Business & Economy

What You Can Learn from Family Business

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Nicolas Kachaner, George Stalk, and Alain Bloch

This article summarizes the results of comparing family businesses with similar-sized non-family businesses across a variety of industries and geographies in light of the proposition that family businesses hold more of a long-term view than traditional businesses. The authors demonstrate that both structures have their apparent advantages that play out more strongly depending on the economic climate. Nonetheless, overall, the family businesses tend to outperform their peers in long-term profitability according to this study. Some of the explanations provided for this result were greater scrutiny over capital expenditures, carrying less debt, and less of a focus on acquisitions of other companies. The authors noted that many of these principles helped to reinforce the culture within the workplace in the sense that limiting capital expenditures and acquisitions made it much easier to reduce debt. These choices also made it easier for family businesses to focus on other goals such as avoiding layoffs and providing greater training and promotional opportunities for employees.

Such practices have meant that these companies miss some opportunities in more favourable business cycles but are better poised to perform well in difficult times. Likewise, since many of these cycles are starting to speed up, it appears that non-family firms may want to embrace similar policies to increase their resiliency. While readers can rightly point to several challenges that are more likely to occur within family businesses, it is at least worth noting that the focus of family firms on more of a long-term approach to profitability has shown to be a rather viable one within the business sector and one that other firms may soon be mimicking.

The authors note that many of the companies’ policies mutually reinforced one another to create a common culture within the firm. What would be some other examples of company policies that help to mutually reinforce behaviour of one type or another?

Source: Harvard Business Review

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