30. Family businesses: the most successful, long-lasting and impactful businesses in the world
11/15/21 • 46 min
Rob and Josh are each co-founders of BanyanGlobal Family Business Advisors which advises family owners on business, finance, ownership, philanthropy, and a wide range of other issues. They are each leaders in the field of family-owned business. They recently co-authored the Harvard Business School publication: “Family Business Handbook: How to Build and Sustain a Successful, Enduring Enterprise.”
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Links
Why the 21st Century Will Belong To Family Businesses
Build a Family Business that Lasts
Order the HBR Family Business Handbook
Quotes
Family Business Myths/Facts
Myth: Family businesses don’t really matter.
Fact: “About 90% of all businesses in the United States are family owned and they account for about 50% of all employment.”
Myth: Family businesses don't last, after three generations, they're doomed to fail.
Fact: “Family businesses last longer on average than other forms of ownership. Some of the longest lasting and most successful businesses in the world are family businesses. Why don't Americans know that?”
Joe: Josh, why do you think that the myth that family businesses are less successful, that they never get beyond the third generation, why does that persist?
Josh: It's a great scare tactic, I think you keep hearing it is because people want to tell you, "You're doomed to fail and therefore you need my help to be able to overcome it."
Myth: Family businesses are rife with conflicts - family members are fighting and suing each other and just can't possibly get along
Fact: “Most family businesses struggle not from having too much conflict, but from too little conflict, because it's really hard to raise some of these issues about fairness and compensation and all the things that come in as being part of a family business.”
Rob: It's strange, but the celebrity or the business celebrities, when I went to business school, Jack Welch, and he was making a brand for himself. Now, it's Bill Gates or Mark Zuckerberg at Facebook or Elon Musk at Tesla. They seek the publicity. I would say most all of the family business that we know the owners, they shy away from publicity. They don't want to be the face of their family business. They actually know the downside that can come with that.
Josh: Most family businesses are private companies and the word "private" is there for a reason, that they don't want to be public. They see advantages in being below the radar. I was visiting a family business recently in a state out west and I drive up to the headquarters and I was like, "That can't be it. We must have the address wrong. That can't possibly be the headquarters of a billion dollar company." And of course, it was.
“One of the amazing things about family businesses is that they can break the rules in a way and practice business in a way that is fundamentally different than other companies.”
“Family business owners can, if they choose, own it for their whole lifetime and maybe set it up for their next generation. It's the difference between maybe renting an apartment or even being in an Airbnb overnight - you're day trading versus owning a home that you're hoping to bequeath to your children.”
Unlike other companies, family businesses actually talk about longevity. How often do you hear companies outside of the world of family businesses talking about how many generations do you last? Do we put like a second or third generation as if that's just a low number, but then you have to multiply it by 20 or 30 years and you realize that a third-generation family business has probably been around for a hundred years.
Josh: People say: "Oh, most family businesses don't make it for a hundred years and therefore they're doomed to fail." I'm like, "No, no, most businesses last for under a year, maybe five years."
Joe: Their success is actually used as a way of talking about their failure when it's not really a failure at all.
What we find in family businesses is that core decisions are really made at the owner level in family businesses, not like publicly-traded companies. If you don't like what's going on at GM, you sell GM and you're out and it wasn't really hard to sell. With a family business you're in. So, you're going to work really hard to make the owner decisions the right decisions.
The rights that come with that ownership are profound, the ability to influence the company in ways that are positive and ...
Rob and Josh are each co-founders of BanyanGlobal Family Business Advisors which advises family owners on business, finance, ownership, philanthropy, and a wide range of other issues. They are each leaders in the field of family-owned business. They recently co-authored the Harvard Business School publication: “Family Business Handbook: How to Build and Sustain a Successful, Enduring Enterprise.”
Thanks for listening!
We love our listeners! Drop us a line or give us guest suggestions here.
Links
Why the 21st Century Will Belong To Family Businesses
Build a Family Business that Lasts
Order the HBR Family Business Handbook
Quotes
Family Business Myths/Facts
Myth: Family businesses don’t really matter.
Fact: “About 90% of all businesses in the United States are family owned and they account for about 50% of all employment.”
Myth: Family businesses don't last, after three generations, they're doomed to fail.
Fact: “Family businesses last longer on average than other forms of ownership. Some of the longest lasting and most successful businesses in the world are family businesses. Why don't Americans know that?”
Joe: Josh, why do you think that the myth that family businesses are less successful, that they never get beyond the third generation, why does that persist?
