Doing business in the family way

Do family businesses provide the perfect model for companies looking to survive the downturn?

Last Updated: 31 Aug 2010

The typical approach of family businesses makes them particularly well-suited to surviving the current economic turmoil, according to a new study by Barclays Wealth. In a survey of about 2,300 rich people, the asset manager found that those in family businesses tended to adopt a lower-risk, longer-term, more community-minded approach to running their companies – all characteristics that should serve them well in the recession. In other words, the very same qualities that probably looked conservative in the boom years have suddenly become the envy of everyone else...

The survey discovered that family businesspeople typically have different motivations. They’re less likely to be driven by an appetite for risk, and they’re less likely to be obsessed with money – 42% said they were motivated by cash, compared to a general average of 52%. They also tend to be thinking longer-term – just one in ten were considering a sale of their business, compared to nearly a quarter of other businesspeople. So they’re clearly working on a very different time horizon – which could make them less likely to throw in the towel when times are tough. What’s more, their leaders tend to have a more personal attachment to the business, not to mention the support network of their family around them – which presumably makes them less likely to cut and run.

Not all of these areas will be easy for other companies to emulate; it’s not easy for a non-family firm to generate the same kind of loyalty, for example. But others seem more attainable – notably family firms’ greater focus on their social obligations (55% said their key motivation was to help people, compared to the average of 39%). If you’re more conscious of your role within the local community, Barclays argues, you may be more likely to avoid redundancies and look after local suppliers. This is partly enlightened self-interest, of course – if your customer base is local, it makes sense to keep the local community onside. But it also gives you the extra goodwill you may need to get through the tough times.

For instance, if Northern Rock ever gets its mojo back, it will be a lot to do with the goodwill it still possesses in the North-East, where many locals were sad to see this former local success story laid low. In a similar way, some of the other businesses that have been humbled in recent months could probably try and learn a thing or two from the approach of family firms…

In today's bulletin:
UKFI gets a kicking - and Rock sinks to £1.4bn loss
Terra Firma hands back £70m after EMI slump
Doing business in the family way
Denise Kingsmill: Tone comes from the top
Route to the Top: Eight ways to manage change

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