Family businesses are better survivors
THE DEMOULAS clan is at it again, with name-calling and bad blood spilling into the public realm as the owners of the regional Market Basket supermarket chain gear up for another legal fight. The enterprise had its origin in Lowell in 1916 as a humble store selling fresh lamb. The two sons who bought it from their father in 1954 made it big and profitable. But the death of one in 1971 triggered a war for control and money that persists to this day. One rip-roaring lawsuit in 1994 featured fistfights and the disbarment of two lawyers; now the Demoulases are back in court, expletives and all.
I’m not picking sides. Family feuds are like divorces: Each camp can make its own compelling case for the utter venality of the other. The best course for bystanders is just to get out of the way. But it does make one wonder whether the worlds of commerce and family are just too toxic a mix. Perhaps it would be best to keep the two apart.
That won’t happen — and it shouldn’t.
The clashes of the Demoulases are hardly unique. From Cain and Abel and down through the years, families have a habit of shamelessly and publicly ripping themselves apart. Sumner Redstone, head of National Amusements, has had a series of public fights with daughter Shari. Donald and Roger Saunders — celebrity local hoteliers — clashed in the 1990s over accusations of self-dealing. Roger and Marc Berkowitz, inheritors of Legal Seafood, battled each other in court as well. Adidas and Puma are two shoe companies born out of a nasty split between two brothers. The life of L.S. Shoen, founder of U-Haul and father of 12, crumbled amid intrafamily tales of murder, beatings, and lies.
It’s a sad scene. The Universal Declaration of Human Rights states, “The family is the natural and fundamental group unit of society,” but based on these stories, one might credibly fear for the future of civilization. Yet for all of the well-publicized incidents of strife among families, there are many more that are doing just fine.
For those of us accustomed to following the fortunes of public companies, it may come as a surprise to learn that family-owned or controlled companies are by far the biggest players in the world’s economy — accounting for somewhere between 70 to 90 percent of global GDP, according to the Family Firm Institute, an advocacy group. Perhaps even more striking, those businesses tend to be better run than non-family companies. A November 2012 study in Harvard Business Review found that while family businesses fared slightly less well in good economic times, they did better in bad times and in the long run had superior returns.
That makes sense. Family companies tend to be more conservative. As economies soar, they may not be as quick to rush ahead as their non-family counterparts. But that same frugality serves them well during recessions. In addition, because they aren’t subject to quarterly reporting measures, they can think more about investing for the future.
Bechtel, S.C. Johnson, Mars, and Wegmans are just a few of the larger, family-held companies where contentious and bitter lawsuits are not the norm. In fact, there’s an industry of advisers to family companies whose job it is to help them avoid precisely the sorts of problems that plague the Demoulases. A lot of that has to do with smart planning — being clear about who gets what and making sure that, the pressures of nepotism notwithstanding, the right people fill the right roles (even in family-owned companies, only one person can be the CEO).
Don’t expect family companies to go away, either. It is through families that we create and nurture the next generation. That means, most obviously, providing care, sustenance, and education for children. But also, for those in a position to do so, it means passing on a means of livelihood, a legacy arguably of far more value to one’s heirs than just a pot of money. It’s a job and an opportunity to have an impact on the world. The family business fulfills a deep human need, one undeterred even by the public feuds of others — since, of course, that would never happen to our family. . . .