Running a business is difficult, no matter your background. Finding trustworthy employees and planning for future growth are two of the toughest parts of running a successful business, and family businesses take a unique approach addressing them. The strategies they use aren’t limited to only locally-based companies, either — Volkswagen, Walmart, Nike, and Samsung are all family-owned and recognized worldwide.
While the common heritage and multigenerational insight that family members bring to work may be hard to imitate, there are some common things that family businesses do that can be adopted by non-family businesses.
Here are some things family-owned businesses do to prosper:
They Promote Common Values
One of the most unique benefits in a family-run company is the greater likelihood of shared values between employees. Mutual values help employees get on board with big-picture goals and how day-to-day operations can help achieve them.
The following values are among some of the most common promoted within family-owned businesses:
Family businesses generally rely on the strong personal bonds to guide companies through good times and bad, and it makes teamwork easier. It promotes a “we’re in it together” mentality that doesn’t always occur as naturally in non-family businesses. Loyalty is more common in family businesses because the team’s collective success over time is more important than an individual member’s development.
Personal More Than Positional
Family-owned businesses prioritize a culture of teamwork rather than success for individual gain. Because of their familial connection, executive leaders and subordinates are more likely to set goals together, and understand the role that each person plays in achieving those goals. All of this decreases the perceived power distance between employees and company leadership. It also breeds greater customer satisfaction, as employees that feel a part of the business’s future are more likely to take customer service to heart.
They’re Frugal And Have Low Debt
In modern corporate contexts, having an agreed-upon amount of debt is pretty common and strategic. When planned well, taking on a certain amount of debt can contribute to greater value by making it possible to provide new products and services faster. The expectation is that the new products and services will produce more than enough value to pay off the debt and still make money.
In contrast, family businesses are more likely to treat company money as “family money” and not take on significant debt to accelerate growth. Such may seem counterintuitive at first, but it’s often a strong financial strategy: without real debt, there’s less financial risk about having to pay back a non-family lender if certain business decisions don’t pan out, or if there’s an economic recession.
There’s often less immediate financial growth with this strategy, but it creates more reliable financial stability and adaptability, which allows for strategic future investments and philanthropy down the road.
They Retain Experienced Employees
Employee turnover occurs in practically any business, but the average rate is significantly lower for family-run businesses. Family-run businesses allocate more resources for developing current employees rather than hiring outside talent for new roles. This goes for leadership positions too, with family businesses generally electing a family member as the CEO for longer periods of time than CEOs of non-family companies.
By developing their existing workforce, companies are able to save on recruiting costs. Additionally, long-serving employees carry institutional knowledge, and are more likely to be efficient and similarly-minded about how to achieve goals. This is especially true of employed family members who were exposed to the family business at an early age, increasing the chance that on-the-job training translates to their own success later on.
For family-run businesses, fiscally conservative strategies and long-term approaches to employee development help mitigate risk while still leading to growth. These businesses commit to fewer high-risk, high-reward strategies, but suffer fewer losses during economic downturns by taking on less debt. Continually developing long-term employees over regularly hiring new staff saves company money and builds loyalty among team members.
These practices help create a sense of community and trust that other businesses may only be able to dream of.
For more insight about the effectiveness of family-businesses and general business development, take a look at these other blog articles from Brian France.