Family businesses have a unique ownership structure that gives them a long-term orientation that traditional public firms often lack. Despite the conventional wisdom that family businesses are local and small, family-controlled enterprises play a significant role in the world economy. In fact, family businesses account for more than 30% of all companies with sales in excess of $1 billion. To understand what makes family businesses different, researchers conducted a study of 149 publicly traded, family-controlled businesses with revenues of more than $1 billion in seven countries, along with a comparison group of non-family businesses. The results show that family firms perform worse than non-family firms during economic booms but fare better during recessions. The average long-term financial performance was higher for family businesses than for non-family businesses in every country examined.

The simple conclusion is that family businesses focus on resilience more than performance. Rather than pursuing excess returns during good times, family firms focus on increasing their odds of survival during bad times. CEO’s of family-controlled firms invest with a 10- or 20-year horizon, concentrating on what they can do now to benefit the next generation. Additionally, executives of family businesses often manage their downside more than their upside, in contrast with most CEOs who try to make their mark through outperformance. The research identified seven differences in approach that contribute to family businesses’ focus on resilience: being frugal in good times and bad; keeping the bar high for capital expenditures; carrying little debt; establishing a strong bond with employees; being decentralized and territorial; sticking to what they know; and balancing family and business.

At a time when executives of every company are encouraged to manage for the long term, well-run family businesses can serve as role models. Several companies with dispersed ownership have been identified whose strategies mimic those of family firms. These companies also exhibited a similar performance pattern: below their peers during upturns but leading the pack in times of crisis. The study of family businesses provides valuable insights into the advantages and challenges of different ownership structures in achieving long-term success.