It
isn’t a secret that some of the most successful businesses in the world
were started by families. BMW, Cargill and Johnson & Johnson are
just some of the bigger names that are either owned in part or have a
family presence to this day.
In
Australia, family businesses range from local shops to large operations
such as Linfox and Visy. In fact, family businesses represent about two
thirds of the overall Australian business community.
KPMG
Enterprise Partner Dominic Pelligana, who is actively involved with
Family Business Australia, says running a family business is complex –
but it has strong competitive advantages.
“I
always say the family business system is the optimal model for running a
business – but it comes with an asterisk,” he says. “That asterisk is
making sure you have a strategic plan for the business – and the
family."
Embedded values make a stronger culture
Think
about what it takes to get a traditional business up and running. It
requires a core set of values – a principle to rally behind and a shared
vision to strive for. In a traditional business, the founders often
deal with a number of partners, or investors, who all want a say. With a
family business, the values and ethos are embedded from the start.
“They’re
usually genuine values, and the purpose isn’t just to make money – it’s
to solve a problem or fill a niche. It’s almost like their intent is
stronger,” Pelligana says.
The
KPMG Family Business Survey 2015 recorded a rise in the number of
family owned small-to-medium enterprises using Family Constitutions to
document their values. This effort means family businesses are able to
play the long game, integrating two powerful systems – family and
business.
“They’re
more willing to invest in ‘patient capital’ – that is, spending that
takes a while to realise value – and take long-term views,” Pelligana
says.
Bringing the family on board
When
it comes to handing over a family business to a new generation, some
tension can arise. This is often due to different approaches to strategy
and risk.
The
KPMG survey revealed 49 percent of first generation founders are
‘prospectors’ and more willing to take on necessary risks. However, it
also found 50 percent of those in the second through to fourth
generations are ‘defenders’. They want to protect the business, and
introduce more advanced and professional systems and processes. The
founder of the business can be resistant to that change.
However,
that generational shift can also be an advantage. Handling customer
accounts takes on a new life, as sons and daughters continue the legacy
set down by the previous generation.
“People
who work in the family business could get a higher salary elsewhere.
But they understand the money is going back into the business, creating a
legacy for their family. When customers see that loyalty, they know
they’re in good hands,” Pelligana says. More