Family Businesses Have a Media Problem

By David Bain

Originally published in: Family Capital (September 2014)

This summer an earthquake erupted at family-owned DeMoulas Super Markets, the Massachusetts-based supermarket business which runs the Market Basket chain, when a long-running disagreement led to one cousin ousting another as chief executive.

The US media gleefully portrayed the story as a family feud, pure and simple. But is that the best way to see it? “Our temptation almost always when we see problems in a family business is to blame it on the family,” says John Davis, a professor at Harvard Business School and a family business expert. “And when we see strength, we say that’s because they must have a good board, or good management. It isn’t because of the family.”

Davis, who advises many North American family businesses, says this situation isn’t fair. “Of course, sometimes the family is responsible for some of the problems, but they are also in many cases responsible for many of their strengths,” he says.

Davis reckons the coverage of the story was typical of how the media portrays family businesses – through the prism of a family feud. “The only time you hear about family businesses is when something like the Market Basket case pops up and them we tend to demonise them,” he says. He has a point.

A story explaining that family ownership is behind a business’s success is a rare thing in the mainstream business press. On the flip-side, problems at family firms are almost always blamed on some aspect of family involvement, real or imagined. Look at how stories about News International are often seen in terms of perceived friction in the Murdoch family. In reality, nobody knows whether the family members get on.

Does this matter? Well, yes, because it disguises the fact that family firms perform so well. “I’m not glorifying family capitalism as a superior form of capitalism,” he says, “there are good family businesses and bad ones, just as there are good non-family businesses and bad ones. But on average, family businesses perform far better than non-family businesses. That has been shown in a large number of studies over the past 15 years.”

The reason they do perform better, says Davis, is because they are sensitive to their stakeholders; they aren’t just trying to build financial value for their shareholders, although they do that as well. And yet that fact is widely ignored.

Why does this happen? Perhaps because, being secretive, family firms become a blank canvas on which people can paint their own stories. “All of the criticism that you see come out about capitalism – the excesses and disappointments – are really being addressed by these better performing family businesses,” says Davis. “But they aren’t telling the world about it.”