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What Companies Can Learn From Family-Run Businesses
Living in the past can be emotionally destructive, but learning from the past is a horse of another color. This is essential to personal growth, and in the realm of commerce, a vital key to accomplishment in every family-run businesses.
While there is no “one size fits all” solution for success, one constant is the fact that every participant in a family business is connected to one another by an invisible thread that binds focus, vision and purpose. Conversely, the lack of similar motivation in a company where employees work only for their targets and income, is one of the top reasons many commercial enterprises fail.
The phrase, ‘family business’, often brings to mind a small or mid-sized company with a local focus and a familiar set of problems, such as battles over succession of power. While this description is certainly appropriate for many mom and pop operations, it fails to reflect the enormous role family businesses play in the global and local market places, like ours, Air-Scent International, and all of our sister companies — most notably, our pest and hygiene control division, Pestco Professional Services.
The All-Inclusive Sense Of Family Capitalism
The cornerstone of family business is trust. Many experts believe that it is the biggest factor in determining ultimate success. The primary goal of any family business is to propel its seamless continuation into the next generation. This can only be achieved by strategic, frequent planning and revision when necessary. Financial experts believe that succession plans often lead to success because they motivate everyone to work to their highest capacity so that they will be a part of the next management team.
While there is truth in that thought, in the words of Arnold Zlotnik (pictured below) founder and CEO of Air-Scent, “A successful family business focuses on creating a bond of commitment and purpose by promoting from within, investing in its people and avoiding layoffs as much as possible during down times, whenever possible. We’re fortunate in that all of our companies have been deemed essential through the Coronavirus pandemic, but we couldn’t function or survive without our employees, without their talent and their dedication.”
Arnold went on to explain, “Families can be defined by many things, but they often are defined by those who are there for you, through thick and thin, when times are tough. We’ve been through our fair share of tough times. For me, that’s what makes a family. That’s the epitome of family.”
Family firms by their very nature incorporate the idea that company money is the family’s money, and as a result, expenses are usually better controlled than in larger enterprises. In the words of one executive from a family firm: “People think we are rich and courageous, but in fact we are cowardly. We leave most of the cash in the company to avoid giving away too much power to our banks.”
Vikram Bhalia is the global leader of The Boston Consulting Group, and his thorough research on family businesses in emerging markets is the first of its kind. Previous studies on this topic have centered on more advanced nations.
His focus is discovering the unique aspects, perspectives, and mind-sets of family businesses, which are currently the fastest-growing, most ambitious type of commercial enterprises today, since they comprise more than 50% of all companies in the world.
The leaders of family companies strive to create a tightly knit and highly-supportive societal network. Academics Karlene Roberts and Karl Weick refer to them as “high-reliability organizations” in which efficient team dynamics work in tandem with a collective mind-set that helps them achieve specific goals.
In the words of one CEO of a diversified group valued at $10 billion: “We don’t have the smartest guys out there, but they know their job like nobody else, and when a problem hits, they can act immediately as a team that has been there before.”
Tim George, Bryan Zlotnik and our Chief Perfumer Roger Howell.
Air-Scent International As A Family Business
In addition to sharing profits and enduring success, a family business also experiences a unique sorrow and loss as an entire unit, whether that be through the death of a fellow employee or family member, or some other unforeseen circumstance.
All commercial enterprises require a well directed focus, which by its very nature is integral to every family business. By concentrating on what is most important, the interests of the company supersede those of any one individual. It’s similar to that old geometric axiom about the whole being equal to all of its parts (or something like that).
A prime example of company loyalty literally ‘under fire’ concerns a terrible disaster that befell our company on August 2, 1995, at our previous facility in Braddock, Pennsylvania — a devastating fire caused by a bolt generated by a dry lightening storm burned everything to the ground.
The searing, unrelenting pain of loss was magnified in the hearts of every employee, and many of those who were there at the time of the blaze have remained with us to this day — they have become “heart family members” because of their enduring dedication.
An interview with Arnold Zlotnik about overcoming the adversity of the 1995 fire.
