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Tip Sheet: Four critical mindsets of high-performing family-owned businesses

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BizTimes Staff
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Family-owned businesses, by and large, perform better in times of economic uncertainty compared to those that are not family owned, according to research by McKinsey. Breaking down the factors that contribute to their adaptability and resilience, a 2023 report highlights four critical mindsets of high-performing family-owned businesses. Focus on purpose beyond profits: Most respondents to

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Family-owned businesses, by and large, perform better in times of economic uncertainty compared to those that are not family owned, according to research by McKinsey. Breaking down the factors that contribute to their adaptability and resilience, a 2023 report highlights four critical mindsets of high-performing family-owned businesses.
  1. Focus on purpose beyond profits: Most respondents to McKinsey’s survey of family-owned businesses around the world said their firm has a clear purpose beyond creating value for shareholders. Whether that’s building the company’s legacy or driving positive change in the community, a purpose-driven mindset generates goodwill and fosters employee loyalty, thus leading to better performance.
  2. Take a long-term approach: High performing family-owned business “ruthlessly optimize for the longevity and resilience of the organization, even if it comes at the expense of short-term performance.” A family ownership structure – one that is not beholden to shareholder demands – allows these companies to be more patient and deliberate with their investments.
  3. Exercise financial caution: A conservative approach to finances, including debt and high-risk investments, provides a cushion when economic volatility does arise. “Given that they are using their own money, (family-owned businesses) often prefer to invest their funds in marketing, sales, manufacturing, and other parts of the business where there are clear paths for growth and some precedent for returns, rather than invest in high-risk areas such as R&D.”
  4. Efficiency in decision making: Respondents cited “centralized but flexible processes and engaged employees” as key to efficiency in decision making. Since big decisions are typically driven by a single leader or small group of family members, there is more decisiveness and fewer levels of approval to move through.

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