Richard M. Walusimbi talks about the characteristics of family-owned businesses and what others can learn from them
Family business owners should have a longevity front of mind, rather than a meteoric business performance hike.
The CEO of another company might be more inclined to take big risks because they may not be invested whole-heartedly in the company, but rather in their career. The company is always separate to an outsider – but for a family business, the lines are blurred.
A family business owner owes it to the family to look after the business as if it is another member of the clan – and this leads to some interesting characteristics.
Be frugal all the time
In times when the economy is booming, capital-driven companies are enjoying the luxuries that profit provides, but also hedging stakes that could land them in trouble come a recession.
Family businesses should view profit and incentives more holistically – saving for a rainy day when the profits are high and being able to scale back when times get tough. This balanced way of viewing profits allows a family business to be less affected by outside forces.
Family business owners should also have a different view of what “incentives” are in the business. While a CEO of a non-family owned business needs rewards for a job well done, a family member CEO should see it as their obligation to bring the wealth back into the business and into the hands of the family themselves.
Invest in performance
Family business owners are always personally interested in the performance of the business and in turn its stability. The average family business would forego chasing the highs by opting for a lower and steadier performance. The family members should be after the long-term success of the business, which can often be forgotten in the heady rush of short-term highs in other businesses.
Most family businesses are closely entwined with many family members, affording the business with a stable support system over time. The business success and decisions are not all on one or two people’s heads, but are made by a family council with both professional and personal factors in mind.
A high staff turnover makes it difficult to instill a sense of community and shared goals in a company, meaning that most who come in are after their own means first and those of the company second. In a family business though, most employees are family members and the rest are brought into the fold – ensuring that everyone works for the greater good of their work ‘family’.
Businesses that are not family-owned need to learn how to create a sense of community around their employees to earn their personal investment in the company.
The writer is the Audit Manager at KPMG.