The Last Days of Summer? The Perfect Time to Celebrate 'Family' Businesses.
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This summer, the economy has been as hot as the weather -- with the unemployment rate down to just 4 percent. GDP growth, overall, is over 2 percent; and even with the claw back in the markets, the Dow Jones Industrial Average has roared back from around 7,000 -- its financial crisis nadir in 2009 -- to more than 25,000 today.
A big part of that economic comeback? It's due to large family businesses.
When you think of family businesses, you likely conjure the image of a mom-and-pop store. But many of the world’s largest and best known businesses are led by families. And these businesses are not only growing at a rate faster than that of other businesses; many sustain themselves for decades across multiple generations.
Just look at the way family-run businesses dominate the things we love to do in the summer, which sadly (though unofficially) ends this upcoming Labor Day. Going to a barbecue? The company that makes Weber grills is family-owned. That slice of cheese on your burger? It may well be from the cheese dynasty family Sargento.
And if you're making s’mores over a campfire, recognize that those chocolate squares may originate from Pennsylvania-based Hershey Company, which, too, is family-owned (as is candy giant Mars). The plastic wrap you’ll use to put away the corn on the cob, meanwhile, and the insect repellant you apply, may come from S.C. Johnson, a family-owned company based in Wisconsin.
And that’s not all. Your summertime duds may have been made by family-owned L.L.Bean of Maine, and you may have enjoyed your recent road trip via a car rental from Enterprise Holdings, the family-led company behind Enterprise and Alamo rental cars.
Finally, all those fireworks that lighted up your 4th of July picnic? Many of the biggest producers of fireworks shows, like Grucci in New York, are family-owned companies.
Family business is for other seasons, too.
Of course, large family-owned businesses aren’t limited to producing what we love in summer. Just look at Koch Industries, Ford Motor Company and Comcast, as some of the largest. "Family-owned" is typically defined as a scenario where more than 32 percent of the voting power in a company is controlled by the family.
Some statistics about these scenarios? The top 139 family businesses in North America generate some $2.5 trillion in revenue, represent over 12 percent of GDP and employ close to 7 million people. More than a third of them are publicly listed. And, if you turn things around statistically, you'll see that upwards of half of the publicly listed companies in the United States are family-controlled.
Family businesses also generate impressive results. They are growing faster than their peers, are more likely to enter foreign markets and typically carry less debt than other types of companies. There’s also evidence that family businesses weather economic downturns better than non-family peers. One study found that family businesses with annual revenues of between $100 million and $3 billion were less likely to fail during economic downturns than comparable businesses with other forms of ownership.
Another study found that family businesses examined spent less on research and development but got much more out of what they did spend, making them often more innovative than their non-family rivals. Other researchers, meanwhile, determined that in S&P 500 companies, ROI was greater in family businesses, with a 6.65 percent greater return for family companies than for their non-family peers.
It’s not surprising that with results like these, 73 percent of global family businesses are in their second-to-fifth generation of family ownership. And, given this kind of scale and staying power, large family businesses offer the following lessons for other kinds of companies aiming to grow sustainably over time:
Focusing on the long term is part of why family businesses are so strong. The leader of the average family business has been at the head of the company for 20 years, instead of a mere six years for non-family businesses. In 2015, when my firm, EY, and Kennesaw State University surveyed large global family businesses with average sales of $3.5 billion, we found that 87 percent had a clear plan for succession.
They had more active boards of directors that served as coaches, counselors and peer advisors. They reported caring deeply about one another. And most large family businesses emphasized their family ties prominently in their branding.
Family companies are often nimbler than other types of organized business. This is one of the characteristics that contributes to their long-term survival. As Harvard Business Review noted, “They tend to have nimbler and flatter structures, where information flows quickly and easily in to the leaders, and decisions come out.”
Family companies offer more opportunities for women. Many family businesses used to be known for having the word “son" or "sons” in their titles. But in fact, today, women are more likely to land in family business C-suites than in the leadership teams of their peer companies. Currently, 24 percent of family businesses are led by a female CEO or president, and 31.3 percent of global family businesses surveyed indicate that the next successor will be female. Nearly 60 percent of all family-owned businesses have women in top management positions.
Family businesses nurture talent. This may be one of the most important lessons all companies have learn from family ones: Canada’s Eddy Group, a maritime distribution business that’s been in the same family for more than four generations, is very careful about bringing in family members. “When a family member joins, there can be no sense of entitlement," group president Robyn Eddy, told me, referring to her daughter and three other members of the fifth generation who are now Eddy Group employees. "No one is treated differently,” Eddy said.
How, then, do we help strong family businesses, mainstays of our worldwide economy, continue to thrive? We need all the conditions that help business in general, including a favorable tax and regulatory climate, immigration policies that attract talent, trade policies that open markets and healthy capital markets that underpin a bright future.
So, this weekend, when you fire up your grill, rent a car or watch late-summer fireworks light up the sky, remember the dynastic families behind your summer fun -- and enjoy that cheeseburger or s'more their companies helped produce.