I grew up in a family business started by my grandparents and continued by my father, his six siblings, and their spouses. The business was a chain of clothing stores in small towns in the Midwest. While each sibling owned their own store or two, a number were jointly owned by all the family members, and these were run by my father as the corporate CEO. I began working in the business, as did most of my siblings and cousins, around the age of eight. Because I was the oldest of my three siblings and showed interest and business acumen, I understood from an early age that I was being groomed to take over for my father some day to run both our individual store and the jointly owned businesses. I was exposed to and mentored in every aspect of the business, and the fact that I was female never came up as an issue with anyone in the extended family. It was a great disappointment to all when I discovered during college that my path in life lay elsewhere and I declared that I would not be joining the business after college—but that is a story for another day. It was with both pride and recognition that I read about recent research, conducted in 2014 by Ernst & Young (EY) and Kennesaw State University, which found significantly higher rates of women in senior leadership roles in family businesses globally. When I thought about my own experience, this finding made sense, and the implications suggested by the authors seem exciting and important. Why are these findings important? This research gathered data from 525 of the world’s largest family businesses. The responses are from twenty-five of the largest family businesses in each of twenty-one countries with global markets. The authors note that family businesses are not insignificant players in the global marketplace. In fact, they are anchors of the world economy, and as a whole they create 70–90 percent of the global GDP and 50–80 percent of jobs in the majority of countries worldwide. The research found that the 525 participating family businesses average about five women in the C suite, 55 percent have at least one woman on their board, and 70 percent are considering a woman for their next CEO. These statistics are considerably higher than overall global business statistics, even though a great deal of research exists that shows having women in leadership roles makes economic sense for businesses:
- Companies with more women in leadership increase focus on corporate governance, corporate responsibility, talent dynamics, and market acuity.
- Publicly listed companies with women on the board tend to outperform those without in key metrics such as share price, return on equity, net income growth, and price-to-book value.
- A gender-balanced board is also associated with better corporate social performance in community, customers, environment, and supply chain. These activities improve business outcomes in areas such as risk management, corporate and brand reputation, and recruitment and retention.
A Magic Formula for Creating Gender ParityThe study authors summarize the family business formula for success for bringing women into leadership roles as the following: Role Models + Long-Term Thinking + Inclusive Environment = Women in Leadership
- Role models: Women are inspired to be leaders when they see women in positions of power. When I was growing up, I was surrounded by capable women business leaders who were my mother, aunts, and cousins. Consequently, I never doubted that I could be a leader in our business if I wanted to.
- Long-term versus short-term thinking: Family businesses are focused on long-term sustainability because they are focused on the business as a legacy to be preserved for future generations. Other types of business entities tend to be focused on delivering short-term results to respond to investor expectations. Also, the average tenure of a family business CEO is twenty years compared to six years for the CEO of a public company.
- Inclusive environment: Family businesses are built on relationships and on balancing a focus on both family and the business. The relationship focus includes activities that keep both family members and employees more cohesive and engaged with each other and the business. The authors also note that “diversity in leadership, including gender diversity, is positively correlated to employee engagement and satisfaction—factors that drive retention and increase cohesion.”