Watching New Economy starlets like Amazon steal all the headlines, it would be easy to assume family empires are a dying breed, rapidly being replaced by corporations where meritocracy rules, capital runs free, ownership is traded swiftly and the financials are posted for all to see.<\/p>\n
Not quite. The family-controlled firm remains at the heart of even the most modern industrialized economies. Family-run businesses still account for the vast majority of the world’s companies\u2014about 90% of them, in fact. Some are little more than corner stores, but they still make up 33% of all American businesses with revenues of $1 billion and up, and 40% of such companies in France and Germany, according to Boston Consulting Group.<\/p>\n
Many are the exact opposite of the cobwebby firms of yore\u2014they include such modern marvels as Wal-Mart, Samsung, LG and Foxconn, which probably made your iPhone. More importantly, as a group, family businesses deliver superior returns. When Credit Suisse analyzed financial data from 920 large family-controlled companies from around the world, it found that over the past decade their share-price returns have outperformed the global MSCI benchmark by 47%.<\/p>\n
Why would companies rooted in the past outperform modern publicly traded corporations? The main reason is their ability to think long term. The CEOs of your typical non-family-owned public companies don’t spend a lot of time at the helm\u2014the average tenure is less than 10 years\u2014and they’re under more pressure than ever to maximize short-term results.<\/p>\n
The leaders of family-run companies, on the other hand, are focused on where their businesses will be a generation from now. Horst Brandst\u00e4tter, owner of the German maker of Playmobil figures, ran his company for 54 years. He reportedly once gave a designer 10 years to develop a new product line.<\/p>\n
Sean Silcoff’s revealing feature offers a rare glimpse inside James Richardson & Sons\u2014a Winnipeg-based company older than Canada itself. CEO Hartley Richardson is part of the fifth generation to run the company, and over the past 24 years, he’s grown its revenues to $9 billion. Now he’s facing the biggest challenge of his career: Who will take over when he’s gone?<\/p>\n
More than one family business has been brought down when control passed to children or grandchildren who lacked the smarts or instincts to run a big enterprise. The Richardsons were so afraid of that happening that they pushed the next generation out of the corporate nest to prove themselves before they could get a shot at the top job.<\/p>\n
The experiment was perhaps too successful. Having seen\u2014and thrived in\u2014the outside world, many of the 20- and 30-somethings in the sixth generation are in no rush to return. Some in the family are questioning whether the next CEO needs to be a Richardson at all.<\/p>\n