For the families themselves the passion may never have dimmed, but there is a renewed commercial interest in how resilient large family businesses in particular are proving to be in the face of global uncertainty. So what are the sources of their strength? We asked a range of experts at HSBC Private Bank and beyond for their take on the unique characteristics of good family enterprises.
They understand ownership, control and long-term planning
It’s said that failing to plan is the same as planning to fail. Bernard Rennell, Regional Head of Global Private Banking, Asia Pacific and Global Head of Family Governance and Family Enterprise Succession at HSBC Private Bank, says that lack of adequate planning can condemn even the strongest family businesses. “Most families are used to thinking strategically for their family business and investments – it’s natural; it’s instructive,” he says. “But it’s less instinctive to plan for the business of the family. However, if the family business is to succeed over the longer term, it’s essential to plan for the impact of intergenerational wealth transfer on the business and on family harmony”.
Rennell underlines factors that can create the right conditions for a healthy, long-living family business: “developing a framework for collective decision-making which recognises and respects the different roles and responsibilities of owners and managers – a critical distinction as the family grows over time”.
They are in it for the long term
According to Adrian Wooldridge, Management Editor at The Economist, if family businesses can capture the essence of their history, this creates an appeal that engenders a long-lasting and loyal customer base. But also because they have such an emotional stake in the longevity and success of the enterprise, they are comfortable with taking decisions that might only realise a benefit some generations into the future.
“The long-term perspective tends to be particularly valuable in the newspaper and the luxury good industries,” says Adrian. “It’s very striking how those newspapers owned by families tend to do much better than those owned by anonymous corporations. That’s because they’re willing to take the long-term investments that newspapers require. Most luxury companies, too, tend to be family-owned. Anything that requires long-term stewardship and taste, can put family companies at a big advantage.”
Family comes first, business second
Philippe Bera, Group Development Manager of fine wine business Omtis Ltd, is representative of today’s new generation preparing to take on increasing responsibility for the family firm. “The core objective of our business from the very beginning was always about family values and not about commercial objectives,” he says. “Commerce was very much integrated to the family dynamic, but it was not the main objective.”
Philippe developed his own career in banking and finance before taking the opportunity to return to the business when his father and he came to an agreement about his role in developing the company for the future. “You can see very clearly that those who co-operate at home are very successful in the business because that itself is all about communication and sharing,” he adds.
They are the future
If the research is to be believed, it seems large, successful family businesses will dominate the future of capitalism in the 21st Century – but only as long as they get better at managing the succession process. Wooldridge continues by stating that the will is there – and with Edelman’s annual Trust Barometer placing big family businesses much more favourably than public corporations in terms of trust and loyalty, there’s an added incentive to dominate their markets.
“Historically, those families that have succeeded in reproducing themselves after many generations are those who have a very strong and cohesive sense of values,” Wooldridge argues. “A lot of what will shape the future of the world will be dominated by Asia, shaped by the dynamics of family businesses and the problems of family successions.”