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Recent economic news headlines are enough to cause fear and anxiety around employment. From Brexit to the almost consistently looming threat of a US government shutdown to trade tensions between US and China, the global economic outlook at the start of the year was challenging. This was confirmed by the very real impact of the highest quarterly layoffs in the US in a decade occurring in the first quarter of 2019.
More often than not, even the best economists are usually blindsided by a recession. So, understandably, concerns about an economic slowdown are valid. While the pain of the Dot Com bubble in 2000 or the Great Recession in 2008 may be things of the past, recent mass layoffs at corporations across the globe weigh heavily on the minds of employees.
In this article, I examine which companies will provide better odds of providing safe harbor in the event of an economic downturn. When job stability starts to erode with economic belt-tightening, which businesses are most likely to resist the pressure to let you go?
The answer to that question is straightforward: family-owned businesses. They come in all sizes and are in industries. As we’ll see, employees of family-owned businesses are less likely to lose their jobs in a downturn .
In fact, these businesses are more likely to withstand a recession than their peers. Here are 5 characteristics that family-owned businesses rely on to secure their longevity. You should also look for these in a company that is less likely to let you go in a recession:
1. A History of Higher Employee Retention
According to the Harvard Business Review, family businesses retain talent better than their non-family peers. Why? Because these companies “focus on creating a culture of commitment and purpose, avoiding layoffs during downturns, promoting from within, and investing in people.”
The commitment to employees stems from a strong culture that allows family-owned businesses to value and protect employees, almost like members of a family. This allows these companies to do a better job at retaining employees than their peers, without having to rely as heavily on financial incentives. In a tightening economy, the effectiveness of non-financial incentives to aid retention becomes even more important.
2. Flexibility In Avoiding Layoffs
Cultural commitment creates a workplace in which employees serve together longer, get to know one another more deeply, and operate more cohesively as a result. Not only does that create a healthier workplace, but it cements the indispensability of each member of the team.
The value that family-owned businesses place on their employees leaves them far more prone to go to extraordinary lengths to retain individuals—even amid a recession. Without the encumbrances of a complicated corporate structure, this may involve coming up with unorthodox solutions that ensure employees are taken care of.
Employees, are also in a much better position to react favorably to concessions that ensure the harsh impact of retrenchment is minimized or avoided for themselves and the team as a whole.
3. A Built-in Conservatism That Protects Jobs
With a legacy to protect, employee loyalty inspired by core values, and the recognition that cohesive workforces perform at a higher level, many family business leaders tend towards a healthy level of conservatism in the business.
With their name on the building and/or product, family business leaders are far less likely to take the kinds of risks that leave companies vulnerable to sudden economic downswings. In many cases, most of the family’s wealth tends to be tied up in the business. Family business leaders act as custodians of that wealth for their generation.
While this penchant for conservatism may mean that the business may not be on the forefront of adopting many innovations until they are proven, it also protects against the losses that unproven and unsuccessful innovations may incur.
4. Financial Buffer That Provides An Emergency Fund
While it may seem counter-intuitive that a more conservative approach could result in financial out-performance, this ‘slow and steady’ approach does indeed win the proverbial race for family-owned businesses versus non-family-owned peers.
With the goal of securing the business for future generations, many leaders adopt an approach that both protects the current business and provides for the long term. The financial buffer accumulated by such an approach provides an emergency fund of sorts that the businesses could access in the event of a recession.
5. More Ethical Approach Minimizes Risk
Why do family businesses put so much stock in creating a culture of commitment and purpose? In part, this cultural commitment stems from the family business’s origins.
The founders’ story is typically part of the company lore; it deepens as the company builds on that foundation and matures.
When you go to work for a family business, you engraft yourself into that story. In a way, you become part of the family. The sense of traditioned identity that binds a family business together attracts new talent, inspires veteran employees to stick around and minimizes the incidence of risky behaviors that could jeopardize the family and the business.
Family-owned businesses are uniquely placed to weather an economic downturn. This is especially the case when the business benefits from the active involvement or influence of original founding family members. With more deeply ingrained values. these members may have more control in ensuring that decisions are in line with the bedrock of the founder’s values.
Arguably, this level of control becomes more difficult over time. As a family business’ ownership structure and operational footprint expand and move further away from the nucleus of the founding generation, initial motivations and values may become diluted.
That said, if you’re concerned about keeping your job during the next recession, I’d advise a strong preference—all other things being equal—for a position within a family-owned company over one of its non-family-owned peers.
April 25, 2019 at 03:30AM
Forbes – Entrepreneurs