Family businesses are a critical part of the global economy. Their impact has been an integral part of the global economy, providing a wide range of goods and services, creating jobs, and stimulating economic growth. They account for more than 80 percent of all businesses and generate over 50 percent of the private sector GDP. However, tracking the impact of family businesses on the economy is a challenging task.
There are several key issues that make tracking family business data a challenge:
- The term ‘family business’ does not have a commonly accepted definition
- Family businesses often operate under a veil of privacy
- Information on family businesses operating globally, is hard to obtain
Family Business Can Be Defined Various Ways
First, researchers have not reached a consensus on a single, commonly accepted definition which can be applied in family business. This creates ambiguity about what data can be assigned to family businesses and what cannot.
Most family businesses fall into three categories which are family-owned, family-owned and managed, and family-owned and led.
- Family-Owned Business: As the name suggests, a family-owned business is one in which family members own, operate, and control the business.
- Family-Owned and Managed Business: In this kind of business the controlling size of ownership lies in the hands of a single family, or by a single member of a family. The majority owner allows the family to develop and decide the objectives and policies.
- Family Owned and Led Business: In such a business, along with the majority, at least one member of the family is a member of the board of directors. This ensures family influence over the business’s direction, strategies and plans.
Family Business Privacy
Secondly, family businesses often operate under a veil of privacy. This makes it difficult for researchers and policymakers to gain access to the necessary financial and operational data that is needed to effectively measure the impact of the business on the economy.
Every family has different reasons for wanting to keep their financial information and other business matters private, but some of the most common reasons include protecting their reputation, minimizing competition, or avoiding public scrutiny. It’s also important to note that many families may have legitimate legal or tax considerations that require them to remain discreet.
Family Businesses Operating Internationally
Thirdly, family businesses are very common throughout the world. This diversity of culture, language, regulations and sophistication can make it difficult for researchers to accurately measure the impact family businesses have on the global economy.
Collecting data on family businesses outside of the United States can be a difficult task due to cultural and legal differences in different countries. In some countries, it is illegal for companies to disclose ownership information or for third parties to obtain such information without permission from the company itself.
Additionally, many family-owned businesses do not want to publicize their ownership structure because they believe it makes them vulnerable to outside interference or takeover attempts. This makes it harder for researchers to identify which companies are actually owned by families and thus limits the amount of data that can be collected.
Another challenge that researchers face when collecting data on global family businesses is access to certain areas or countries. Some governments restrict access for foreign nationals or impose restrictions or fees on those who wish to enter their country in order to conduct research. Additionally, language barriers can also impede research efforts as many documents and reports related to local businesses may only be available in the language of the country they are located in.
Family Business’s Clear Impact
Even without precise data to support their impact, it is still clear that family businesses play a major role in the economy. This is one of the reasons we love working with family businesses. Seeing a family’s organization thrive and grow, when given the right leadership, is rewarding. Centennial has decades of experience working with family businesses and it’s a sweet spot for us.
We understand that family businesses have a level of privacy, and we respect that. Our team has the experience to know the right balance of sensitivity and questioning that is necessary to understand the leadership qualities and experience that an incoming leader will need to be successful in their business. It’s an exciting opportunity to be a partner for family businesses.
Measuring the impact of family businesses on the economy is a complex and challenging task. It’s one that researchers and policymakers will continue to come up against as they try to accurately evaluate the importance of family businesses on the global economy. At Centennial, we’ll continue to support the hiring efforts of family businesses, knowing the right leaders lead to successful businesses.