Family Firms Vital to Sustainable Economy

What's so special about family business? Business is business is business, right? Isn't any business better than no business -- no matter the size, family-held or not? Do family businesses impact a local economy?  

In every measure that's significant -- from return on assets to profitability and from sales growth to return on equity -- family firms outperform non-family firms in the long run. Communities interested in preserving and growing their economies need to know that the engine of job creation and prosperity begins with family-owned firms. They play a vital part in any sustainable economy. 

That is according to an Op-Ed article entitled, "Family Firms Vital to Sustainable Economy," written by Mike McGrann, Executive Director of the S. Dale High Center that recently appeared in the Central Penn Business Journal on the main editorial page. You can read Mike's column at this link.

Mike and the Center help family-held businesses achieve their goals of entrepreneurial growth, family unity and prosperity across multiple generations. Their experience indicates that family businesses possess a unique resource or capability tied to the ownership family. As is the case with many of the members, this resource is often based on the family's core values. The strength of such a culture leads to performance outcomes such as quality, efficiency, productivity and better customer service. Their shared family values obligate them to offer the best goods and services possible. Many stand behind their work -- without equivocation -- because their family name is their brand, and they are deeply committed to their reputations. A cluster of unique family-based resources allows them to innovate and grow in ways that constitute a true competitive advantage.

Mike points out another significant difference between family and non-family firms is often tied to the patience they exhibit when investing their capital, when a more substantial payoff down the road is preferred to turning quick profits.

Communities interested in sustainability want to attract and keep businesses with the potential for patient capital, which allows for longer-term investment horizons. Publicly traded companies don't have the luxury of investing for the long-term. They report quarterly earnings and make decisions based on profitability -- hirings, firings, plant openings, and plant closings.

By contrast, family businesses that exhibit unity within their family shareholder group have the option to follow a different model. They can make long-term financial decisions in the best interest of the firm, family shareholders, workers and the communities they serve. They can elect to invest in a $20 million plant expansion because the family ownership group understands the long-term nature of the investment and is willing to wait for the corresponding long-term return.

Another quality of family businesses noted by Mike is that they prefer long-term business relationships with their customers to one-off transactions. Who among us wouldn't prefer to do business with a company that treats us like customers rather than consumers, with honesty and respect, tending to our needs because customer relationships are viewed as partnerships to preserve and nourish? In an era rife with corporate greed and mistrust, isn't it comforting to know that some businesses in our community embrace practices antithetical to the Enron and Wall Street way of doing business?

Our firm, McKonly & Asbury, has been a long time sponsor and supporter of the S. Dale High Center for Family Business at Elizabethtown College. I continue to be impressed with Mike and his team at the Center and encourage you to check out what they are doing to help grow our region and help family businesses.

Comments

[cleondann]

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