Josh: It's a great scare tactic, I think you keep hearing it is because people want to tell you, "You're doomed to fail and therefore you need my help to be able to overcome it."
Myth: Family businesses are rife with conflicts - family members are fighting and suing each other and just can't possibly get along
Fact: “Most family businesses struggle not from having too much conflict, but from too little conflict, because it's really hard to raise some of these issues about fairness and compensation and all the things that come in as being part of a family business.”
Rob: It's strange, but the celebrity or the business celebrities, when I went to business school, Jack Welch, and he was making a brand for himself. Now, it's Bill Gates or Mark Zuckerberg at Facebook or Elon Musk at Tesla. They seek the publicity. I would say most all of the family business that we know the owners, they shy away from publicity. They don't want to be the face of their family business. They actually know the downside that can come with that.
Josh: Most family businesses are private companies and the word "private" is there for a reason, that they don't want to be public. They see advantages in being below the radar. I was visiting a family business recently in a state out west and I drive up to the headquarters and I was like, "That can't be it. We must have the address wrong. That can't possibly be the headquarters of a billion dollar company." And of course, it was.
“One of the amazing things about family businesses is that they can break the rules in a way and practice business in a way that is fundamentally different than other companies.”
“Family business owners can, if they choose, own it for their whole lifetime and maybe set it up for their next generation. It's the difference between maybe renting an apartment or even being in an Airbnb overnight - you're day trading versus owning a home that you're hoping to bequeath to your children.”
Unlike other companies, family businesses actually talk about longevity. How often do you hear companies outside of the world of family businesses talking about how many generations do you last? Do we put like a second or third generation as if that's just a low number, but then you have to multiply it by 20 or 30 years and you realize that a third-generation family business has probably been around for a hundred years.
Josh: People say: "Oh, most family businesses don't make it for a hundred years and therefore they're doomed to fail." I'm like, "No, no, most businesses last for under a year, maybe five years."
Joe: Their success is actually used as a way of talking about their failure when it's not really a failure at all.
What we find in family businesses is that core decisions are really made at the owner level in family businesses, not like publicly-traded companies. If you don't like what's going on at GM, you sell GM and you're out and it wasn't really hard to sell. With a family business you're in. So, you're going to work really hard to make the owner decisions the right decisions.
The rights that come with that ownership are profound, the ability to influence the company in ways that are positive and ...
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29. Marcus Peacock on the impact of the Business Roundtable
Marcus Peacock is the Chief Operating Officer of the Business Roundtable, an association of Chief Executive Officers of America's leading companies. In this episode we discuss the Business Roundtable, its highly publicized Statement of Corporate Purpose (August 2019) and what it’s like to administer the BRT board of directors, composed of more than 20 CEOs of large US companies.
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Links
Link to Statement pf Corporate Purpose
Quotes
The purpose of the Business Roundtable is to promote policies that will result in a growing and thriving economy for everybody in the United States. We ar e made up of the CEOs of large US companies. So, if you think of a large US company, their CEO is probably a member.
The CEOs are the members – not their companies - and we help them develop and formulate policies that we think will meet the mission of the organization, and then we help them advocate those policies at the federal level - with the administration or on Capitol Hill.
The BRT is an issues organization, not a partisan one. We don't give campaign money. We don't have a PAC, but there are issues that our members care a lot about that, we think, if our policies are adopted, it'll help the economy grow and people find jobs and help out the general welfare.
Big Ideas/Thoughts
The BRT Statement of Corporate Purpose (8.8.19)
See full text below and here.
Just so people know, it states that a company, and particularly the CEO of the company, has a commitment not only to the shareholders of that company, but to the customers, the employees, the suppliers, and the communities in which that company works. Of course, there’s more detail in the statement.
In 2018, some of our members were receiving criticism from both the left and the right of the political spectrum based on a stereotype of businesses where it's all about maximizing short-term value, even if that hurt suppliers or communities or employees, and they felt “that's not the way we do business” and “we need to do something more than just push back when we see these people making these assertions.”
The statement sets a standard that is very much about long-term value, and I think some of the criticism we received may miss that point. You're not going to have, in the long-term, a thriving organization that doesn't treat its customers, employers, suppliers, and communities well. All those things are necessary.
Criticism of the Statement from the Wall Street Journal
JA: I wanted to ask about criticism that you've got from the Wall Street Journal and the pushback that you've received.
MP: They were saying, "No, this is about your shareholders. They are the people who are taking the risk. They're putting the investment in. This isn't about these other stakeholders who may have completely different objective functions."
