Family businesses holding their own

http://www.ifb.org.uk/
At a recent London School of Economics meeting, which I chaired, a member of one of Europe’s leading family businesses saw a positive outlook for the sector. In a debate with students on whether family businesses can hold their own in today’s economy Dr H.C. August Oetker, Chairman of the Supervisory Board of Oetker KG, the Germany-based diversified family company, rejected as outdated the stereotype images of a sector plagued by nepotism, lack of scale and inflexibility.

Dr Oetker argued that the modern family business is often engaged in a David against Goliath battle and has three main advantages:

• Stability - a conservative policy in terms of financing the business, eschewing excessive risk and debt investing the family’s own capital

• Security - more predictability in terms of strategic approach; often generating greater employee trust and loyalty

• Long-termism - where the payback horizon on investments may often be measured in decades not years

But there are risks such as the resistance to change, particularly in making decisions on employment issues that impact the workforce. Family business boards have to address the dilemma of balancing an instinct towards social responsibility while driving business performance.

The Oetker formula - With revenues of more than 9.2 billion euros, the group’s formula for success is driven by a high degree of reinvestment, paying shareholders a modest dividend each year. Risks have been balanced through a process of diversification and key divisions include the Hamburg Süd shipping group, Dr. Oetker branded food products and a focus on alcoholic beverages.

http://www.ifb.org.uk/