What makes Swiss family businesses successful
Two researchers from the Lucerne University of Applied Sciences and Arts have investigated how Swiss family businesses survive in the tension between innovation and tradition. Their result: A company that is managed by a family that acts professionally, appears united and develops continuously has important advantages over other companies.
Swiss family businesses employ 60 percent of all workers and generate two-thirds of the gross domestic product; family businesses are also the pillars of the economy worldwide. Many well-known traditional Swiss companies such as Victorinox, Kambly or Bernina have been family-owned for centuries. The Pestalozzi metal company, for example, has been managed by the ninth generation since it was founded in 1763.
How do these family businesses manage to be successful as a company over generations and remain united as an entrepreneurial family? Claudia Astrachan Binz and Sylvie Scherrer from the Institute of Business and Regional Economics IBR at the Lucerne School of Business investigated these questions. For the research project, they interviewed 13 successful Swiss family entrepreneurs. The findings show what the secrets of successful entrepreneurial families are.
Interplay between preservation and renewal
"Families are in the interplay of preserving and renewing," says Sylvie Scherrer, a staff member at IBR's Family and Business thematic focus. Long-lived family businesses refer to their values, traditions and history - and draw strength for renewal precisely from this. After all, the company founder is often a role model for innovation, courage and risk-taking.
Although functioning family businesses have a very strong awareness of their tradition and carefully cultivate it, they are open to change. For example, the study quotes Oscar A. Kambly as saying, "The original idea must be further developed over time, but the essence, the values, they must remain." Even though today's business fields have often moved away from their origins - for example, Kambly AG's large-scale operations from the bakery of 1906, Trisa AG from the brush factory of 1887, or Victorinox from the knife forge of 1884 - these long-lived family businesses have nevertheless remained true to their roots.
with father (right) and grandfather (left). (Image: Kambly)
Not forced to grow
Many Swiss family businesses have a high equity ratio; they can invest quickly without borrowing and becoming dependent on lenders. "We have never - in contrast to globally active companies with large competitors - been forced to grow in a way that would have necessitated the use of non-family capital," Matthias Pestalozzi is quoted as saying in the study.
In addition to the high degree of financial independence, the long-term planning horizon is another advantage of family businesses. This allows them to tackle multi-year research and development projects that public companies would avoid. Oscar A. Kambly says in the study: "My planning horizon is my whole life and that of my successors, and not the quarterly report."
Individual needs put to the test
The needs of the family members may diverge over time, and the financial expectations of the - exponentially growing - family may exceed the financial capabilities of the company in the longer term. Especially when certain family members are financially dependent on the company, conflicts can arise. "Here it is important for the family to be aware of the connection between family needs and company goals, and to align them," says Claudia Astrachan Binz, head of the Family and Business theme at IBR.
But how do you ensure that the family does not fall out when there are different interests and needs? The researchers describe a united family as follows: "The family members commit to a common, overriding goal and accept that their individual needs related to the company - for example, employment opportunities in the company - must be subordinated to the sustainable prosperity of the company."
Swiss family businesses place high demands on succession
The study provides recommendations on which points the family should pay attention to: These include promoting employees and finding a suitable and well-qualified successor in good time. "If you give a post to a family member, he or she must be at least as good as the external candidate - rather five percent better, so that this is unsuspicious," says Carl Elsener of Victorinox AG in the study.
"A professional family uses many tools to effectively manage the interface between the family group and the company, to control the flow of communication within the family and between the family and the company, and to deal with conflicts," the researchers write. But Claudia Astrachan Binz is convinced: "You can plan a succession as precisely and write as many contracts and define as many rules as you want - it is much more important to make sure that the family is united and wants to achieve something together. If a value base and a vision that inspires everyone are missing, then it will be difficult."
Family Business Forum on February 1, 2018
Since 2011, the Institute of Business and Regional Economics IBR of the Lucerne School of Business has organized an annual event exclusively for members of owner families. The next Forum for Family Businesses will take place on February 1, 2018 at the Hotel National in Lucerne. Topic: "Are you fit for the future? Families and businesses that move with the times".
Further information on the study and the Family Business Forum
