Keeping It in the Family Can Be Good

FF Fashion

Another interesting read which I can't help but post it here for those who may have missed it! Happy reading!

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Thu, Nov 06, 2008
The Business Times

By RICHARD BOLTE JR

ONE of the common fallacies about family-owned companies is that they can never grow to be large companies.

When my father, the late Richard J Bolte, started his small export business 40 years ago, I doubt he envisioned his enterprise growing into BDP International - a logistics company turning over more than US$1.6 billion annually.

Today, members of my family still take an active role in the management of the business. We remain 100 per cent family-owned. And we choose to stay that way.

While many see a public listing, a merger or an acquisition as the ultimate goal - and a sign of becoming one of the 'big boys' of business - family ownership structures provide opportunities that more splintered ownership models do not.

Throughout the post-war period of the 1950s and '60s, family-owned businesses were the building blocks of America's amazing economic growth. Now, family-owned and run businesses are more associated with the Asian approach to management than the US. Today, in Singapore, there are thousands of family-owned and managed companies - some large, some small. The question for these companies is whether they can achieve their full potential with their current structure or whether they should consider a different approach.

It is a question we have asked ourselves many times at BDP International. So what is it that keeps BDP from going public or looking for a sale? What are the characteristics of a family-run business that give it an advantage over other ownership models?

Be fast

The first advantage - and arguably the most important - is the speed of decision making. This does not mean making rash or hasty decisions. It means that once a decision is made, the whole business machine swings behind that objective instantly. Unlike a listed company, we can take advantage of opportunities without the need for circulars and AGMs which flag your intentions to your competitors. When our competitors figure out what we are doing, we are already up and moving.

It's about relationships

With a family-owned business, we place greater emphasis on the relationships we have with customers. They know us - individually as people. The interface our customers and vendors have with us is through our people. We know customers choose to do business with us because the experience they have with our people is personal. It is a relationship that instils confidence and conveys gratitude.

Of course, this is in contrast to the one-size-fits-all approach of many mega-companies - especially the mega-forwarders. Some are so large that their customers have to adapt their systems to access their services. A family-owned business approaches it from the other direction: how can we change to accommodate the needs of our customers.

Ethics and values matter

Another advantage of family-owned businesses is the focus given to maintaining your values and acting ethically. There are many who see ethics as a weakness, but ask yourself: if you have the choice of doing business with an ethical company or one with a more dubious reputation, which would you choose? Ethics matters. And to a family-owned company, it means everything because it is the family's name that stands behind the company; it is your family's good name and honour on the line.

Don't build a company - build a legacy

Family-owned companies have the luxury of taking the long-term view. The objective of our effort is not to squeeze a piece of short-term gain at the expense of the future. Rather, it is to build a legacy which can be enjoyed by this generation and handed on to the next. The pressure to achieve short-term results can cloud the judgment of many sensible managers and forces them to make decisions which clearly put the long-term viability of their companies at risk.

Extend the family

The sense of family must extend beyond blood ties. A family-owned business should 'feel' different to work for; in my opinion, it should be better. Family values should give everyone a sense of belonging, of camaraderie. And like all good families, we must acknowledge the contribution made by individuals and reward it with gratitude. While it may sound cliched to talk of all the employees being 'one big family', the sense of belonging and of shared achievement is very real within a well-run family business.

Communication and merit

A key ingredient to making a family- owned business work is to communicate with your employees and to reward on merit. Failure to do either results in a sense of division and favouritism within your business.

The importance of face-to-face communication is the ability it gives you to convey your passion and your humanity to your staff. If the leadership can demonstrate their passion and commitment to the shared goals, then the employees will respond much more positively than if they were forced to sit for a couple of hours and watch a video or a slideshow.

And promotion on merit is a must if you want to survive from generation to generation. By all means, nurture the talent within the family but always reward the deserving by giving them the jobs they are best suited for - regardless of whether they are family members or not.

In fact, failure to attract and retain good people to your business is one of the reasons many family-run businesses stay small - they just do not have the experience within their own circle and they are too scared to go and find it in the open market.

In good times and bad

These are a few of the reasons BDP has remained a privately-owned business for more than four decades. It's not as if we have never been approached by bankers wanting to take us public or multinationals wanting to absorb the company into their operations. I'm not saying there will never come a time when a sale, merger or a public listing is the best course for our company. But right now there are many benefits to keeping it in the family.

And in the current climate of economic tumult, many of the benefits of being family-owned are brought to the forefront. Ask yourself: what type of company do you want to give your business to - one that is desperate to achieve short-term gains at the expense of quality and service? Or one that is in it for the long haul - that believes relationships are the building blocks of a generational legacy?

A business is a lot like a family - everyone must pull together in bad times so that when the good times return, you are stronger for the experience.

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The writer is president and CEO of BDP International, which has a network spanning 121 countries serving more than 4,000 customers.