You may be surprised to learn that family businesses are a major contributor to the U.S. economy. Here are some interesting family business facts and figures. A family-owned business is company owned, controlled, and operated by members of one or more families. Many of these family businesses have non-family members as employees, but the top positions are often held by family members.
Historically, Mom and Pop businesses have been the backbone of the U.S. economy. Yet some may say that family businesses are out and big corporations are in. Are family businesses dying out?
Despite the rising influence of large, global corporations, family operations continue to thrive. In fact, some of those well-known big corporations are family companies. Cargill, Jeld-Wen, Koch Industries, Eberhard’s Dairy, Mills Fleet Farm, S.C. Johnson Company are just some of the examples of family businesses. 35% of Fortune 500 companies are family owned and operated and cover a full spectrum of American companies from small to large. In addition, family companies are responsible for 60% of the nation’s employment and 78% of all new jobs created, pay 65% of all wages, and generate 50% of the nation’s Gross Domestic Product.
In the face of these tough economic times, family businesses can survive and even thrive. Family participation in a business can strengthen the business because family members are often very loyal and dedicated to the enterprise. Such loyalty can be a priceless commodity in these recessionary times.
However, family businesses are also well known for their complex relationships. An example of such a conflict is best demonstrated in a story about a family business owner whose son’s performance was deemed unsatisfactory by his supervisor. The father told the supervisor that he would take care of it. The father asked his son to come to the family home for a talk in the hot tub. When they were settled in the tub the father put on a hat which he said was his “Boss” hat and told his son that he was fired. He then removed that hat and put on another calling it his “Father” hat. Then he said: “Son, I’m very sorry to hear that you lost your job. Is there anything I can do for you?”
One of the challenges facing family businesses is management succession. Only 30% of family businesses survive to the second generation; a mere 12% make it to the third generation, and only 3% survive the fourth generation and beyond. Business articles are full of stories describing disputes among family members that turn bitter and result in hurting or destroying a once-thriving business.
Why do so few survive the transition from one generation to the next? And when they survive, how do they outperform their competitors? How do they overcome family challenges?
In an article titled “The Success Gene” (Inc. Magazine, April, 2008), half a dozen fifth and sixth-generation family businesses were surveyed to find out their secrets to success. What they found was that the businesses tended to make and sell products that last: guitars, pool tables, and furniture, for example; most of their manufacturing is in the U.S.; and they were able to put challenges in perspective. “You think this is bad?” they might say. “You should have seen what happened during the Great Depression!”
The article continues to explain how “the families have a lot of pride in their forebears’ accomplishments, yet they are unusual in the business world for their modesty. They are quick to credit the hard work of previous generations yet speak humbly of their own contributions. These families are about a lot more than just material success. They have a powerful sense of duty both to the past and to the future.”
When one reads the stories of these fifth- and sixth-generation family businesses, it becomes clear that the core values instilled upon them at an early age from their fathers and their fathers’ fathers have enabled them to carry on. Besides entrepreneurial perseverance in the face of tough times, the family businesses that have survived illustrate the importance of integrity both professionally and personally.
They also show ownership of family reputation, commitment to financial conservatism (in good as well as bad times), a solid work ethic and family pride—along with the freedom to argue (with other family members) respectfully. Most importantly, they illustrate the virtue of always remembering that family
Theresa Freihoefer is an assistant professor of business at Central Oregon Community College. She comes to the college with a wealth of real-world experience in business. Professor Freihoefer can be reached at firstname.lastname@example.org.