Skip to main content
About HEC About HEC
Summer School Summer School
Faculty & Research Faculty & Research
Master’s programs Master’s programs
Bachelor Programs Bachelor Programs
MBA Programs MBA Programs
PhD Program PhD Program
Executive Education Executive Education
HEC Online HEC Online
About HEC
Overview Overview
Who
We Are
Who
We Are
Egalité des chances Egalité des chances
HEC Talents HEC Talents
International International
Sustainability Sustainability
Diversity
& Inclusion
Diversity
& Inclusion
The HEC
Foundation
The HEC
Foundation
Campus life Campus life
Activity Reports Activity Reports
Summer School
Youth Programs Youth Programs
Summer programs Summer programs
Online Programs Online Programs
Faculty & Research
Overview Overview
Faculty Directory Faculty Directory
Departments Departments
Centers Centers
Chairs Chairs
Grants Grants
Knowledge@HEC Knowledge@HEC
Master’s programs
Master in
Management
Master in
Management
Master's
Programs
Master's
Programs
Double Degree
Programs
Double Degree
Programs
Bachelor
Programs
Bachelor
Programs
Summer
Programs
Summer
Programs
Exchange
students
Exchange
students
Student
Life
Student
Life
Our
Difference
Our
Difference
Bachelor Programs
Overview Overview
Course content Course content
Admissions Admissions
Fees and Financing Fees and Financing
MBA Programs
MBA MBA
Executive MBA Executive MBA
TRIUM EMBA TRIUM EMBA
PhD Program
Overview Overview
HEC Difference HEC Difference
Program details Program details
Research areas Research areas
HEC Community HEC Community
Placement Placement
Job Market Job Market
Admissions Admissions
Financing Financing
FAQ FAQ
Executive Education
Home Home
About us About us
Management topics Management topics
Open Programs Open Programs
Custom Programs Custom Programs
Events/News Events/News
Contacts Contacts
HEC Online
Overview Overview
Executive programs Executive programs
MOOCs MOOCs
Summer Programs Summer Programs
Youth programs Youth programs
Article

To Prosper in a Crisis, Adopt the Strategy of Large Family Businesses!

Strategy
Published on:

Family businesses are full of surprises. They have very strong roots while being highly international, they avoid layoffs while staying focused on profitability, they innovate while playing it safe, they distribute few dividends and acquire little debt, and, finally, they resist crises better than nonfamily firms. Their most remarkable advantage: a strong capacity for resilience!

Family Business Portrait

Do family businesses really outperform others? While debatable, it all depends on the period of study. Alain Bloch, Nicolas Kachaner, and George Stalk show that family firms remain consistent through different economic cycles instead of mirroring them, unlike their nonfamily counterparts (see diagram). Thus, over the medium and long term, they generally appear better off than nonfamily businesses. The explanation is simple: Family-owned firms implement a strategy that promotes sustainability over short-term performance. This strategy, without necessarily being explicitly theorized, is the result of the common way in which they allocate resources.

Frugal companies 

CEOs of family businesses manage the company’s money as if it were their own. They do not spend more than they earn and borrow little. This policy can make them miss great opportunities, going against traditional management principals that advise going into debt to maximize leverage of investment, but prevents big disappointments. These leaders generally prefer organic growth, partnerships, joint ventures, and acquisition of small companies rather than large ones. Since they incur little debt, they are less likely to make financial sacrifices during periods of recession.

International and diverse companies

Their frugality does not mean that family-owned firms are complacent. In fact, they are strikingly more diverse and international than their nonfamily counterparts. Among the family businesses studied, 46% are very diverse, while only 20% of nonfamily businesses are. This surprising finding is the result of family firms’ cautious approach: they do not put all their eggs in one basket. For them, diversity and internationalization are ways to ensure sustainability. When one country or sector suffers from a recession, they are supported by more profitable activities elsewhere. The need to diversify risk also leads them to be audacious. It is this unique way of combining ambition and caution that builds their resilience.*

Companies that care more for employees

Another particularity is that family businesses retain talent better than nonfamily businesses. This is the case even though employees often receive fewer financial incentives. Significantly, family businesses avoid layoffs during downturns, which contributes to increased employee engagement and enables them to keep skills and expertise. Family businesses also invest more in training, spending on average €885 a year per employee, versus an average of €336 euros among nonfamily companies. Ultimately, this virtuous circle further enhances the resilience of family businesses. Especially by avoiding transformational transitions, companies require fewer integration efforts to make and better preserve their culture.

If this resilience strategy seems uniquely innate to family businesses given how naturally it fits with their conception of the world, it can also very well be applied within other nonfamily businesses. It is already implemented in non-family groups such as Nestlé, Saint-Gobain, and Essilor. In his work with old firms, Bloch observed similar practices. According to him, it is perhaps the stability of the management team that constitutes a key element of this strategy. At Accenture, for example, overall turnover is huge, but the management team has 25 years of seniority. It is difficult to think in terms of sustainability when the leadership changes every four years and market pressure is at its strongest!

*Resilience: the ability of an organization, group, or structure to survive and adapt to a turbulent environment.

Applications

Image - Social Networks
The study led by Alain Bloch, Nicolas Kachaner, and George Stalk helps to understand the factors underlying the performance of family businesses by lifting the veil on a type of strategy that is not theorized but naturally applied in these companies. When crises follow one another at a rapid pace, this strategy, focused on long-term resilience rather than short-term performance, could inspire many managers. By combining entrepreneurial audacity and caution in the same way, favoring sustainability over short-term profits, non-family businesses could better withstand shocks, (provided they can withstand shareholder pressures).

Methodology

methodology
Alain Bloch, Nicolas Kachaner (BCG), George Stalk (BCG), and Sophie Mignon (École Polytechnique) analyzed 149 publicly traded, family-led businesses with revenues of more than $1 billion, located across seven countries. They compared them to similar nonfamily businesses during the period of 1997 to 2009.
Based on an interview with Alain Bloch and the article “What You Can Learn from Family Business,” co-written by Nicolas Kachaner and George Stalk, published in Harvard Business Review , November 2012, vol. 90, n° 11, pp. 102- 106.

Related content on Strategy

colleagues shaking hands - vignette
Strategy

Consultants, Lawyers, Accountants… What Drives Team Collaboration

By John Mawdsley, Olivier Chatain

Strategy

Is Scientific Discovery Driven by Great Individuals or by Great Teams?

By Denisa Mindruta

Eloic Peyrache - HEC
Eloïc Peyrache
Professor, Dean