Family Businesses: Performance Enhancing Characteristics

15th April 2022

Family businesses are often misaligned as small, local organisations, only contributing peanuts to the UK economy. The reality couldn’t be further from the truth and the Institute For Family Business states that 1 in 5 UK businesses are family owned and as a whole, family businesses employ more than 13 million people, generate a quarter of the UK’s GDP and pay more than £180 billion in tax.[INSERT LINK] In Scotland, family firms account for 86.2% of our companies. The most successful family businesses in the UK are the backbone of our economy, the litmus paper of financial prosperity and are often pioneering and transformational.

Loyalty and pride generates economic benefits
Operating under a family name generates loyalty, not only from the working family members, but also from non-family employees. Family values are passed from generation to generation and from colleague to colleague, so the family approach often means employees are just an extension of the family. The pride in the business generated by this unique working situation secures the corporate legacy as both family members and employees seek to protect and honour the family name and business. Due to this close bond, family businesses might be less likely to make people redundant, but rather invest in their employees, even in moments of economic downturn – assuming they can afford it.

Customers too might also be more likely to generate deeper consumer relationships with family businesses. This is particularly true of our client, care home provider, Meallmore Ltd. Meallmore was first established in 1987 by brothers Gerry and Aidan Hennessey. Since then, the care home company has retained its original family business values and prides itself on providing exceptional standards of quality care for family members across the country. Employees also join a ‘Good to Great Upskills Academy’, a programme unique to Meallmore that encourages all employees to learn new skills and advance their career through being promoted within the business.

Longevity secures solid growth
Multi-generational family businesses might be able to adopt longer-term outlooks more easily. Their strategic decisions on long-term investment, growth and change operate outside a market that often fixates on the short term. Our client, family business and Scotland based Fraser Technologies, has focused on securing long-term working relationships with leading suppliers across the globe, supporting the ambition to be world leaders in their field.

Long running family businesses might also know how to weather storms. In the case of Covid-19, family businesses didn’t just adapt to get through lockdown, some set firm foundations for the future. The Institute for Family Businesses found in study that 75% of family businesses still operating in 2020 were seeing a combined income of £500 million . 

A desire to preserve the family name results in better financial strategy?
The combined factors of loyalty and long term business strategy could support higher profitability as taking the long term approach might might make family businesses more fearful of taking on debt. Not only is debt detrimental to a business, but it’s also detrimental to the family name and legacy that both family members and employees are often eager to protect. This might further protect a business from over stretching itself, or making short term focused decisions.

High levels of corporate social responsibility
Families look out for each other, but they also play active roles in their local communities. Some family business might do the same and could be active in supporting charitable projects through donations, supporting employee fundraising, or sponsoring community activities. As businesses who might value nurturing good talent, they could be a good source of internships or work experience that has long term prospects.

Family businesses make a bigger effort in overcoming performance limiting qualities (PLQs)
Whether family owned or not, there are many risks associated with a long running organisation, such as stagnant governance or a lack of innovation. And often these are the issues people might associate with family businesses. However, a recent study found that multi-generational family businesses were 42% more likely to adopt business transformation strategies to combat these.

Our client, James Dondaldson and Sons Ltd is one family business that strives to put innovation at the heart of its operations. This sixth generation company led by brothers Andrew Donaldson (Chief Executive) and Michael Donaldson (Chairman) now holds six businesses within the Donaldson Group. Currently the business employs over 1000 people and has a turnover of £225 million.

Andrew Donaldson joined the firm in 2010 after a Graduate Traineeship at KPMG Edinburgh, qualifying with the Chartered Accountants of Scotland and was previously Finance Director. Meanwhile Michael Donaldson joined in 2003, manufacturing roof trusses for Donaldson Timber Engineering in Cramlington. Working within three of the companies in roles ranging from internal sales to operations director, Michael is now the director of the Timber Trade Federation. Andrew and Michael’s varied experiences inside and outside of the business, alongside their shared commitment to the family business’ values and vision means they have the knowledge and expertise that few from outside the business could possess.

Pagoda has been supporting family businesses across the UK for over twenty years. We know what motivates them, what drives their vision and what makes them unique – they are always a good source of a story. Whether you’re a first generation family business or a sixth, our insight, understanding and our team of dedicated communicators means we’ll create the public relations and public affairs mix that supports your business ambition and drive.