A family-owned business is a 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.
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.
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 big corporations are family companies. Cargill, Jeld-Wen, Koch Industries, Eberhard’s Dairy, Mills Fleet Farm, SC Johnson Company are just some of the examples of family businesses. 35 percent 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 percent of the nation’s employment and 78 percent of all new jobs created, pay 65 perecent of all wages, and generate 50% of the nation’s GDP.
In the face of the tough economic times we are currently in, 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 which can be especially important 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 percent of family businesses survive to the second generation, just 12 percent make it to the third generation, and only 3 percent 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), 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; 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.”
In reading the stories of these fifth and sixth-generation family businesses, it was the core values instilled upon them at an early age from their father and their father’s father… that they carried on. Like entrepreneurial perseverance in the face of tough times, the importance of integrity professionally and personally, taking ownership of your reputation, commitment to financial conservatism in good as well as bad times, a solid work ethic and family pride, to argue (with other family members) respectfully, and always remembering, family comes first.
Theresa Freihoefer is an instructor in the business department of Central Oregon Community College. She can be contacted at firstname.lastname@example.org.