The desolation and helplessness of watching a family business transform into a heap of ashes and smoke was miraculously eclipsed by the collective motivation of everyone to fix everything, which they did within 30 days when Air-Scent resumed 80% of production. The love, loyalty and support of those special souls who stood by our company in its time of dire need relegate them to a certain special status and honorable mention.
They include: LeeAnn Patsen (Sales Manager), Lisa Vasko (Sales Manager), Ray Czapko (Business Development), Mary Beth Howard (Office Continuity), Rick Madden (Mass Spectroscopist), Matt Zigarovich (Chief Compounder), Bobbi Vaccaro (Purchasing), Tom Jugan (Chief Compounder), Dolly Cook (who was our financial controller and has since retired) and last but not least, our company matriarch and patriarch, Mimi Zlotnik (pictured below) and Milton Zlotnik, mother and father to Arnold Zlotnik.
Mimi Zlotnik, mother of Arnold Zlotnik, and one of the founders of Pestco Professional Services.
What Are The Values Of Family Businesses?
Obviously, the goal of every business is to survive. The emphasis on resilience rather than performance however, is much stronger among family-run operations. This is because generally speaking, family businesses tend not to spend excess returns that might be available during good times so that they may increase their odds of survival during periods of unexpected decline.
In a global economy that unexpectedly and frequently shifts from crisis to crisis, accepting a lower return may be a trade-off that corporate managers should consider embracing. Also, statistics indicate that on average, family-run operations retain talent 9% better than their competitors do.
One of our many incredible employees.
Relevant Statistics Concerning Family Owned Businesses
According to recent statistics, family-controlled companies on average generate more sales outside their home base (abroad) than other businesses do. Figures for the former are 49% and for the latter 46%. Foreign growth via family run businesses usually accrues naturally or via small local purchases that don’t require a heavy cash output.
The key to international expansion is to understand that it provides a natural diversification of risks. In any language under the sun, fewer acquisitions translate into less debt.
Unlike larger corporations and conglomerates with anxious share-holders, family-controlled operations understand the power of patience when evaluating new investments. In the words of one executive from a family-run global consumer products company: “ We accepted that we’d lose money in the U.S. for 20 years, but without this persistence we would not be the global leader we are today.”
It is estimated that 85% of family businesses are run by ethical standards and family values. Additionally, 60% of enormous world businesses are operated based on a certain code or ethical practices. Current research also indicates that when compared to sole entrepreneurship, family business tends to survive for a longer period of time.
Some 30% of family business proceeds to the second generation while 12% make it to the third. While these are certainly not high numbers, they are a lot better that the duration of companies run by entrepreneurs and/or partners, which tend to cease either upon the death of their creators or termination of the enterprise.
Our Air-Scent International team at work.
Unified Vision, Innovation, and Growth
Family business decisions are guided by values and ethical practices rather than profit, which appeals to many customers. Although it may seem so and even be so for some, not everything is about money. Family members usually do not need to be convinced about a particular course of action, as everyone has the same basic vision and goals.
However, they always have the chance to contribute their views until a general goal is decided upon. Unity usually triumphs because of the family business structure. Frequent meetings, for example, help to educate members, build conflict resolution and effective communication skills.
Many family businesses such as Cargill, Koch Industries, Tata, and LG, are far more diversified than the conventional corporation. Some have expanded naturally into distinctly new and diverse lines of commerce while others have built on smaller acquisitions. Consequently, many family-owned companies have learned that diversification protects family wealth in times of deep recession.
In the continued word of Arnold, “While all of the statistics, numbers and bottom line matter, at the heart of any family business is the family you build; the family you protect and the family you nurture within your company. When one sector of your business is impacted, the others hopefully compensate by picking up the slack. Air-Scent International and its sister companies are all family owned and Pittsburgh-based business enterprises that have weathered many unexpected storms, recessions and down turns, and will succeed due to the many dedicated employees that have become a part of our family over the years and work so hard to make each company the successes they are in each of their respective industries. I truly thank everyone one of them.”
Good luck to every business and individual in this time of terrible economic crisis.
Final thought on family business: You don’t inherit a family business; you borrow it from your grandchildren. ~ Hermes spokesman
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