Family Business by Gert HeroldFeatured, Financial Services Saturday, January 15th, 2011
Whilst some analysts and consultants do not necessarily attribute long-sighted operations, professional management and use of modern tools to owner-managed companies, in particular family businesses, they rather mention weaknesses in qualification and succession, recent figures show otherwise. In the past years owner-managed or family businesses not listed on the stock exchange and regardless of size, created seven times more jobs in Germany and worldwide, than companies listed on the stock exchange. On average the largest family businesses also grew in terms of turnover during the crisis of the past year, whilst the largest listed players almost stagnated.
Personal: Reasons for this are obvious. Whilst listed corporations have to comply with short-term result expectations, owner-managed companies can follow long-term strategies – personal short-term profit expectations take a “back seat” in favour of long-term company protection interests. Key personnel will also not be laid off as quickly in crisis situations, due to a personal sense of responsibility. Hereby a know-how loss can be got around and with the next upturn, reaction to market demands is faster and, besides having positive effects on company climate, high restructuring costs can also be avoided.
Frustrated managers in listed companies often throw in the towel because their conscience does not allow them to share responsibility for reduction scenarios in favour of short-term result optimization – in the interest of profit expectations of anonymous owners any longer- and thereby are lost by the company. In contrast co-workers and managers in owner-managed business are more likely to show understanding for difficult decisions in crisis situations and remain loyal to their employer. Here local bonds and long-term, personal contact of owners to their employees inure to their benefit. Owners are trustworthy.
In addition, companies where ownership and management coincide, often grow organically less through takeovers. Mergers and takeovers lead verifiably to staff reductions, often intensified by managers leaving due to demotivation and uncertainty.
Invest: Whilst the “red pencil” also affects investments for developments and plants in the listed market segment, medium-sized business in Germany have invested heavily in the past year and have significantly increased their investment volume compared to the previous year. The opposite applied to colleagues listed at the stock exchange. This also relates to acyclic investments in know-how and therefore their employees and managers. For this reason owner-managed companies are an important stabilizer of the economic cycle and an economic driver. This is part of the reason why family businesses prefer to invest in the future of their business rather than to distribute profits to shareholders.
Another success factor: Decisions can be taken faster when owners, decision makers and board of director functions are one.