Article:

Women Rise to the Top in Family Business

11 April 2010

Susan Rix AM , Partner, Business Services |

BDO is a proud sponsor of the research conducted for the book Women in Family Business Leadership Roles: Daughters on the Stage by Mary Barrett and Ken Moores, which demonstrates women’s entrepreneurial leadership.

Thirteen international cases have been included in the research on the challenges that women have faced in traditionally conservative family business environments. The research focuses on the patterns of success and failure, and analysis on whether this is the result of gender or other factors. Insights are provided on growth and sustainability, dynamic leadership, and a desire to achieve and succeed.

Family ties

After millennia spent behind the scenes, women are rising to the top of family firms in ever increasing numbers. Recent Bond research sheds new light on their experiences.

The family business model is the oldest and biggest business model in the world. Since the dawn of trade, family business has dominated commerce. In fact until very recently, a family business was the only kinds of businesses. The term ‘family business’ is a modern distinction.

When the family-owned company Kongo Gumi closed its doors in 2006, it ended more than 14 centuries of continuous operation. The Japanese company had been in the business of building Buddhist temples since the year 578, making it the oldest family-operated business in the world.

Kongo Gumi’s final president, Masakazu Kongo, was the last in a line of 40 family-members who led the company during its 1428-year life.

Two generations earlier, Kongo Gumi’s 38th leader was the company’s one and only female president, Masakuzo’s grandmother Yoshie. Yoshie Kongo’s leadership was a one-off departure from the traditional practice of passing the reins to a male heir, and it was born of extraordinary circumstances when her predecessor committed suicide. Yoshie Kongo’s preparation for leadership in the family firm was informal, incomplete and unexpected. Nevertheless, she developed the business as capably as any of its male leaders, overseeing the reconstruction of Shitennoji’s five-story pagoda after it was hit by a typhoon in 1934. Masakazu Kongo reportedly said of his grandmother, “If anyone is a superhero in our family, it’s her.”

Identifying the path to leadership

According to a new publication by family-business experts Professor Ken Moores (Director of Bond University’s Australian Centre for Family Business) and Professor Mary Barrett (Professor of Management at the University of Woolongong’s School of Management and Marketing), Yoshie’s path to leadership was representative of the differences between men and women when taking the helm of the family business. Professors Barrett and Moores conducted a study of successful chief executive officers (CEOs) in family run firms in 2002. They identified four distinct phases in the preparation for and administration of family-business leadership: learning the business, learning our business, learning to lead our business, and learning to let go.

However, the significant skew in family business toward male leaders meant the study was heavily weighted toward men. In fact, there was only one woman in the data set. This raised the question in Barrett and Moores’ minds as to whether or not women were afforded the same sequential preparation process as men along the road to the top.

The resulting study was published late in 2009 as a book, Women in Family Business Leadership Roles: Daughters on the Stage. By analysing 13 international cases of women in family business, Professors Barrett and Moores began to uncover patterns in the way women attained leadership in their family businesses, and to learn why, in some circumstances, they failed to do so.

The resulting study was published late in 2009 as a book, Women in Family Business Leadership Roles: Daughters on the Stage. By analysing 13 international cases of women in family business, Professors Barrett and Moores began to uncover patterns in the way women attained leadership in their family businesses, and to learn why, in some circumstances, they failed to do so.

Not the least of the study’s insights was the discovery that while the path to leadership for women was neither as strategic nor as sequential as the process identified for men, most women nevertheless did manage to find their way through each of the four phases identified in the earlier study.

And most importantly, they were equally equipped for success when they reached the top.

Defining the family business

Family-owned business outperform their publicly-owned counterparts with higher returns on investment, better profit margins, more stable earnings and better cash-flow and earnings per employee.

Probably the most telling characteristic that defines a family business, and separates it out from other businesses in which family members work or even lead, is the intention to continue the business across generations.

“If you or I start a business and engage members of our families, it is in one sense a family business,” Professor Moores says. “But does it really have all of the characteristics that we typically associate with a family business? Has it formulated the intention to carry across into the next generation? I would suggest not.

“So intentionality becomes a critical distinguishing feature to separate a family business from any other business.”

