Business man drawing  graphIn late 2012, researchers Nicolas Kachaner, George Stalk and Alain Bloch at the Harvard Business School published a study to compare family-owned businesses of certain sizes and industries with their non-family-owned counterparts. The idea was to identify how family-owned businesses compared to non-family-owned businesses during an economic slump and why. The results are enlightening. The study involved a list of 149 publicly traded, family-controlled businesses with revenues of more than $1 billion and covered entities in the United States, Canada, France, Spain, Portugal, Italy, and Mexico. According to researchers, “Our results show that during good economic times, family-run companies don’t earn as much money as companies with a more dispersed ownership structure. But when the economy slumps, family firms far outshine their peers. And when we looked across business cycles from 1997 to 2009, we found that the average long-term financial performance was higher for family businesses than for nonfamily businesses in every country we examined.” The rigorous analysis behind the study validates what some family business consultants have been saying for years – when your most prioritized business objectives include passing a healthy business on to the next generation, your vision will necessarily stretch further into the future. But the more interesting question is how a family business translates that vision into practice.

Traits of Family Business Operations

The researchers identified seven primary ways in which family business owners are differentiated from their peers:
  1. Frugality
  2. Better Scrutiny of Capital Expenditures
  3. An Aversion to Debt
  4. Fewer (and Smaller) Acquisitions
  5. Diversification
  6. International Presence
  7. Retention of Talent
Some of these might be consistent with stereotypes and widely-held notions of family businesses. Others might not. For example, it is probably not a widely-held belief that family-owned businesses embrace industry diversification better than non-family owned businesses. But this belief is consistent with a philosophy of protecting against downturn more than capitalizing on upturn, which is part and parcel of having a longer vision.

Company Culture and Talent Retention

Others traits on that list are more difficult to appreciate, such as the ability of a family business to retain talent. A widely discussed challenge of many family businesses is the tension between finding the right person for the job and keeping family members involved in the business. To fill roles, is it better to find a more qualified outsider or is it better to use a less qualified family member? By implication from the HBS study, the ability to retain outside talent is attributable to the culture family businesses are able to maintain. Many family business owners find that, with the sense of family follows the possibility of more security and connection among workers – even those not in the bloodline. The ability to capitalize on this culture and weave it into the business is a distinct advantage of family-owned businesses. Obviously, these are all generalizations across many businesses in many different stages and industries. Not every family business will succeed in these areas to outshine its competitors. But it is interesting to take note of the aggregate comparison and to focus on the underlying advantages that family businesses have that can allow them to execute on these seven points.   Keith Baldwin is a business transactions and securities lawyer with a thirty-eight year history of serving clients’ legal needs. Keith focuses his practice on business relationships, including mergers and acquisitions, agreements among owner-entrepreneurs, and best practices for corporate governance. Keith can be reached via email at or directly at 425.646.6133.   Drew Steen is a business transactions attorney at Davis Wright Tremaine, LLP.  He represents both buy-side and sell-side clients in mergers and acquisitions, venture capital investments, joint ventures, equity co-investments and restructurings.  He also serves as regular corporate counsel for several closely-held and family-owned companies.  Drew can be reached via email at or directly at 206.757.8081