Workplace

I recently participated in a conference recognizing and celebrating 100-year-old family businesses. Their celebrated feat was sustaining family ownership of a business for at least one century.

Was this a celebration of anomalies or curiosities? Was this assemblage of century-old firms a collection of antiques? I think not because I believe ownership matters. And I believe those who stay owners of a business for a century or more provide important, powerful lessons not only for other family businesses but also for the entire economy, culture and society. And I fear the lessons, wisdom and knowledge embodied by these institutions are in danger of being thoughtlessly lost in a business culture preoccupied with speed, paper wealth and virtual reality.

Two spheres

In the public company environment, often presented by educational institutions and media as the business "norm," ownership has evolved into a true legal fiction, an abstraction existing primarily in the minds of tort lawyers who purport to protect anonymous shareholders from the misfeasance and malfeasance of directors and executives who often play cynical games.

But family businesses, especially century-old family businesses, measure stock turnover in generations, focus on the long-term and are distinctly concerned about the institution they will leave behind. An executive of a public company cannot even begin to conceive of the long-term interests and shareholder stability century-old family businesses have achieved.

When ownership turnover is rapid, as it typically is in public companies, owners are unidentifiable gamblers with a one-dimensional sense of value—financial. It can be no other way.

When ownership is committed, as it is in family businesses, stewardship becomes a meaningful concept. Stewards show care for their assets, building on them for their progeny and the benefit of all. They understand what "built to last" means and recognize that though financial value is important, it is only one of the values that provide the foundations for the institutions their families own. They understand legacy is composed not just of material goods but also of spiritual values. And they realize that when material wealth has passed to future generations without values, all are in peril.

Family businesses—especially century-old family businesses—are where these lessons live.

Shared values

Owners should not be indifferent to their assets. And assets, at least in the form of living systems called businesses, should not be indifferent to who their owners are because owners can and should bring value—and values—to the assets they own. Public companies, which offer shares to the public, can't discriminate as to who their owners are and, therefore, are indifferent to ownership.

Sustaining ownership in the same family for a century suggests not only that successive generations have been deserving owners and developed mechanisms to transfer assets from generation to generation but they also have passed to each generation the understanding of how to be good owners. That understanding inevitably includes a culture that fosters individuals' sense of responsibility and accountability to something larger than themselves. Having a set of interacting owners who have developed and articulated a deeply shared commitment to a set of goals and values makes it possible to create and sustain organizations that are built on and for values that include but supersede profit. Within the world of business, those circumstances exist almost exclusively among family businesses.

When a family business shares a commitment to an articulated set of values, it can hew to a strategy that is unique and of incredible value. That is not possible under public ownership. The constructive reality of committed, cohesive, experienced, wise ownership is a resource unimaginable to businesses lacking the ability to experience it. For family businesses, it can be the secret to effective corporate governance and competitive advantage.

Well-kept secret

When values stretch across generations for 100 years or more, one is most likely to discover the biggest secret of all. The secret relates to the power and value that is developed when all the parties—owners, directors, managers, employees—align their goals and values. The secret is called "trust," and it permits and encourages everyone to find the best paths to pursue.

Craig E. Aronoff is co-founder of The Family Business Consulting Group Inc., Marietta, Ga.