Many family businesses are a far cry from the tiny ‘Mum and Pop’ storefront operations we may often envisage. “They transcend all of the size categories, from the largest firms to indeed the smallest firms,” Professor Moores says. “More of them are small, simply because more businesses are small. But a significant percentage of family firms is owned and operated at the top end.

“News Corporation, the Packers, Linfox and VisiCorp: they are all significant family firms, both public and private, in Australia. And of course when you take it to the world stage, you’re talking about Walmart, Ford, BMW, Samsung ... all of those are family-controlled companies.”

Approximately 15 percent of the businesses publicly listed on the Australian stock exchange are family operated businesses. Moving through the ranks of private companies, that percentage grows a lot larger. And ultimately, “when you crank all the numbers you come out with about two-thirds of all businesses in Australia being family owned and operated,” Professor Moores says.

“Worldwide, family firms are a very significant economic force. If you have a look at the Global Entrepreneurship Monitor (GEM), it considers the start-up of new enterprises. In the creation of new enterprises, family businesses are dominant players. So they are not only there in percentage terms as established businesses, they are going to continue to grow in years ahead.

Females and family dynamics

“Families within businesses can create good, bad and even ugly business practices,” Professor Moores says. “The good can indeed become great, while the bad and ugly can turn nasty, and endanger the survival of the enterprise.

“In many cases, the founders of businesses are enthusiastic, visionary, busy people who take their family members along with them. But they don’t always spend time explaining to the family what their longer-term intentions are.”

For example, whether or not the business will be handed down to male heirs.

Cultural and sociological traditions have often dictated the roles of women in family business and until relatively recently; it was widely assumed that only the male members of a family would take the helm of the family business. Male succession is no longer an instinctive assumption in contemporary Western society, although it does remain the predominant outcome in family business leadership.

However, this will not likely be the case forever. Female leadership of family business is growing at a considerable rate. “It’s not necessarily outstripping the men, but then it’s coming off a fairly low base,” Professor Mores says. “Perhaps even more importantly, the opportunities being afforded to women in family business have been escalating quite a lot.”

Data collected by Mass Mutual Financial Group and the Raymond Institute found that between 1997 and 2002, the proportion of family-owned businesses with female CEO’s doubled. More than a third of family owned business (34 percent) said their next CEO could be a woman, up from 25 percent in 1997.

Female business leadership in the all-important start-up phase of a business is a significant growth area. “Women entrepreneurs are emerging as a very significant force in the starting up of new businesses,” Professor Moores says.

Moreover, “The whole idea in many cultures of ‘primogeniture’, the firstborn son assuming leadership when the incumbent steps down, has been jettisoned in favour of choosing the best person for the job.

“Even in cases of very male-oriented industries, such as transport or trucking for example, when the businesses have grown and become more sophisticated, their leaders may not be dealing with trucks so much as with managing people and managing finances, and those are skills at which women are equally adept.”

So with women coming out of the kitchen and emerging from the HR department, how are they being prepared for family-business leadership, and what does this mean for the company employee and stakeholders?

Daughters on the stage

In their 2009 study, Professors Moores and Barrett identified four key circumstances that illustrated the manner in which women came to lead the family business, and then explored how that journey impacted on their leadership styles. They used a showbiz metaphor to best explain the process.

‘Stumbling into the spotlight’ was the title given to women who unexpectedly found themselves leading the family business. ‘Building your own stage’ described women who came from a family business background but, instead of leading it, chose to create their own firms. ‘Directing the spotlight elsewhere’ grouped a category of women who led the family business precisely by not appearing to do so. And ‘Coping with shadows’ was the title given to women who must deal with an earlier leader.

None of these categories necessarily fit the ordered, sequential and strategic four-phase journey to the top that Barrett and Moores identified in 2002 as being a common experience of men (learning the business, learning our business, learning to lead the business, learning to let go). Nevertheless, they found that women did tend to pass through each of those four stages, albeit in a less defined manner.

The end result was that by the time women attained leadership of the family firm, they were equally as equipped to lead it as their male counterparts. However, they often faced challenges in building a case for legitimacy among employees, shareholders and most importantly other family members, since their career progress was not as easy to define.