And our response to the Wall Street Journal is “well, so you're against the long-term. You make commitments to these other stakeholders because you're trying to build this long-term value. If you're not interested in long-term value, then, yeah, go ahead and screw your suppliers, you get out of them what you can today, but pretty much from now on, they may be broken down and gone. That's a good way to get short-term value, it's not a good way to build up a company for the long term.”
Momentum Behind Change in Corporate Perspective
JA: I believe some of the momentum is driven because institutional investors who look at the failure to focus on the long term as a risk, and as long as there’s that risk, that creates a problem for the company.
MP: It does mean that, particularly for a signatory, people should be able to go to them and go, "How are you implementing [this]? How are you living up to the words that you signed on to?" And the fact is, they are.
Impact of Statement on BRT
Some CEOs who had not been members in the past have now come to us since the statement was put out and said, "We would like to join BRT." In some cases, I know the statement made a difference.
And some of the increased interest in BRT comes directly from actions our members took during the pandemic and also in the wake of George Floyd's murder. Our members have taken actions which people see demonstrate that they're living by the words that they'd signed on to.
Managing a Board of 20 T...
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31. Joe Hurd: Every company is a technology company
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Episode Description
Joe Hurd is a public and non-profit board director and early-stage investor. As an operating executive, Joe is the Operating Partner at SOSV, LLC, a $1B early-stage venture fund, where he leads strategy and business development efforts for the fund’s life sciences, deep tech hardware and mobile portfolio companies. In this episode, we talk about how technology is impacting every business and differences between US and UK boards
Quotes
My role as an operating partner of SOSV is to work on an ongoing basis with six or eight of our top portfolio CEOs. I tend to focus building on my 20 years of experience in digital media, on strategy, corporate development, business development, sales, and helping them penetrate the market. We want entrepreneurs that will make the world better.
“Deep tech” is a phrase that's come into vogue over the last three or four years, and the focus is on technology companies that combine three things. The first is, for our purposes, hardware manufacturing, something tangible, something that you make, something that requires engineering and engineering skills, and then there is software. And, most importantly, mission and purpose -these are companies that are solving problems where it may not be clear for another 3, 5, 7, 10 years, whether you're actually on the right path.
UK PUBLIC COMPANY BOARD vs US
When you're a director of a UK public company, you need to think about all of the stakeholders of that company, not just the investors, but the employees, the suppliers, society as a whole. I had to really take a step back and put my legal hat on for a minute and really understand what the fiduciary duties of a director are and work the interests of all the stakeholders into my decision process when I was in boardroom conversations.
The first and the biggest difference between the US and UK is when you look at how governance is approached in the United States, it tends to be, as I alluded to earlier, shareholder first. You have fiduciary duty as a director to the corporation, the shareholders, sometimes the creditors.
In the UK, it's much broader. It's more of a stakeholder-first approach where you're looking at, not just the investors in the company, the shareholders, but also the employees, the suppliers, the customers and society as a whole. The UK corporate governance code actually enshrines this in law and regulation where it is a very broad principles-based approach to governance as opposed to a very specific rules-based approach that you get in the United States.
It's hard to say whether the UK is better or not better, but it seems to me if the law has codified the need to take into account all stakeholders. If the law has mandated certain kinds of diversity, gender and/or racial, I would say that is better. I don't think it is just reflecting what your cultural background is. It would seem to me that that is better because it forces those companies to move in a direction that is likely to make them stronger, is likely to make them more responsive to their stakeholders - and that is a very good thing from a capital point of view at the end of the day
Employees Voice in UK
In the UK, they have said that directors and boards of directors have an affirmative obligation to reach out to the employees and bring the employees' voice into the boardroom, whether they nominate a director to be the workforce net designate or even bring employees on the board in some cases. The code says that either one of your directors needs to be explicitly designated as the director that interfaces with the workforce or, if you want to take another model, you can bring employees onto the board and bring the employee voice in in that way.
Compensation for UK companies
Part of the corporate governance code required that directors of UK companies are paid a salary. There is no equity component to the compensation and that is in keeping with the independent maximum, that you're not running the company for the benefit of the shareholders only. There's nothing stopping me as a director from purchasing shares, provided that you adhere to the relevant purchase windows. So, that's a pretty big difference between US and UK boards.
Big Ideas/Thoughts
When I say: “every company's a technology company,” what I mean is that over the last 20 years technology has become so pervasive as to how companies operate that even if you're involved in a non-tech sector, you still need to integrate, rely on and be mindful of companies that have more of a tech-focused approach than your company.
Whether it's brick or mortar retail, travel or leisure, or oil and gas, companies are now realizing that technology is integral to all parts of ...
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