Family Businesses Are Vital To The Economy

New research undertaken at Monash University’s AXA Australia Family Business Research Unit at Monash University shows that about 17 per cent of companies listed on the Australian Stock Exchange are family controlled.

More than 80 per cent of private companies are controlled, managed or more than half owned by families. Together worth an estimated $1.3 trillion, they employ more than half of all private-sector workers.

When family businesses run well they can be very successful indeed, as the Murdochs, Packers and Smorgons have demonstrated. But when things go wrong, acrimony can cause divisions which sometimes last generations.

Leo Moio, managing director of the Print Media Group at Heidelberg, is an accountant turned entrepreneur. He believes that one of the keys to running a family business successfully is maintaining some emotional distance.

When he decided to buy the century old printing business Fraser and Jenkinson in 1990, five of his siblings soon decided to join him. Mr Moio says his aim was not specifically to provide jobs for his brothers and sisters. "I just thought it was an opportunity for me, and whoever else wanted to join in, to create some wealth for the family," he says.

One of 11 siblings, he says that although a decision was taken some time ago that no more family members should join the enterprise, all his brothers and sisters and their spouses have a say in how the Print Media Group is run. He believes the closeness of the family and the fact that everyone is still quite young - at 37 he is the oldest - minimises the potential for serious conflict. "We have had friends where business has caused problems between siblings. Things can get out of control. Because we’ve all started fairly young, we have grown together in it. The problem for us may start when everyone gets married and has other commitments pulling them away from this commitment. It’s a lot harder to run a family business when you’ve got the pressure of children, spouses and other relationships." Business planning and effective human-resource management are, he believes, important in fostering harmony.

Because printing was not a family trade, his brother Raymond, now 24 and the print supervisor, joined the firm to undertake an apprenticeship. Annual investments are made to update equipment and technology and, when the company moved to new, purpose- built facilities four years ago, buildings were designed to accommodate expansion. In 1996 the family took over the Clifton Hill firm, Miller Business Forms, merging it with the modernised Fraser and Jenkinson operation.

The management structure of the firm, which now employs about 90 people, ensures that not all family members report directly to Mr Moio, and of the six members of the senior management group, four are non-family. "Because the family report to independent people, they know they’ve got a job to do," Mr Moio says. "I treat family members like any other employees. I think in a business like ours you sometimes treat your siblings more harshly because of the perception that family members get an easy run."

Although Leo Moio admits that he thought there was something magical about the firm he originally bought - complete with some of its historic printing presses - a deliberate decision has been made that the family is not out to found a dynasty. "We never look at this business as something we shall pass on to our children. We have no emotional ties to it. We take the view that it is up for sale all the time and, if someone came in with the right offer, we would sell tomorrow," he says.

And while he believes a lack of dynastic pretensions minimise jostling for position, he regards succession planning as important in any business. He is trying to address his concerns that decision making and governance rest on too few shoulders by giving family members more responsibility for decision making, formalising board meetings and ensuring that the business acquires information from independent sources.

Seeking out information - and being prepared to pay for it when necessary - is an approach shared by Jill Yeats who, with her husband Russell, owns and operates Admiral Air Conditioning at Bundoora. The pair established the business - which now employs almost 20 people - with $10,000 from savings and the sale of a boat, 17 years ago, shortly after their marriage. "There was a downturn in the economy and job security was a bit of a question - although not as much as it is these days - so we sat down and thought about starting our own business," Ms Yeats says. She believes their success has been based on a readiness to adapt to changes in markets, to study to gain business as well as technical skills, to use the services of business consultants from time to time and to provide a service that is reliable as well as expert.

Admiral Air Conditioning moved from providing a service to domestic clients to more specialised work, providing controlled atmosphere environments for organisations buying mainframe computers. With the spread of PCs, they moved into a different type of commercial work, installing and providing preventive maintenance to systems in stores, offices and supermarkets. "We looked for developments in the industry and moved into niche markets. I did a lot of research and short courses and Russell impressed people with his expertise. We bend over backwards to give service. There’s never a moment when our customers can’t get us through the paging system or mobile," Ms Yeats says. Being a family running a business, she adds, has made them conscious of the personal and domestic commitments of their workers.

Like many small businesses, they struggled in the recession of the early ‘90s but tried to redeploy staff to other duties when mainstream work was in short supply. "If there wasn’t outside work, people would come in and do a shadowboard or they’d clean cars or tidy the workshop . . . we like to keep our staff. If you put off one person it affects their whole family," she says.

Professor Claudio Romano and Dr Kosmas Smyrnios, foundation directors of the AXA Australia Family Business Research Unit at Monash University, say that contrary to conventional wisdom, the pragmatic approach taken to the future of their businesses by the Moio family and Jill and Russell Yeats is not atypical. Many family firms are established not to be handed on to future generations but to be sold if, and when, the time or price is right. But the academics are concerned that too few family businesses plan adequately for their short and long-term futures. Their research shows that many have not tackled retirement, succession, estate and strategic business issues. Sometimes they have no strategy for continuing if the chief executive dies.

Professor Romano says many of the owners of businesses founded in the ‘50s and ‘60s are now contemplating retirement. Unless they have successfully addressed strategic planning and succession issues, the worth of their companies may be eroded in the transition from generation to generation or non-family ownership.

Any significant decrease in the value of Australia’s family business sector will have an adverse impact on national prosperity and job levels. "Family businesses have an enormous influence on the economy and employment," he says.

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