Do Family Businesses in Canada Outlast Publicly-held Enterprises?

If you haven’t worked in one, it’s easy to imagine that family-owned and run businesses might be characterized by a rise in conflict and power struggles. These are some of the unavoidable attributes that offer family business owners a unique set of challenges that are often difficult to solve without outside assistance. One Canadian organization that offers support to family business is called Canadian Association of Family Enterprise (“CAFE”). CAFE’s Executive Director, Paul MacDonald explained to me how members of CAFE help one another avoid and mitigate such challenges, while also pointing toward evidence that despite these challenges family businesses in Canada enjoy an advantage over publicly held firms.

Evidence Suggests Family Businesses in Canada (and Around the Globe) Excel in the Long Run

According to an article posted in Harvard Business Review (HBR) titled, “What You Can Learn from Family Business,” the ownership structure of family businesses gives them a long-term orientation unmatched by rival companies.  Whether this is because family business owners give more importance to the legacy of their enterprise, or that their pride and commitment help them to persevere through tough times is not immediately clear. However, research performed by the Center for Management and Economic Research at École Polytechnique between 1997 and 2009 shows that family businesses are more resistant to downturns in the business cycle.

Source: Harvard Business Review, 2012

Family Businesses in Canada Forego Excessive Returns to Ensure Survival

The team from the Centre for Management and Economic Research looked at family-owned businesses from the United States, Canada, France, Spain, Portugal, Italy, and Mexico. The study concluded that the resilience demonstrated by family businesses can be attributed to the fact that family businesses are typically more frugal in good times and in bad -as the CEO of one family controlled business told authors of the report, “The easiest money to earn is the money we haven’t spent.” In addition to the family business’ propensity towards frugality one would imagine that family businesses might enjoy a more robust company culture, which could also lend to its resilient nature. In fact, one HBR reader echoed this position in an ensuing discussion of the article, stating, “our family business’ biggest advantage is that we stick together.”

Vast Majority of Family Businesses Say Support Group Has a Positive Impact on the Performance of their Businesses and their Lives

Along with the advantages of family businesses, those who participate in support groups offered through CAFE enjoy the positive impact their involvement has on their business as well as their personal lives. Paul McDonald explains the importance of the support network this way:

“Family business owners grapple with family dynamics such as retirement and succession planning.  Having the support and guidance of people that have walked a mile in their shoes is very effective in helping them to overcome such challenges.”
-Paul MacDonald, Executive Director of CAFE 

CAFE runs more than 60 peer groups from coast to coast and boasts of more than 800 members nationwide. Through the 12 chapters of CAFE they also offer a variety of workshops, seminars, social networking events, and an annual national conference. Visit http://www.cafecanada.ca/ to learn more.