This crisis has highlighted the real strengths of family businesses, including their long-term perspective, entrepreneurial spirit, agility and guiding sense of purpose.
1. Live by your values
Values lie at the heart of successful family businesses. Family values likely influenced the foundation of the business and have helped to connect different generations over time. Values are important because businesses that live by their values are more likely to make decisions that are in the best, long-term interests of their stakeholders. One of our award winners is Far East Organization, Singapore’s largest private property developer and a Christian enterprise that aims to serve with grace, honesty, integrity and love. It believes the places where we live, work and play can help to nurture progress and success, which is why it creates spaces that improve people’s lives.
Values are also important to our other winners. Take another property company — New Zealand’s Barfoot & Thompson. For nearly 100 years, the real estate business, which is now run by the third generation, has held true to the founding families’ values of family, community, diversity and people. In Brazil, Energisa Group celebrated its 115th anniversary in 2020. Now the country’s fifth-largest energy distribution group, the business has maintained its founders’ values of safety, people, innovation, commitment, results and customers. And in Finland, the family behind travel and health care company Aho Group nurtures the company’s commitment to “brave and joyful entrepreneurship, long-term thinking and sustainability.” Finally, the core value of family-owned Dutch manufacturing business VDL Groep is “strength through cooperation.”
2. Look after your people
People are a huge source of competitive advantage for family businesses. In fact, their success at retaining the loyalty of their people is a major reason why family businesses are so effective at navigating challenging times. Thomas Hartland-Mackie, President and CEO of US electrical wholesale distributor City Electric Supply, heeds the advice of his grandfather, who founded the business in 1951.
That advice is: “If you take care of your employees, they take care of your customers.” During the difficult trading conditions that followed the 2008 financial crisis, Thomas involved his employees in critical decision-making. He also continues the family tradition of treating employees as family. At Barfoot & Thompson, the family owners look after their staff by ensuring the business remains financially sound — instead of taking money out of the business, they put money aside to shore it up.
3. Operate sustainably
Sustainability underpins the long-term success of family businesses. French family brewery Meteor is a leader in sustainability, having become the first brewery to obtain the ISO 50001 certification, a validation of best-practice approaches to energy management. Meteor has built its own wastewater treatment plant, and 80% of its brands use returnable containers. Another family-owned brewery, Belgium’s Duvel Moortgat, is also a leader in sustainability. All the electricity for the brewery comes from renewable sources, and the owning family sets targets to reduce waste.
4. Innovate and diversify
The integration of new family members naturally brings evolution and a fresh injection of ideas into family-owned businesses. Danish manufacturing business LINAK, founded in 1907, originally made pulleys and grinding mills. When Bent Jensen joined the family enterprise in 1976, however, he brought with him the design for an electric linear actuator. This invention sent LINAK on a steep growth trajectory, and the company now manufactures advanced electric linear actuator systems for a variety of applications from agriculture to health care.
Family-owned retailer SIBA transformed Sweden’s home electronics industry when it opened the country’s first department store for radio and television in 1974. Innovation has also helped to drive the growth of Spanish food and beverage company Grupo Osborne. CEO Ignacio Osborne says that diversification is key to the group’s business model. For example, while it is known for the production of wine and spirits, it has recently moved into mineral water.
5. Exploit the transformative power of technology
Family businesses aim to endure for the next generation, which is why they are constantly looking ahead, anticipating trends and finding ways to do things better. In the digital era, family businesses are investing in technology to operate more effectively, gain a competitive edge in the market and future-proof their operations. Over the past 100 years, Germany’s TRUMPF has gone from being a mechanical workshop to a world leader in the manufacture of machine tools and industrial lasers.
Its mission is to further develop and digitally connect production technology so that it is even more efficient, precise and future-proof. Today, its software solutions are paving the way to smart factories. In Italy, the Zanetti family has built a fully automated maturing warehouse for its high-quality cheeses, while continuing to incorporate traditional approaches into its cheese-making practices.
6. Be willing to adapt
The unique resilience of family businesses is closely linked with their adaptability. LOTRIČ has become Slovenia’s leading metrology company thanks to the determination of the Lotrič family to adapt to new developments. Meanwhile, SPAR has grown from its humble beginnings as a single Austrian grocer to now having a European footprint that spans 1,557 branches and 59 restaurants. Its success is linked to its willingness to adapt to local consumer demands.
7. Invest in communities
Family businesses understand that their own fortunes are closely intertwined with those of both their communities and their environment. Hence, in South Korea, environmentally friendly timber business Eagon Industrial has not only planted trees throughout the Solomon Islands to replace those that have been cut down, but it also has provided education and medical facilities for the locals. UK motorway services business Westmorland makes a point of championing local suppliers, thereby investing in communities.
8. Maintain a long-term outlook
A long-term outlook enables family business leaders to both make decisions that stand the test of time and pass down the business to subsequent generations. Swiss medical supplies company SIGVARIS has representatives from the fourth and fifth generations of the founding Ganzoni family. The family believe that their values of long-term orientation and a sound financial background have contributed to the company’s success.
Multigenerational advantage
It is no coincidence that some of the most successful family enterprises have a strong track record of integrating younger generations of family members into the business. While respecting the values of their founders, these businesses welcome the fresh insights that new generations offer.
A great example of an enduring family business among our class of 2019-20 is Meteor. Founded in 1640, the brewery has been run by the Haag family for eight generations. Belgium’s Duvel Moortgat is now run by the fourth generation of the Moortgat family, which is respected for its corporate governance practices.
Ignacio Osborne, who became Grupo Osborne’s CEO in 1996, represents the sixth generation of the Osborne family. He understands the diverse perspectives that different generations can bring to a business, saying that “experience has taught us to look beyond just one generation.”
Going forward, family businesses will need to rely more than ever on the talents of their different generations as they — along with all other organizations — are forced to rethink their business models, supply chains and working practices in response to COVID-19. They should take confidence from their past successes as they progress into the future. In the wake of the pandemic, they have the experience, knowledge and skills to help regenerate our world.
Summary
As the winners of this year’s EY Family Business Award of Excellence show, the most successful family businesses live by their values. They also operate sustainably, look after their people, innovate and diversify, exploit the transformative power of technology, show willingness to adapt, invest in their communities, and maintain a long-term outlook.
