Growing large, staying in charge

By Barbara Spector

Most people who aren’t involved in a family firm equate “family business” with a mom-and-pop shop. They don’t realize that huge private enterprises like Cargill and Koch Industries are also family businesses, and so are giant public companies like Wal-Mart and Comcast.

 

Some large firms simply don’t emphasize their family connection in their advertising. Perhaps executives at these companies fear that prospective customers (or potential investors) may associate “family business” with “lack of professionalism”—though events of the past decade prove that executive shenanigans and bad decisions can occur in enterprises of every stripe.

 

On the other hand, ads that promote a company’s family status, such as S.C. Johnson’s “A Family Company” campaign, appeal to consumers because these marketing initiatives connect the business with tradition and continuity, and attach a personal identity to the brand in this era of faceless conglomerates.

 

In this issue of Family Business, we celebrate big family firms with an updated list of America’s largest family companies—a list that has changed considerably since the last edition was published in 2003. Our special section also includes some advice on the challenges facing family enterprises that aspire to grow into billion-dollar companies.

 

Large family firms can get derailed by the same forces that doom the mom-and-pops: reluctance to change an outmoded business model; a poor economic climate; or the inability to separate the realms of family membership, business management and business ownership.

 

But, as the articles in this issue show, other factors are involved when a company grows larger. In a family firm, this also usually means that the family has transitioned to later generations, with a larger ownership group whose members vary in their connection to the business.

 

In some cases, problems arise at a family company when the family insulates itself from outside perspectives. A series of studies by David M. Reeb of Temple University and Ronald C. Anderson of American University found that family firm performance is greater and economic value added is 5.5% greater when founding families maintain an ownership stake—but a firm’s performance is highest when family members hold only about 12% of the board seats.

 

A family council can be an effective means of promoting continuity of family ownership, especially in large families with large companies. When directors, owners and managers all can effectively carry out their responsibilities, a family business is in the best position to grow and thrive.

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Issue: 
Winter 2009

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