Blood is thicker than water

Blood is thicker than water

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Thu 07 Jun 2012 12:00 AM

Sometimes the best innovation is right under our noses and we just need help seeing it. At a time when economists are desperately searching for sustainable business models that go beyond corporate social responsibility, family businesses are showing that they have it in their DNA. Family businesses. Because they are always thinking about the next generation, family businesses conduct themselves―whether consciously or not―in a way that is future-forward and sustainable. In light of the economic crisis, Suzi Jenkins takes an inside look at the successes of―and continual need for―the Italian and Florentine tradition of the family business.

 

 

Family businesses are Florence?s and, indeed, Italy?s lifeblood. In business terms, most European countries use the term SME (small- to medium-sized enterprises) to describe exactly the category that most family businesses fit. But in Italy we also have the term ?microbusiness,? which just about says it all: dad runs the business (innovator, operator, salesperson, purchaser, developer, communicator, etc.), mum does the accounts, and oldest son chips in whilst also trying to follow a degree course at the University of Florence. Of course, in Florence we also boast some of the oldest surviving family businesses in the world, such as Frescobaldi (who began producing wines in 1308) and Antinori (whose first wines can be traced back to 1385). Florence is also home to some of the most internationally successful companies of recent times, among them the Ferragamo Group, the Romanelli sculptors, the Roberto Cavalli empire, the Menarini pharmaceutical company.

 

 

Family businesses have a knack of hanging in there, in the good times and the bad. But with today?s grim economic outlook, just the words ?family business? are enough to make any business consultant?s blood run cold. What is it about them that make them a recipe for both success and disaster? 

 

 

Family-run businesses tend to be highly flexible. If money is short, it?s easier to cut salaries or pay late if you are dealing with your own family members. Often, those same salaries end up under the same roof, with so many young Italians still living at home until an advanced age (see news on page 4), making belt-tightening and cost-cutting somewhat easier. When things are looking up and orders are flowing in, a family member will think nothing of working 18-hour days, Saturday and Sundays with no holidays, in order to keep the customers happy. The vested interest of family members in the success of the business induces dedication, perseverance and a whole lot of extra effort. In addition, family businesses tend to have a strong orientation towards social and ethically responsible activities because when making decisions they always have in mind their grandchildren as heirs to the business.

 

 

Yet family businesses have their weaknesses. First, the extremely close relations between co-workers means that stressful situations can often easily escalate or be extended to the work place. Another problem is that whilst some experience is great, too much becomes a handicap, and the reluctance of the older generations to let go and allow the new entries to make changes is manifest. Rebuilding post-war Italy required man-hours and elbow grease―the honest, hard work of putting hours and hours into production. In today?s work environment, the ability to evaluate risk, innovate, forge strong relationships, interpret client demands and keep pace with technology are vital to survival. Thus, insistence on the old tried-and-trusted work methods can drive a company into the ground. This can make the generational handoff a dramatic process.

 

 

However, overall, family businesses continue to have a competitive edge and statistically outperform non-family businesses. Family businesses tend to favour long-term interests over short-term profits, speedy adaptation over growth, incremental improvement over innovation, family members and staff over stakeholders, the immortality of the business over it being a disposable asset, pratical management over charismatic leadership. 

 

 

Sound like anyone you know? Google has long been ?accused? of behaving just like a well-run family business―even though it isn?t―starting with its decision to float its shares at a relatively low price, and  keeping focus on the long-term interests of the company rather than short-term profits. Parmalat, on the other hand, is an example of a badly run family company where power was exploited and a quick buck became priority number one at the expense of everyone and everything.

 

 

In the current economic environment, Florentine family businesses are facing the test of their lives. Will they be able to exploit the family business?s advantage, the model that Google has successfully replicated? 

 

 

The Florence local government offices are currently involved in getting a great project off the ground; the Global Family Business Forum, May 2013. It will potentially be a fantastic opportunity for both large global family businesses and the local micro companies.

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