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Happiness and the family business

The family business model consistently is shown to wipe the floor with rival methods of ownership. The latest has come booming out with the compelling headline in the UK Times newspaper that "Happiest employees are those who can say they are part of the family."

There a huge appetite for studies that compare the performance of family-owned businesses to those that plump for alternative stake holding models. There’s a good reason why: the family business model consistently is shown to wipe the floor with rival methods of ownership. The latest has come booming out with the compelling headline in the UK Times newspaper that "Happiest employees are those who can say they are part of the family."

The latest study by Professor Stanley Siebert, an expert in labour economics from the University of Birmingham, which was commissioned by the Unquoted Companies Group, suggest that 28% of workers in family companies strongly agree with the assertion “I feel loyal to my organisation”, compared with 22% in other businesses. And as everyone thinks they know a loyal, happy worker is a productive worker.

Professor Siebert knows why this is: “Family businesses tend to treat employees much more transparently and consistently than other employers. In particular, family businesses encourage (but do not guarantee) long-term employment. The closer relationship between bosses and staff makes workers feel much more included. Although job tenure is shorter, they feel far more involved in the success of the firm, far less alienated from decision making, and far more valued by their company.”

Why is it that family business managers appear to believe in the value of providing long term employment? Because they are not always in pursuit of the fastest buck and don’t have to answer to the baleful clamours of hard-to-please and faithless institutional shareholders every quarter. There is time for patience and careful strategic thinking.

It’s all about trust. The bond between company and employee is a complex and subtle one. Over the last few years the HR buzz word has been “engagement” and the turbulent events since 2007 and shedding of labour have done nothing to lessen this. An engaged employee is one who gives that extra bit of discretionary effort. They try harder because they feel committed to the cause. They know the goals of their organisation inside out and find themselves in sympathy and alignment with those goals. More often than not they feel their company deals with them and the outside world with a good degree of integrity.

So when things cut up rough in the digger market in 2007/08 the family-owned JCB was able to persuade its staff to vote for a cut in their working week in a bid to save 500 jobs under threat. Shop-floor workers at the construction equipment manufacturer gave the green light to a 34-hour week by a two-thirds majority.

I’d speculate that this trust comes from the bond between family members which passes by osmosis down through the organisation. There is also a strong dose of paternalism involved here. It’s a cultural thing rather than behaviour expressed just by family individuals because this applies even in the largest family-controlled companies where direct management by the owners no longer happens.

It’s not just a matter of long term employment stability either. Because as professor Siebert points out this “job-for-life” approach also applies in large parts of the public sector. And when was the last time anyone said how fantastically well run their local refuse collection or social services department was? Or how happy their bin men appeared?

The huge irony, incidentally, is that although public sectors workers still enjoy three times more job security than those in the family sector, they actually feel far more insecure. With the extent of public sector cuts coming down the line from Athens to Aldershot, it’s not hard to see why.

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