Family Business: Inefficient or simply caring?

Stephanie Brun de Pontet

Sometimes you see two news items on the same day and they seem to really underscore the differing views that some may hold about family owned business…  In fact, I recently read about an article in the UK’s Daily Telegraph, which cited research from the London School of Economics in an article titled “Family-run firms are Britain’s weak economic link” The article pointed to research findings that suggest second and third generation family-run firms have weaker management than non-family firms.

However, the day I read that piece was also a day where President Obama was pointing to the example of some US businesses, such as Marvin Windows – a family business – that have stood the test of time by engaging in a practice of shared sacrifice in tough times.  Specifically, at Marvin when the economy took a nose-dive, the employees were happy to make concessions on pay and benefits AND the owners also made significant sacrifices on the dividend side – enabling a company that is heavily exposed to construction to weather this terrible recession.  This is not a new approach at this third & fourth generation family firm, in fact they have had almost no layoffs in over 100 years of history as they see the cost of losing skilled labor (to the business AND the community where they grew up & live today) as too steep a price to pay for a short-term boost to profits.

Is it possible that some family enterprises may look less aggressive – or may not otherwise fit some business-school models of hard-nosed decision-making because they are committed to their communities, and see decisions with an eye to the very long term?  While this approach may not always squeeze out every possible dime of profit from an enterprise – is it possible that society as a whole is a little bit better if we leave some of that on the table?

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