Institute for Family Business (IFB)

Institute for Family Business (IFB)

Cass Consulting research found that employees in family-run businesses are happier and more loyal than those in other firms, and this strength should be harnessed.

Synopsis:

One of the major advantages that family businesses have over their non-family run peers is their "people capital". Employees are often treated better than in non-family businesses, and they are therefore happier and more loyal. This can give family firms a competitive advantage in the current difficult business environment.

Background:

A previous Institute for Family Business (IFB) report into stewardship had found that people capital was one of the four fundamental sources of strength for family businesses and the organisation felt that this particular aspect deserved deeper analysis. The IFB believes that successfully developing an organisation's people capital - defined as "the strength of knowledge, skills, behaviours, energy, loyalty and commitment which exist within the non-family members of a family business" - can create a vital source of competitive advantage. They commissioned Cass Consulting to produce a report that would quantify this insight.

Consultancy:

The researchers analysed data from the UK government's Workplace Employment Relations Study 2011, and investigated the differences in people capital in family businesses compared with non‑family owned businesses. They found that family businesses create a distinct and positive relationship with their staff in the workplace.

For example, employees in owner-managed family businesses were more likely to say that their managers were good at responding to suggestions and allowing them to influence final decisions; they were more likely to report that managers can be relied on to keep their promises and treat employees fairly; and they reported greater job satisfaction in terms of the sense of achievement they get from their work, the scope they have for using their initiative and the amount of influence they have over their jobs.

Perhaps unsurprisingly, the researchers also found that employees in family businesses were more loyal, and more satisfied with their job security. Family businesses had lower labour turnover and are doing just as well in terms of labour absence rates, labour productivity and the quality of products or services.

However, the researchers also found that as family businesses increase in size, and members of the family step-back from day-to-day involvement in management on a full-time basis, the strong and positive interpersonal relationship between the family and employees is more difficult to maintain.

Conclusions:

The ability of family businesses to keep employees happy, foster loyalty and promote long service generates an important source of competitive advantage. The report suggested that as family businesses increase in size they ought to build on their strength in the area of people capital and develop human resources strategies to select and implement high performance work practices.

Cass consultant:

Professor Nick Bacon

An expert in Human Resource Management, Professor Bacon's research has explored the impact of human resource management practices on organisational performance and employee outcomes in a wide variety of settings including manufacturing firms, unionised workplaces, small firms, medium-sized enterprises, private equity-owned firms and the public sector.

Read more about other Cass Consulting projects on the Case Studies page