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Why family businesses are at an advantage
How do you create continuity at a time of permanent change? Family companies manage it by planning over decades and averting crises. Professor Peter May, a leading expert on family businesses in Germany, discusses the strengths and potential weaknesses of family-run companies in an interview.
“I am … convinced that family businesses are … clearly the best form of economic activity in a capitalist society,” explains Professor May, whose consultancy firm advises many family-run companies. “They combine three elements that distinguish good capitalism. Firstly, they aim for economic success. In other words, they have a need to be better than their competitors and to continuously improve. Secondly, they have a social responsibility to employees and communities. And, thirdly, they have a strong connection to their local region, which ensures that you will find flourishing economic landscapes, even in small places like Allendorf or Blieskastel. This results in a stable social model that is supported, in essence, by family businesses.”
In an interview for Hager Group Annual Report, May points out that in Germany, more than 90% of all companies are family owned. These businesses – of which Hager Group is one – generate over 50% of all sales and employ more than half of the country’s employees.
The key difference between family-owned and non-family-owned businesses lies in the fundamental approach to running the company, Prof. May says. “Families think differently to investors. Someone who wants to be successful in 30 years’ time will set different objectives to someone who will leave after short-term success.
This became evident, for example, in the financial crisis: instead of dismissing employees, many family-run businesses were able to sustain jobs by sacrificing short-term personal gain. And because of this, our family businesses rightly benefit from greater trust from the public.”