The Global Value of Family Enterprise

For years, I travelled the world, and was quite frankly oblivious to the pervasive nature of family business everywhere I went. As I reflect on it now, in Asia, Europe, North and South America as well as Africa, families working together in business is not only common – it is the norm for business ownership, by far!  From the factories in Asia producing goods for the world, to the corner fruit seller in Africa, relatives working together in commerce are everywhere.

Many people don’t realize that in the Western world, even some of our largest publically-traded companies are essentially family-owned. The most common definition for family business generally is that it refers to firms which are primarily controlled by a family or related group of families. This would include such large global companies as Bechtel, Comcast and Wal-Mart, as well as the corner drycleaner.

In Canada, our statistics on family ownership are much the same as other western countries. These firms contribute 50% of private sector GDP, employ 7 million Canadians, and contribute a significant proportion of provincial and federal tax revenues. In other words, family business is a primary building block of our economic engines, and communities.

For this reason, the study of family business has accelerated in the past 50 years. In the 1970’s thought-leaders like John Davis and Renato Tagiuri at the Harvard School of Business began to build models of family business, to better understand the dynamics of families working together. The resulting “3 Circle Model” is widely used across the globe, as the basic building blocks of this conceptual framework holds for all families in business, regardless of context.

More recently, academic research from all over the world has added to our understanding of the issues family companies face – especially when they undergo transition from generation to generation (or not), in leadership, and in ownership. At the same time, many professional advisors (lawyers, accountants, tax and wealth advisors) to families in business have also deepened their understanding of the dynamics of family business, making them more effective in how they approach the multi-faceted issues their clients need to work through.

The good news in all of this is that there is little need to re-invent the wheel when working through the challenges and opportunities that come with this foundational form of business ownership.  The advantages, tensions, health and concerns which surround family enterprise are relatively well-understood, and there are ample examples of healthy families who work together in business over many generations. While it is not at all uncommon for families to get “stuck” from time to time with the issues that arise when working together, it is good to know that it is extremely rare to encounter challenges that have never been seen before. Solutions exist – and the task is more one of applying time-tested processes and solutions, than it is of pioneering new trails and working on one-off and unique concerns.