Loblaw Companies is one of 43 large business, successful family-run companies in Canada that National Bank says out-perform the S&P TSX composite index.
The bank looked at Loblaw and a number of other companies. Examples include Bombardier, Rogers, and Shopify. 206 per cent, an absolute rate of return was achieved. This covers a period of the last 13 years which is a good consistency. This is from the month of June 2005 to June 2018. That’s significantly ahead of the 133 per cent total return over the same period.
The “2018 Family Advantage” reported, the bank’s analysis of companies including Bombardier Inc. Also, Loblaw Companies Ltd., Rogers Communications Inc., and Shopify Inc. say the businesses have achieved an absolute return rate of 206 per cent. This is over the last 13 years, between June 2005 and June 2018. That’s much higher than the 133 per cent S&P TSX composite total return over the same period.
The study also says returns for the family-run companies were about nine per cent on an annualized basis, compared to 6.7 per cent for the S&P TSX composite total return index.
The bank’s conclusions are based on an analysis of companies. This includes stats where a founding business or founder controls 10 per cent or more voting rights. Hence, or an individual and related entities with ownership control 33.3 per cent or more of voting rights.
ADVANTAGES OF FAMILY-RUN BUSINESSES:
Some key advantages of leading family-run companies to out-perform. Hence, it includes a focus on sustainable long term profitability versus short term results. Also includes a strong corporate culture driven by family values. That corporate culture includes intangibles such as the values of the founders. Applicable to their organizations includes values such as entrepreneurship, vision, and work ethics. Finally, also includes the commitment to the communities as well. Furthermore, personal relationships with stakeholders across the value chain, loyalty, and concern for reputation. Preserving the uniqueness of their culture, for instance by avoiding one size fits governance model. As a success factor, it has been highlighted with due importance.
‘CORPORATE CULTURE’ IN FAMILY BUSINESSES:
The corporate culture in the family business is a bit different from the normal culture in the corporate sector. It revolves heavily around emotional values. Family businesses apart from the huge profits also involve huge emotions. This is more common in family businesses as a trend than in other kinds of business setups. ‘Family business’ involves more emotional intelligence than other businesses. Years of hard work and consistency is there behind the family-run businesses. Also includes a positive approach and constant improvements. In the business, profitability is more important for partners for mutual growth rather than knowing each other and interactions on a daily basis. The trust factors are a bit higher as family values and emotions bind the business for international and national growth.
SHARING PROFITS & LOSSES:
In a family business, there is a sharing of profits & losses with no disputes. The involvements of partnerships are deep with strong bonds of mutual trust. Hence, working for the business constantly and thinking for aligned goals is important. Businesses while incurring losses have higher tendencies to bounce back as sharing and understanding within partners is more than in normal circumstances. ‘Entrepreneurship’ in a family business is easier for partners as they are either brothers or cousins or in-laws. Linked-up with the family affair, a huge degree of emotional intelligence is involved. Affirmatively, emotional intelligence in similarly run businesses is seen as a likely scenario.
To perform with an eye for success is the key in business. Therefore, this is vital with decision making in the family business. The decision making mostly doesn’t involve any fights as it is with mutual agreements of the concerned partners in the business set-up. In successful set-ups businesses, decision making is often in the hands of one person or partner, and others have a relationship of trust with the primary decision-makers.
‘THE FAMILY ADVANTAGE’:
The family advantage is something that most businesses make use of effectively and efficiently to perform better. The family business holds many advantages that are good for the set-up in future. Hence, some are highly detrimental in bringing them in the most valuable list. Why enjoy the family advantage? It is because in such a scenario most of the time you are not working but your work is rather like home. Working in a different environment needs flexibility and emotions. Ironically, there is more linking with emotional aspects and thinking for the business. ‘Family advantage’ is a blessing and should be utilized effectively for the best results in the competitive business markets.