Uploaded by Lionel Calvin


Family Business, NonFamily Business, Urban
Steven Brown
AMR Services.co.nz
13th August 2014
Family Business, Non-Family Business,
Urban Myths.
After 20 years of working with Senior Executives across the
world it’s interesting to see the mistakes when appointing
Senior Executives.
One reason is not understanding the differences of
working in a Family Business and a Non-Family Business
Senior Executives are unhappy with their employment
because of this lack of knowledge and understanding.
Business owners don't realise there is a difference.
Money and title isn't enough.
Does the Mantra of “ ‘C’ level Executives can work in
any company?” ring true.
Changes in the Economy
• Family Businesses are competing with the corporates to find ‘C’ level
• To do this successfully, They must understand the differences of a
Family Business and a Non-Family Business.
• Working for an English and Indian Family Business in a past life helped
me at first hand to see the ups and downs of Family Businesses. This
with a theoretical base has helped with running my own companies or
advising others with theirs.
A New Zealand Family Business
I worked with a family business run and founded by a successful
New Zealand Entrepreneur.
They did not have anybody in their immediate family to hand the reins over to.
They had tried (outside the family) executives to fill ‘C’ level roles . They had three people
in three years?
What is the problem?
Was this a real Family Business?
Was the Problem his, or the Executives?
Firstly where did his people came from. All three ‘C’ level people were from corporates
and had done an excellent job in their corporate environment. They all returned to
corporate life and continued to do well in their new roles. Why did they fail then in this
successful Family Business?
Definition of a Family Business
• I needed the owner to identify a “Family Business”.
• “A commercial organization in which decision-making is influenced
by multiple generations of a family—related by blood or marriage—
who are closely identified with the firm through leadership or
ownership. Owner-manager entrepreneurial firms are not considered
to be family businesses because they lack the multigenerational
dimension and family influence that create the unique dynamics and
relationships of family businesses” Wikipedia 2014.
• We looked at his company and although he didn’t have anyone in
the immediate family to take over the reins he had people who
owned the company in minor leadership roles. We both agreed he
did in fact have a Family Business.
• He thought that buying in top salaried ‘C’ level Executives from
corporates would enhance growth and sustain his business. He had
not seen any differences between Family and Non-Family Business.
Urban Myths for Family Businesses
• All Family Businesses are unstable Small to Midsize businesses’.
• As an Executive I don’t want to baby sit the junior family members so they can take
over my job.
• A non-family member will never run the company.
• Mother and Father Companies, the only people that matter in the company are family
• Emotional hard to work places due to family disagreements/arguments.
• Incompetent family members in positions of authority.
Are these statements true or are they just Urban Myths?
More Positives than Negatives
Family businesses are one of the fastest growing sectors of the world
Amazing turnaround 25 years ago nobody wanted to work for a Family
Patricia Epperlein from InterSearch reports that;
“In the USA, 90% of businesses are family-owned. They contribute
towards 40% of that nation’s GNP and pay approximately half of its
total wages.
59% of France’s Top-500 industrial companies are family-owned.
It is estimated that 70% to 85% of all businesses worldwide are
Tom O’Neil NZ Herald. Jan 2014 states;
Small to medium businesses are the lifeblood of New Zealand industry.
Various sources cite family businesses as representing 75 per cent of
Kiwi firms, providing up to 80 per cent of employment and 65 per cent
of national GDP
Family Business World Leaders
• Not all Family Businesses’ are SMEs.
• Porsche.
• Walmart.
• Tata Group.
• In New Zealand we the Talley Family (Agribusiness) and the Pandey
family (Hotels).
NZ Family Businesses
• Simon Peacocke of BDO Auckland states,”
• NZ Family Businesses do well because of the following reasons;
• They think long-term and are very resilient, much more so than
non-family businesses.
• Second and third generation family business members start their
apprenticeship. 5 years old they are hearing their parents talking
about the business so they have an incredible depth of knowledge to
draw on.
• Relationships with staff and communities also tend to be different –
closer, more connected, more loyal.
• Staff tend to become part of the family business and to stay on as
long-term committed employees.
• While corporates like to be seen supporting their communities,
family businesses generally don’t promote they are doing this – they
just do it.
• They don’t throw lots of money at things trying to get rich quick.
Economy and the Business
So is it worth working for a family company? Is it better to work for a
Non-Family Business? Is there any difference when the economy is
good or is in a slump?
Nicolas Kachaner 2012 in the Harvard Business Review states;
• “Results show that during good economic times, family-run
companies don’t earn as much money.
• When the economy slumps, family firms far outshine their peers.
Using Business cycles from 1997 to 2009, we found that the average
long-term financial performance was higher for family businesses
than for non-family businesses in every country we examined”.
• Senior Executives looking for longevity in the work place should look
at the Family Business as this would take them through economies
varying peaks and troughs.
Identifying a Family Business
• A Non-family office has a “Wow Factor”. The Frugal Family Business has
very few “Bells and Whistles”.
• The Family Business CEO has a long term 20 year plan passing down the
generations. The Non-Family CEO is looking to make an instant mark and
will try and outperform the person they have taken over from, whilst
consuming large amounts of money and resources.
• There are many studies that show that Family Businesses did better in
the recent Global recession. The Family Business is frugal in the good
times and the bad allowing them to weather the storms of economic
This is one of the factors that had been wrong in my client with three ‘C’
Level people in three years. His ‘C’ level people came in with a quick
turnaround plan which they hoped would give a quick fix and outspending
the last person in the hope that they would do something instantly. No
twenty year plan for them as they had never been afforded this way of
working in the past.
Do Family Businesses perform
differently in other countries?
Justin Craig, PhD states,
• “Interestingly, in many aspects family businesses as a sector do not
vary much from country to country.
• There are obvious cultural differences but a business with family
involvement is challenging in every country. It is also more
rewarding than the ‘corporates’, let’s not forget that.
• Of course, there are older businesses in Europe, for example, than in
Australia and New Zealand and the United States, and the mind-sets
of companies in Europe will differ than in the later developed
• But day to day the differences are not noticeable. Older businesses
have more at stake and lots more to lose but they also have
• Family leaders still have to manage three independent and
interdependent systems being the family, the business and the
ownership group”.
Can a “C” Level person work in any
type of Business?
• Appointing the right Senior Executives is crucial to any company
and is a costly acquisition. There are many reasons why hiring at
this level goes wrong but getting it right can make a huge
difference to your company.
• To answer one of my questions, can a ‘C’ Level person work in
any type of Business, Family or Non-Family?
• Yes, but they are better served if they are armed with the
knowledge of the differences of the two. What they must also be
sure of is the type of business that they are going to work in as
sometimes this can be a cloudy Look at those mighty corporate
companies of Porsche, Tata and Walmart to name a few.