You may have heard the saying “from clogs to clogs in three generations”, a well-known phrase used to describe the three-generation cycle of a family business’s failure to prosper and their tendency to eventually decay. It is one of the few phrases that can be found universally across a number of cultures repeated in different ways with the same message –that family firms fail to make it beyond the third generation. You may even have heard some statistics to back this up, that a third of family firms fail to make it to the second generation and around a third of those fail to make it to the third generation.
These stats and those phrases are misleading and it’s time to rewrite the narrative. In fact, family firms are better placed to deliver a more sustainable future, not only for the firms themselves, but for their people, planet and communities they are embedded in.
The Northern Ireland Irish Family Business sector is the heartbeat of the Northern Irish economy and represents something in the region of 328,000 jobs and a 57.2% share of all private sector employment (IFB, 2021). When you compare family businesses to their non-family counterparts they may sometimes (though not always) be slower to grow, but consistently outperform on a number of measures – family ownership brings a competitive advantage in situations that demand resiliency rather than rapid growth.
Family businesses, with owners close to the business, can adapt quickly to changing circumstances and balance the imperatives of navigating through the crisis with the implications for the long-term in mind. That means working hard not only to preserve cash, but also to ensure the well-being of employees and communities. In many studies, family companies have been shown to be better employers and community citizens than their non-family–run peers, that’s a distinct competitive advantage.
The UN World Commission on Environment and Development defined sustainability as being about “meeting the needs of the present without compromising on the ability of future generations to meet their own needs”. This definition shares a fundamental theme that’s particularly relevant — and familiar — to families in businesses because of their sense of duty to create and preserve a healthy, diverse and resilient world for their children and grandchildren. The commitment to this ideal of generation-to-generation value creation is not new to family businesses. It’s deeply embedded in the family’s values and woven throughout their business model. What is new, is the opportunity for family businesses to play a larger societal role by using their long-term, multi-generational mindset as a roadmap to sustainability for others to follow.
Focusing on sustainability and strengthening the bottom line are not mutually exclusive. Increasingly, they are becoming competitive differentiators for winning new business and attracting new customers and top-performing employees.
The recent annual conference of the NI Family Business Forum, which was set up by leading local accountancy firm Harbinson Mulholland in conjunction with Ulster University Business School seven years ago, was held in Belfast on the eve of National Family Business Day. A delegation of over 100 people representing 40 local family businesses gathered to hear how being ‘A Force for Good’ would help curate a better future for their businesses and our planet, as well as inspirational real-life stories and experiences that make this sector so unique.
A raft of topics including philanthropy and leaving a legacy, sustainability, creating a world class culture, next gen leadership transition and adapting a lean manufacturing mindset for continuous improvement and growth were addressed by guest speakers and a panel of experts and business owners.
At the conference, Ulster University launched a new dedicated centre, The Centre for Sustainable Family Enterprise, which is dedicated to providing enterprising families with the knowledge, tools and resources they need to build thriving, sustainable businesses that last for generations.
For more information visit the Centre for Sustainable Family Enterprise web pages or email: i.smyth@ulster.ac.uk