investment Partners of GMP Private Client, and an advisor to Sauder’s Business Families Centre, these changeovers can carry a lot of risk. “If the transition is not handled well, it could be disastrous because of the innate emotion and passion tied up in what a family is trying to pass along.”
He say Business Families Centres, along with the work of CAFE, offer family enterprises an opportunity to study successful family business scenarios, dialogue with peers, manage relationships within a family enterprise, and do so in a safe and neutral environment.
---
Also appearing in this report:
Lloyd Steier
Professor, Strategic Management & Organization; Distinguished Chair, Academic Director,Centre for Entrepreneurship & Family Enterprise; Academic Director, Alberta Business Family Institute, University of Alberta School of Business
Support for Business Families:
NATIONAL
Canadian Association of Family Enterprise
www.cafecanada.ca
ALBERTA
Alberta Business Family Institute
University of Alberta School of Business
www.abfi.ca
BRITISH COLUMBIA
Business Families Centre Sauder School of Business
University of British Columbia
www.sauder.ubc.ca/bfc
ONTARIO
Business Families Centre
The Richard Ivey School of Business
University of Western Ontario
www.ivey.ca/entrepreneurship/bfc/
Centre for Family Business
Waterloo
www.cffb.ca
NEWFOUNDLAND
P. J. Gardiner Institute for Enterprise and Entrepreneurship
Faculty of Business Administration
Memorial University
www.business.mun.ca
---
TO READ THE FULL REPORT AS IT APPEARED IN THE GLOBE AND MAIL, PLEASE CLICK ON THE ATTACHED PDF >
| Attachment | Size |
|---|---|
| businessfamilies.pdf | 1.3 MB |