Often punching above their weight in today’s evolving business environment, its family owned and operated businesses, not big corporations, that build the backbone of the Australian economy. According to recent research[1], this self-driven and motivated community now represents around 70 per cent of Australia’s 2.1 million businesses, making it a critical sector.
As a family owned business ourselves, Purple Giraffe is not only a member of this group, but has the ongoing opportunity and privilege to work with many others in a number of industry sectors, helping them chart their pathway forward and unlocking their potential in their business journey one step at a time.
More often than not, success has not been built overnight and these family businesses reverberate with incredible stories of innovation, passion and triumph, often against all the odds and with the power to pivot on a dime.These battles, some won and some lost, are celebrated on September 18th – National Family Business Day!
As the calendar ticks towards this date in a year that has been especially tough for many in this community, we have mused over some of the common features we have observed that allow many family businesses to grow and evolve. Below we detail some of these reoccurring characteristics and explore how you can adopt these behaviours and practices to boost the success of your business no matter what your model is.
Strong relationships and boundaries
Successful family businesses often have a solid network of social and business relationships that bind them together and forms the fabric of their success. If this is managed well, roles are defined and a working balance is struck, this can create a strong and tight-knit team that support each other and that performs.
However, if this delicate balance is not achieved and family team members are not cohesive in their working relationships, it can have the opposite effect and create conflict and inefficiency in the whole.
It is important to note that conflict will always be present and is a process that needs to be managed. The way that it is done will be unique to each organisation and family.
Dr Peter Zinkann, third generation member and former co-managing director of Miele, which is a highly successful family business, likened the successful company to an orchestra: “Miele’s success cannot be attributed solely to marketing efforts and senior management; it is the success of the whole company. … What really matters is not merely being different, but rather being coherent in the ways we differ. Everything must fit together like the notes in a beautiful piece of music. A single false note in a Mozart string quartet would destroy the overall harmony.[2]”
The important point to note here is – how do you create this harmony? Respect and strength within relationships and clear roles and responsibilities sets a strong foundation.
Boundaries can be put in place to ensure balance between family and general life, along with the running of the business. This may take the form of structured office hours, block out times and expectations discussed and agreed upon collectively.
When it comes to building strength in relationships it is important to stick to the basics of good communication and employ these practices no matter how well you know each other.
This sentiment is echoed by John Mclean of family run Bundaberg Brewed Drinks “Communication is the absolute crux of success – if we don’t communicate we can’t be successful”[3]. It’s advisable to keep communication open and honest, and encourage it within the business by implementing regular communication times (e.g. weekly meetings). As Jamie Valmorbida of family run Joval Group expresses “When it comes to family business you need to treat each other with respect and trust each other like you would any other colleague”.[4] This means treating everyone appropriately, making any feedback constructive, and acknowledging your own mistakes.
Living your values
Personal values are powerful and we often perform at our best and feel most happy when we can reconcile these values with that of our employers or of the businesses we work for. It is good practice to set out the values that represent your business. This can help to attract like-minded people and ensure each member of the team or family can relate to them, understand them and regularly refer to them as a guide to success.
An excellent example of values resonating through a family business successfully is demonstrated by the Takanashi family, whom are a part of the Kikkoman family business empire (famous around the world for its soy sauce), which was created by the merger of seven family firms in 1917. The cornerstone of this business is its mutually agreed values set down in the 17th century and still relevant today. They include: showing kindness to each other within the family and to those of lower social status; to not be lazy; to not tell lies or gamble; to devote oneself to family rather than to self; and to never abandon or look down on people.”[5]
Embracing generational differences
The generational differences that occur in family businesses as younger generations come into the workforce and older ones leave, offer an excellent opportunity for learning and innovation. Jamie Valmorbida of Joval Group[6] shares this view in working with his Dad “I’ve embraced and learnt from dad since the earliest days, but since I’ve been working in the business he’s very open and loves teaching”.
A 2016 KPMG survey[7] revealed much about these generational differences. With 49 percent of first generation founders described as ‘prospectors’ and more willing to take necessary risks and 50 percent of those in the second through to fourth generations as ‘defenders’. They act to protect the business and introduce more advanced and professional systems and processes. The combination of these two approaches can create sustainable growth if collaboration and communication is encouraged.
Knowledge sharing
We know the power of compounding interest when we see our savings account balance rise over time without further deposits. Likewise transferring a business from generation to generation can have the same effect of compounding wealth of a family in both knowledge and finances if it is managed well and treated as a shared responsibility.
If knowledge is not shared or passed down from generation to generation the same mistakes can be made again and again[8]. In a family business that knowledge is often more easily transferred and passed down even when that family member decides to leave the business. A thought shared by Jacinta Dowsing of family run Dowsing Group “Knowledge is power and being able to receive wisdom from those that love and care for you and appreciate you is another whole layer of greatness”
Looking to the future
An important consideration for family businesses is their ability to look to the future and plan for it in a way they are comfortable with. Studies have shown that inability to let go is the most cited barrier to effective succession, and if the incumbent is too attached to the business, the potential successor might not be given the opportunity to develop the skills or earn the respect necessary to manage the business when the time comes for the leadership to be handed over[9].
A common feature of successful forward thinking and forward focussed family businesses is a succession strategy that gradually empowers the next generation with the skills they will need to one day take over the business. This is often coupled with both an innovative and open mindset from current leaders as to what the future management and business model may need to look like to remain successful.
One thing is for sure, succession should not happen overnight and for success requires planning, discussion and commitment[10].
A cheers to you
In conclusion, working with family can provide another element of complexity in a business environment however, if properly managed and planned, and with effective communication, roles and responsibilities, it can be a recipe for great success.
Lastly, we would like to say congratulations to all the family businesses out there. On National Family Business Day, we will be celebrating you and the role you play in the Australian economy.
Sources:
[1] KPMG and Family Business Australia Survey of Family Businesses 2009 (in conjunction with Bond University)
[2] https://www.imd.org/research-knowledge/articles/secrets-of-success-in-long-lasting-family-firms/
[3] https://assets.kpmg/content/dam/kpmg/au/pdf/2018/family-business-survey-2018-report.pdf
[4] https://assets.kpmg/content/dam/kpmg/au/pdf/2018/family-business-survey-2018-report.pdf
[5] https://www.imd.org/research-knowledge/articles/secrets-of-success-in-long-lasting-family-firms/
[6] https://assets.kpmg/content/dam/kpmg/au/pdf/2018/family-business-survey-2018-report.pdf
[7] https://home.kpmg/au/en/home/insights/2016/09/why-family-businesses-have-competitive-advantage.html
[8] https://home.kpmg/au/en/home/insights/2016/09/why-family-businesses-have-competitive-advantage.html
[9] Factors Preventing Intrafamily Succession” Family Business Review vol. XXI, No. 2, June 2008
[10] https://www.cooneyleesmorgan.co.nz/vdb/document/55
