The very mention of “Family in Business” conjures up positive and negative visions for the average outsider regardless of their involvement with this critical sector of the Australian economy. Why is this so and what is it that drives these paradigms.
Firstly let’s put some statistical facts around what is a “family business”. Over the past decade there have been many national and international studies, surveys and academic papers written about family business. In Australia family business is best summarised as;
- A business owned and / or operated by family members that are the second or older generation
- Family businesses in Australia total approximately 870,000
- They employ approximately 55% of the total Australian workforce
- These businesses generate approximately 60% of Australia’s economic activity
- Are found in all industries
- Come from just about every ethnic origin
Secondly, let’s explore the negative perceptions that appear to be the “norm” yet are more the result of publicity than the reality. These perceptions include;
- All family businesses are dysfunctional – Not true because in the main family businesses are highly functional regardless of internal family dynamics
- All family businesses are small to medium – Absolutely not true because there are a significant number of family businesses with annual turnover above $100m (and up to $3b)
- Family businesses are not innovative – Again this is far from the reality. Yes a lot of family businesses don’t waste time or effort on formally securing intellectual property however they are some of the most innovative and flexible businesses in Australia and internationally
- Family businesses suffer from the 1st generation makes it, the 2nd generation grows it and the 3rd generation wastes it cycle – Yes there is a lot of evidence to support this however it is not the “norm” at all with a number of family businesses in Australia with five, six and up to eight generations of longevity
- Family businesses are mostly partnerships – Far from the reality as the vast majority of family businesses operate as Companies and there is an increasing number establishing formal Boards
It is not the intent of this article to list all of the perceptions surrounding family business or to attempt to debunk the negative perceptions. Rather I want to focus on some of the emerging trends in Family Business that must be taken into account when dealing with families in business.
Family Businesses are complex in structure, shareholding and behaviour, nothing new here.
Family Businesses are unique. Again nothing new here however so many professionals servicing these businesses do not take the time to understand why they are unique. They are unique because of their “history” and “story” that has evolved throughout the generations and shaped the family values and its legacy.
With the improvements in health care and personal health, people are living longer and while this is not new it does have a significant impact on families in business. Over the past five years I have seen an increase in the number of families where four living generations are involved in the business. Yes this is very much at different levels however this must be taken into consideration when engaging with the family business.
Generation Y and Z will not be “sold to” and they have a very different perspective towards integrity. This means that any professional service MUST have a clear value add proposition for the family and the family business otherwise these generations will not engage. With regards to integrity, they are so connected they will “jump onto Dr. Google” immediately and research the validity and veracity of advice.
Loyalty to “brand” is changing quickly with loyalty now being driving by the value delivered to the supply chain rather being to the “brand”. This is a trend that Family Businesses can exploit very quickly because they are innovative, flexible and creative. Also, the family is really the brand therefore they can change with the trend and still retain market integrity.
The old “chestnut” of entitlement is fast becoming a thing of the past. I have written an article that challenges this perception and will publish it at a later date. The younger generations are as “attached” to the family business as their older counterparts HOWEVER they are nowhere near as materialistic, which enables them to be more creative and flexible WHILE causing some significant disruption within the family. This decrease in entitlement will play out over time however I suspect we will see some very innovative business models come out of this trend especially in the very traditional primary production industries.
Digital disruption is the final trend I want to highlight because it is upon us now. Family Businesses are also well placed to capitalise on this trend because of a range of factors;
- They have multiple generations within the family therefore can quickly react to emerging technology and information transfer platforms
- Decisions on capital expenditure can be made quickly
- Everyone in the family has “skin in the game” therefore their attitude towards risk is different to the corporate sphere. This is especially critical in the areas of cyber terrorism, security and fraud
- Technology can be incorporated into the strategy and operations of the Family business quickly ensuring the architecture, systems and processes are fit for purpose of the business
In conclusion, Family Business is the engine room of the Australian economy and will be for generations to come.
Lloyd Russell is a 4th generation family business member and an accredited family business advisor who is based in Brisbane while servicing clients throughout Australia and internationally. Lloyd is a specialist in family business strategy and governance with a particular focus on inter-generational transfer. He has more than 30 years’ experience in senior management and is an accredited neuroscience practitioner.
Contact Lloyd on 0413 549 748 or email@example.com
Website – www.tcbsolutions.com.au