Building a case for legitimacy

“Legitimacy for leadership typically means that you’ve earned your credentials in terms of your prior development for that particular role,” Moores explains. “And most women typically haven’t been afforded that sort of neat, sequential development, so often it’s not as obvious that they are ready for the role. They may therefore need to project their talents a little bit more obviously, in order to achieve that.”

Bond alumnus Emma Hill, daughter of the Michael Hill who gave his name to the international retail jewellery empire, prepared for her current role as Deputy Chair (and her aspiration of becoming Chair) in a thorough, if not linear, manner.

“I was seven years old when my father started Michael Hill Jeweller (MHJ),” she recalls. “Dad was always home for dinner with us and, as a result, business was always part of the dinner-table conversation. I loved hearing my dad talk about the business and his vision, he gets so passionate about it that you can’t help but be inspired.”

“Building legitimacy” in Hills’s case meant getting to know the business from the bottom up. “To be respected and, more importantly, to have the skills required to continue the success of my father, there are no shortcuts. Being Michael’s daughter, I have had to prove myself more than anyone else, which is a good thing,” she says.

Hill started learning the family business at the age of seven. “I started with Windex in hand, cleaning the counter glass. I progressed to selling at age 12, and spent years mastering the art. I was the fifth-highest sales professional by volume in Australia when I was 22, and became a manager-in-training. I then managed MHJ stores for four years. At this point, Hill decided to take a break from the business. She completed her MBA at Bond University, and left the family company to work in the advertising industry.

Going away and continuing differently

Leaving the family firm, and even leaving the family industry, is a process on the path to leadership that Professors Moores and Barrett found was extremely common among both men and women. Moreover, it was an important step in the learning stages toward leadership of the family firm.

“The first developmental sequence is typically to go outside,” Professor Moores explains. “Women have the tendency to have to go further outside than men: they go further away from the family business, and that therefore sometimes means they are delayed in coming back.

“But when a person does come back to the family business, there is often a need to undertake what we call, in paradoxical terms, “continuing differently”. They need to adapt and adjust the family business, the old strategic renewal. When a new generation takes over, that’s often the time when the business gets repositioned.

“Take for example the Packer family. Sir Frank was newspapers, Kerry was television, and James is now gaming. It’s the same family business, but every generation has repositioned it. They haven’t jettisoned the past completely, but they have repositioned it.”

In Hill’s case, “continuing differently” meant taking Michael Hill Jewellers into new geographic regions. The company started in Hill’s native New Zealand, moved into Australia, and has now expanded across Canada and into the United States, a move spearheaded by Hill.

“After working in advertising for a while, I realised I wasn’t happy unless I was at MHJ,” she says. “I was appointed International Expansion Manager and then General Manager Canada. I started our business in Canada in 2002, and opened 22 stores across the nation, returning to New Zealand five years later.

“When I was 21 years old and living in London, I set myself the goal that I wanted to establish MHJ in the UK within 10 years. As it turns out, when you are determined to achieve a goal it really comes to reality. I opened MHJ in Canada in 2002 when I was 31. Got the continent wrong, but achieved the overall objective!”

More Opportunities in the family

In fact, Moores says family business often provide women with more opportunities than they would gain in a non-family business environment.

“Generally speaking, there seems to be a wider acceptance that women could be contemplated for senior roles within family firms,” he says.

“Yes, women are being developed for family business leadership, and not necessarily as a second choice,” he continues, “although their development for those senior roles is nowhere near as organised and sequential as it is for the men.”

Moores says family businesses are more tolerant and accommodating of career interruptions by women, such as taking time off to have a child.

“There’s flexibility for the interruption of women’s careers without it being detrimental to their ongoing progress. Clearly this is all about child-bearing and those sorts of family responsibilities, which are seen as being particularly important and relevant in the context of family firms,” he says. “Generally speaking, females in family firms are given more opportunities than they perhaps would experience outside the family firm.”

Certainly, Emma Hill seems well on track to achieve her career goals in the family firm, and says being a woman has not hindered her professional path. “It was hard to get ahead, but being female didn’t make it any harder,” she insists.

"BDO wishes to acknowledge Bond University for permission to re-produce ‘Family Ties’ as published in The ARCH, Autumn 2010. BDO is the proud sponsor of this significant research.”