Relative success in FAMILY FIRMS There are important lessons to be learnt from the surprising resilience of family firms
The proportion of Fortune 500 companies that can be described as family companies increased from 15% in 2005 to 19% today. That is largely because of the rise of emerging economies, in which family firms are more common. But even in the rich world family companies are these days holding their own.
Family firms’ strengths, meanwhile, are just as important today as they were in the early days of capitalism. They solve the “agency problem” that Adam Smith put his finger on in “The Wealth of Nations” when he argued that hired managers would never have the same “anxious vigilance” in running companies as the owners. Family managers are often parsimonious: companies such as Walmart, Koch Industries and Mars & Co are famous for running a tight ship with humble headquarters, lean management and an obsession with operational efficiency.
The remarkable record of the best family firms should remind millions of business owners that, in the corporate world at least, you do not have to surrender family control in order to prosper.