By Dan Beenken

Our last session of this year’s breakfast series was one I was really looking forward to. When McKinsey dropped their research on family-owned businesses late last fall, it was validating for me and our Family Business Center to see the proof that “family business do better!” I knew I wanted to get the authors online to share their findings, experience, and advice with our members. We were able to do that for our final session this year and it didn’t disappoint. 

McKinsey’s research speaks to the impact, resilience, and adaptability that family firms showcase on a daily basis. They are critical not just to Iowa’s economy, but the world’s. 

The research is organized into a “4 +5” formula of four Mindsets:

1. Focus on purpose beyond profits!!
2. Long term view with emphasis on reinvesting in the business
3. Conservative and cautious stance on finances
4. Processes that allow for efficient decision making

They overlay this with five Strategic Actions:

1. Diversify their portfolio of holdings
2. Dynamically reallocate resources to the most promising businesses
3. Efficiency in investing and operations
4. Maintain a relentless focus on talent recruitment and retention
5. Review and revise their family governance as generations move in and out of the business

I’m not going to go into all of these – they are the same ideals we trumpet at all of our programming. You can read their research here for yourself. Instead, I am going to point out my top three takeaways from the discussion with its authors. 

Our guests were Acha Leke, Chairman of McKinsey’s African presence and Head of their family business practice, along with Martin Roll, who serves as a Senior Advisor for the firm. They did an amazing job of explaining their work and the insights they have gathered about what great family businesses do well and how that correlates to massive outperformance over a long period of time.

My Top Three:

1. Lean into your culture.
   Family firms often have a closer, more “human” feel to their operations. In short, they really care about their people and their customers. That might sound a little corny, but McKinsey’s research validates that it actually is a more profitable way to behave. Caring takes many forms, time, and money – its not easy. Family firms know that and still press on! They lean into this culture and values knowing its part of their legacy too.
2. Build your board.
   One of our firms asked about building a board of directors - #5 Strategic Action. Mr. Leke’s first response was perfect. He said start to with “Why” – why do you want a board, why are you investing in this? Let that be your guide. It was simple but spot on. And while our session wasn’t devoted to this topic, it was a reminder of a board’s importance.
3. Trust your knowledge.
   Family firms have often been in their industry a long time. They have passed down tacit knowledge for generations, not years or even decades. They know their space cold. They know the players, the cycles, the suppliers, customers, etc. Trust your guy, after all, its been attune to your business model since birth. 

I can’t thank Acha and Martin enough for their efforts with this research and for their time in sharing it with us last week. They mentioned that more is to come and so I am hopeful we can have them back on. 

Good luck out there!