Family ties

When most people think of family-owned businesses, they think of small mom-and-pop stores. But family-owned businesses actually have a huge impact on the economy, create many jobs and are often large corporations.

J. Richard Emens and Beatrice Wolper, attorneys from Chester, Willcox & Saxbe LLP, saw a need for an organization to provide guidance and assistance to family businesses in Central Ohio. In 1998, Emens, Wolper, Carol McGuire and T. Michael McGuire formed the Family Business Center of Central Ohio to advise family-owned businesses on the issues and challenges that are unique to them.

According to the Family Firm Institute, 62 percent of the United States work force is employed by family-owned businesses, and family firms comprise 80 percent to 90 percent of all business enterprises in North America.

“Family-owned businesses are the major growth engine of the entire U.S. economy,” says Emens, executive director of the Family Business Center of Central Ohio and coauthor of “Family Business Basics: The Guide to Family Business Financial Success.” “This has been shown to be true in a number of reports.”

Despite the considerable impact that family-owned businesses have on the economy, the Family Firm Institute estimates that only 12 percent will survive into the third generation and just 3 percent will survive into the fourth generation and beyond.

That is where the Family Business Center comes in. The organization offers a way for family-owned businesses to network with one another and share stories and techniques. It also brings in speakers, hosts six roundtable discussions each year and offers an Entrepreneurship and Family Business course taught by Emens and Wolper at Ohio Dominican University.

Smart Business spoke with Emens about the challenges family-owned businesses face and why these businesses are so important to the economy.

How did the idea for a family business center come about?
We met several people who were involved with family business centers on other university campuses and we got excited about what they were doing in the way of education of family businesses. This was probably 10 years ago. It seemed like such a great concept.

There are over 100 family business centers on college and university campuses around the country. Ten years ago, there were only about half that many. The idea has caught on, and family businesses have responded.

How are family-owned businesses different from other businesses?
The key issues in family-owned businesses that are unique involve succession of ownership, succession of leadership, compensation and communication. Someone looking at this who is not familiar with family businesses would say, ‘These are the same issues that occur in every business.’

But when you have the family relationships and you focus on the differing characteristics, then it becomes apparent why the family dynamics are so important to understand in family businesses.

What are those family dynamics?
If it’s a non-family business, the characteristics are profit-motivated. Accomplishments and achievement are the most important. They focus on commerce. They are forward-looking and take advantage of opportunity.

In a family business, you have love as a motivation. You have taking care of the family (as a motivation). There’s a focus on feelings and there’s often a resistance to change.

One of the very important questions that we try to highlight for family businesses is, ‘Are you in this to make a profit or to take care of the family?’ It’s interesting how many family businesses have not sorted that out. Unless the business is primarily to make a profit, then over time, it probably won’t be successful because of all the competition from the nonfamily businesses who are just out there to make a profit.

If you can focus on these issues and recognize them, then family businesses can be very successful because they have that added plus of loyalty and true caring. The key to success in family businesses is emphasizing that loyalty and caring, all the while being profit-motivated.

How do family-owned businesses influence the economy?
Family businesses are the backbone of the economy. The latest numbers that I have seen show that 90 percent of all of the companies in the United States are family controlled or operated, including a third of the Fortune 500 companies. Family-owned businesses generate approximately 40 percent of the gross national product of the United States.

I saw an article just the other day that (in) the five years leading up to 2004, Fortune 500 companies lost over 5 million employees, but family businesses and the other non-Fortune 500 companies created 34 million jobs.

Most of the new jobs that are being created are created by family-owned businesses.

How has the Family Business Center made a difference to family-owned businesses?
All of the family businesses that we work with are very smart people. They wouldn’t keep coming back year after year if they weren’t receiving a benefit.

We also have seen a number of family businesses face serious issues, and when these (issues) have been discussed at the Family Business Center with other family businesses, we have seen the successful resolution of these problems.

HOW TO REACH: Family Business Center of Central Ohio,