January 15, 2013
// What You Can Learn From A Family Business
More than 20 years ago, I asked a highly respected CEO at a Tier 1 auto supplier this question: If I only read one magazine/periodical, what would you recommend? To my surprise, his answer
was the Harvard Business Review. Since then, I have been a subscriber. I must say, however, that
I have considered canceling my subscription more than once — especially when they went from
six issues per year to 10. (Why would I consider canceling a magazine when I seemed to be getting
more for my money? It's because there is so much information, I struggle to finish reading the
entire magazine before the next issue arrives.) But then, just when my guilt is about to cause me to
pull the trigger, an amazingly relevant, fresh article about a topic that's not covered anywhere else
appears. In fact, that happened as recently as this past November.
Three professionals from the Boston Consulting Group (BCG) reported their findings
from studying 149 publicly traded, family-controlled businesses (as compared to
similar companies that are not family-controlled) in an article entitled, "What You
Can Learn From Family Business." The Harvard Business Review has very strict rules
prohibiting me from sending you the article, but most of you are involved in family-owned
businesses, and I would highly recommend obtaining reprints.
Quoting from the article, "Our results show that during good economic times, family-run
companies don't earn as much money as companies with a more dispersed ownership structure.
But when the economy slumps, family firms far outshine their peers. And when we looked across
business cycles from 1997 to 2009, we found that the average long-term financial performance
was higher for family businesses than for nonfamily businesses in every country we examined.
The simple conclusion we reached is that family businesses focus on resilience more than
They identified the following seven differences that set family businesses apart:
- They're frugal in good times and bad. (Editorial comment: It is their own money they are
- They keep the bar high for capital expenditures. (Editorial comment: Did I mention it is their
- They carry little debt. (Editorial comment: Over the years, our experience has been that
companies with less debt make some of their best investments during economic downturns,
when their competitors cannot come up with the capital.)
- They acquire fewer (and smaller) companies. (Editorial comment: We cannot prove it with
data, but anecdotally, we have observed that most acquisitions fail. So, usually, bigger is not
- Many show a surprising level of diversification. (Editorial comment: As Mark Twain once
said, "Don't put all your eggs in one basket.")
- They are more international. (Editorial comment: When your business goes cross-cultural,
there is often a lot of mistrust. In our experience, family-owned businesses are better able to develop deep, healthy relationships with customers and associates in other countries.)
- They retain talent better than their competitors do. (Editorial comment: In our experience, in
well-run family-owned businesses, the "family" goes well beyond "the family."0
For those of you who own and operate family businesses, we hope the BCG's findings are
encouraging and will give you the courage to keep going.
p.s. For those of you who enjoy reading, I would highly recommend a subscription to HBR.
p.p.s. You can receive e-mail notifications regarding our bimonthly blogs by: clicking here and providing your e-mail address.
Hope to see you at the North American International Auto Show this week.
Seek. Climb. Lead.