What do all of the following companies have in common?
Ford Motor Company, Estee Lauder, Chick-fil-A, Carnival Cruises and Dell
They all fall under the umbrella of family owned businesses. To this day, family members still maintain active roles. Each of these companies have different origin stories and followed varied paths to success.
Ford, the oldest company on this list, has had family involvement since 1903. It is quite the accomplishment to maintain this type of longevity. Statistically, maintaining family ownership is a challenge. In fact, many family owned companies don’t make it past the third generation.
We have witnessed the benefits and challenges when family dynamics have to mix with business operations. Susan took over her father’s business and ran it until the decision was made to sell it. In addition, G2 Solutions has helped family owned companies navigate these sometimes tricky waters.
What sets family owned businesses apart?
Family owned businesses innately begin from a different place. Anyone who starts a business wants it to be successful, but when it is a family owned operation, there is an added dimension. In the back (or front) of the founder's mind is the possibility of passing the company down to future generations.
Family owned firms often are more emotionally attached to their origin story and the values that arise from it. As each generation takes over, members of the family have to find ways to stay close to these values while also staying relevant to the current times.
Take the Antinori family. They have been making wine in Tuscany since 1385. Twenty-six generations of wine makers! It makes the Ford family look like newcomers. Marchese Piero, leader of the current generation, puts it this way, “Ancient family roots play an important part in our philosophy but they have never hindered our innovative spirit”.
The characteristics that are common to all successful businesses may look a little different In family run operations:
Structure: While corporate companies are known for having well-established internal structures, family-owned businesses often have more flexible structures. The organization may be impacted by the amount of family members involved in the business. For example, family members may populate the rank and file of the organization. The positions they hold would not normally have easy access to the CEO. But since it is a family run organization, they may have unfettered input to upper management. This can have advantages and disadvantages. It can allow leadership to be more aware of what is going on in the rank and file. However, if boundaries aren’t clear, there is a risk to morale if other employees believe there is an unfair advantage.
Level of commitment: The sense of building a legacy can enhance the level of commitment to success throughout the company. This can impact how policies are developed. For example, money in the company is not just an asset, it is providing for the generations to come. Research has shown that family owned companies do a better job at keeping their expenses under control. They also tend to be more conservative in capital expenditures which tends to let them weather economic down turns more successfully.
Talent Retention: The family perspective may influence everyone in the organization. Family run companies tend to show more loyalty to their employees. Studies have found family run firms have lower turnover rates. Rather than primarily focusing on financial compensation to retain talent, they put a lot of energy into creating a culture of commitment, avoiding layoffs in tough times, and promoting from within because they see their people as part of the family.
In addition to understanding these different characteristics, it is equally important to understand the actions that can be taken to ensure generational success. We will give you some of those tips in our next blog.
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