Managed properly, family businesses have all the ingredients to secure a competitive advantage.
Small to medium-sized businesses form the backbone of the Australian economy, comprising about 70 per cent of all firms nationally, according to a survey last year by KPMG.
This figure was supported by a Senate report that found a similar proportion of all businesses in Australia are family businesses.
So clearly the issues that affect family businesses have a major impact on the economic wellbeing of the nation overall.
The federal government recognised the key role played by small-to-medium businesses in strengthening and growing the economy in the Industry Innovation and Competitiveness Agenda released in October.
As reported in Business News' December 1 feature, 'Dynasties', succession planning is a major issue facing family businesses.
A survey by accountants and business advisers MGI found that almost 60 per cent of family business owners felt that their children were not interested in taking over the business.
The commitment to pursue family-related goals along with business goals in family business is a key tension contributing to this issue.
Research says that the dominance of family members in decision-making roles can encourage conservatism in managerial practice to prioritise the family legacy over innovation, reducing the opportunity for learning and entrepreneurship.
Though cohesiveness is the competitive edge of family business, it can therefore also be its Achilles heel. Excessive cohesiveness can limit knowledge flows about strategic options that can help the business grow.
The 'Dynasties' report in Business News highlights some of the ways that family business can respond to this issue. The story of the Jim Galvin Family Council gives us one idea about how to unite family and business in the family business.
A family council institutionalises the voice of the family in the business.
Importantly, a family council provides a learning space for the family to not just learn about the business, but about the family in business. A family council can do this by bringing family in from an early age to listen, discuss and learn about how the family works with the business. By doing this, the family in business paves the way for the next generation to become interested in the business, and importantly, remain in the business.
Critically, families can use this space to introduce ideas and tools about how to build and better manage the family in business. Sure, these include those 'hard' skills, but the family council also provides a safe place for the current generation to encourage the next generation to develop the 'soft' skills that are critical for the business to survive as a family business.
These include learning how to manage responsibility, obligation and care towards the family, and how to become good at being attentive and responsive to family matters – without sacrificing business interests.
Our research tells us that learning how to juggle these is pivotal for a family business to remain as a family business.
However, this is a difficult task making resilience a key critical success factor for family business leaders.
Life helps build resilience. We can learn managerial resilience to both create and adapt to change from many external places of management learning. However, our research shows that a key source for family business leaders to learn resilience is other family business leaders.
Having conversations, listening to the stories about the experiences they have had, how these have been managed and then reflecting on what this experience means to juggling their own family and business is a fundamental way that family business leaders learn resilience. It creates a family business dialogue that makes sense because it integrates the family in the business talk.
We are likely to see the family business sector grow rather than diminish in the next phase of our economy.
But, family businesses add more than just economic value.
As the 'Dynasties' stories show, in Western Australia and throughout Australia, family business has created a legacy that is synonymous with growth and development.
'Family' is a unique ingredient in family business success. This is not just because 'the family' provides physical and capital resources for the business; it also provides an emotional resource.
If managed well this can provide a strength for family business. The stories in Business News show how the family ingredient can help a business develop a competitive advantage.
UWA Business School