A recent (2014) report by The Edelman Trust Barometer, which focusses on levels of trust around the world, has found that family-owned businesses have a trust advantage (except in Asia). This was based on an online survey in 27 countries with over 33,000 respondents. This means that family-owned businesses are outpacing other SMEs and private companies, ‘big business’ and state-owned companies.
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According to the Institute for Family Business (IFB), the family business sector in this country contributes significantly to the economy with 3 million firms (2 in 3 private sector companies), providing 9.2 million jobs (2 in 5 in the private sector) and generating a staggering 1.1 trillion turnover which equates to nearly a quarter of GDP (Source: The UK Family Business Sector, Oxford Economics, November 2011).
In a letter to the Chancellor of the Exchequer in November 2013, the IFB reported that “family businesses inherently develop business strategies which focus on the long term”. The IFB therefore claims that, “throughout the recession, family businesses experienced a lower rate of insolvency than in the rest of the private sector”. This is, in part, due to the fact that family business owner managers are more willing to take reduced salaries, preferring to reinvest instead during a tougher economic climate. This in turn helps family businesses to build in strength and command even greater staff loyalty.
In their letter, the IFB went on to say that “by their very nature, family businesses are able to take the long-term view”. They claim that their members “place a greater priority on stability, sustainability and a preference for long-term growth over short-term profit extraction”.
Whilst many family firms have often been criticised in the past for their caution and for the perception that they are overly-sentimental with regard to their staff, it is, ironically these very qualities that are making family businesses so attractive to business buyers who see the value in these strong foundations(indeed, it is estimated that 13% of family businesses are start-up spin-offs from an existing family firm. Source: Global Entrepreneurship Monitor, Family Business Specialist Summary 2006).
The transition of ownership out of the family is often a difficult one and one that of course must be handled sensitively. The real issues arise however in the subsequent management style adopted and in the direction the new owners choose to take the company…whether that is sticking to the practices which made the company successful in the first place, or travelling new business roads.
To discover more about building trust with employees, read Why Should SMEs Build An Employer Brand?