SOURCE: Barclays Wealth

March 02, 2009 09:26 ET

U.S. Family Businesses in Strong Position to Survive Downturn

Barclays Wealth Report Shows That U.S. Businesses Can Learn From Family Business Model; Long-Term Focus, Low-Risk Approach Offer Protection Against Downturn

NEW YORK, NY--(Marketwire - March 2, 2009) - A new report entitled "Family Business: In Safe Hands?" published today by Barclays Wealth and the Economist Intelligence Unit (EIU), suggests that family businesses have leadership values and particular characteristics which may position them well to ride out the economic downturn.

The "Family Business: In Safe Hands?" study, conducted for Barclays Wealth by the Economist Intelligence Unit, finds privately held family businesses are well placed to survive in a downturn because they typically:

--  Have a longer-term view, unpressured by quarterly performance
    expectations.
--  Tend to be more risk averse, which means they are less burdened by
    debt than listed companies.
--  Are agile, since ownership and management are closely aligned.
    

"All the research shows that family firms are much more committed to the longer term and not driven to maximize returns from one quarter to the next," said Andrew Keyt, executive director of the Loyola University Chicago Family Business Center. "This long view is precisely the quality needed to help lead us out of the recession. And, the combination of a long-term focus and agility necessary to adapt to changing conditions and opportunities gives family businesses unique advantages over many listed companies."

Increased local and regional impact

The study also found that family businesses tend to have outsized impact on their local and regional economies because such companies tend to be strong supporters of the communities in which they operate. The importance of this relationship with the community becomes particularly apparent in difficult economic times when cut-backs become necessary.

"In difficult times, family businesses pay a lot of attention to the likely impact of the downturn on their employees and communities," says Keyt. "What you see is that family businesses tend to be slower to lay off people in a downturn than non-family businesses because there is this emotional connection. Often, family members will take pay cuts to keep the business alive and many businesses will suspend dividends if necessary. This commitment tends to make family businesses critical partners in economic recovery."

A successful attitude

The study's survey of 300 high net worth individuals in family businesses ranked the attributes deemed most important to the success of such companies:

--  Four out of 10 cited the ethos and values shared by family involved in
    the business.
--  Nearly four out of 10 percent cited the company's long-term view.
--  More than one third cited the family business' ability to make
    decisions quickly.
--  One out of three cited the business' relationships with the community.
    

"A well-structured family business that has clear objectives can have a significantly longer timeframe than other types of organizations," says Matthew Brady, Managing Director, Barclays Wealth in the Americas. "This allows them to exploit opportunities that others cannot because they do not need to achieve such a quick payback. They are not under pressure to hit certain benchmarks and have the advantage of being able to anticipate longer-term trends. All this means they are more driven by personal and professional commitments and vision rather than short-term demands of the market."

A positive approach

The study did show that people involved in family businesses tend to be significantly more optimistic about the ability of those companies to perform. In a comparison of perceptions by people within family businesses and those who are not, there was significant variation in perceptions about:

Willingness to innovate: 55 percent of family members said the businesses were successful at being willing to innovate; 44 percent of non-family respondents held that view.

--  Willingness to expose the business to new ways of thinking:  52
    percent of family members said the businesses were successful at doing
    that; 37 percent of non-family respondents agreed.
--  Ability to compete with multinationals: 39 percent of family business
    members said the businesses were successful in the ability to compete; 35
    percent of non-family respondents held that view.
--  Strength of governance: 56 percent of family business members said the
    businesses are successful at strong governance; 36 percent of non-family
    respondents held that view.
    

The emotional connection often makes family businesses better corporate citizens, according to the study, which showed that 92 percent of family business members rated "the ability to help others" as important; 20 percent ranked it "very important."

Methodology

The report is based on two main strands of research. First, the Economist Intelligence Unit conducted a survey of 2,300 affluent and wealthy investors with investable assets ranging from £500,000 to in excess of £30 million. Among these 2,300 respondents, almost 300 were family members within a family business. Those respondents that represent a family business were spread across a wide variety of sectors, including retail, construction, financial services, agriculture, energy and utilities, and IT and telecoms. Almost one quarter have liquid assets in excess of £10m. Family business respondents were distributed internationally, with around 80% in Europe and Asia-Pacific, and the remainder in North America, and Middle East and Africa.

Log onto www.barclayswealth.com to access the Barclays Wealth Insights series.

For further information contact: Monique Wise, Barclays Wealth, Corporate Communications - 212 526 3568

About Barclays Wealth

Barclays Wealth, a leading global wealth manager with total client assets of £145bn at 31 December 2008. It serves affluent, high net worth and intermediary clients worldwide, providing international and private banking, fiduciary services, investment management and brokerage. Thomas L. Kalaris is the Chief Executive of Barclays Wealth and he joined the business at the start of 2006. It was voted Global Investor's Wealth Manager of the Year for 2007.

Barclays is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services with an extensive international presence in Europe, the USA, Africa and Asia.

With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 155,000 people. Barclays moves, lends, invests and protects money for over 48 million customers and clients worldwide.

For further information about Barclays Wealth in the Americas, please visit www.barclayswealthamericas.com.

Barclays Wealth is the wealth management division of Barclays Bank PLC, functioning through Barclays Capital Inc. in the United States. Barclays Capital Inc., an affiliate of Barclays Bank PLC, is a U.S. registered broker-dealer and regulated by the Securities & Exchange Commission. The registered office of Barclays Capital Inc. is 200 Park Avenue, New York, NY 10166. Barclays Bank PLC is registered in England and Wales (registered no. 1026167) with a registered office at 1 Churchill Place, London, E14 5HP, United Kingdom. Barclays Bank PLC is authorized and regulated by the Financial Services Authority. Member SIPC.

Contact Information

  • For further information contact:
    Monique Wise
    Barclays Wealth
    Corporate Communications
    212 526 3568