Family businesses call the shots in the economy

FAMILY-owned companies make up 25pc of Australia’s top 500 private firms.

Toby Bensimon is managing director of the Shiels jewellery chain, which has 50 stores and employs 516 people

Many of the world’s most productive companies are run as part of a family dynasty — employing hundreds of thousands of white- collar and manufacturing workers across the continents and stimulating the global economy.

Think Samsung, Miele, Peugeot, Barilla pasta, Clarks shoes — and in Australia Visy, Linfox, Primo Smallgoods, Henley Properties, Paspaley, Kennards Hire and Lenard’s.

A Deakin University study has found family-owned companies make up close to 25 per cent of the top 500 private Australian firms, contributing $42 million more revenue per firm than their non-family counterparts in 2008. They employ roughly 30 per cent more employees than non-family owned companies.

With much of the country’s economic future riding on business conditions improving and innovation leading to jobs growth, KPMG’s Brisbane-based private enterprise partner Bill Noye says family business does not neces­sarily mean small business.

“Family businesses contribute 70 per cent of the world’s gross domestic product,” Noye says.

“Family businesses are the ones that take risk. If they could just employ one or two more ­people, and there are 500,000 small businesses out there, that’s a lot of people.”

Earlier this month Reserve Bank governor Glenn Stevens placed the onus on business to innovate, increase staff, improve technologies, create new lines of business and invest to improve the economy. And with so many companies run by families, future jobs growth could rest with family-owned corporations.

“There’s no doubt many reasons that people will register companies but surely among them is going to be there are people with ideas, ambition, passion, plans and they’re saying: ‘I’m going to have a go,’ ” Stevens told a Committee for Economic Development Australia forum.

“I think all of these things are at least encouraging. I think they’re encouraging if you’re looking for some evidence of genuine risk-taking starting to build up out there. And of course in the end that’s really the vital ingredient for private-sector growth.”

KPMG Melbourne-based partner Dominic Pelligana says the family business sector has changed dramatically during the past 20 years, with more companies aware of their legal obligations and the need for succession planning to survive.

Owners no longer hand the business to their oldest son, and more are likely to find the child who best suits their long-term plans, the most qualified or the child who wants to stay.

“The next generation now has more options than in the 1950s and 1960s — you went to school, you went into the business, the oldest son got it,” Pelligana says.

“Now they’ve got more options, they could study, it could go to another family member or they go and work elsewhere first.”

Pelligana says raw statistics show 70 per cent of businesses will not make a successful transition from the first to second generations, and by the time they reach the third generation 90 per cent will have failed.

“Some family businesses don’t even recognise they’re a family business until the next generation comes along,” he says.

“Some recognise themselves as small businesses. Then they have to recognise what they are, how it is managed and who has control. They might succeed ownership and have outside management, or succeed management and retain ownership.”

Good planning, he says, involves family businesses having rules in place to cover issues such as who will take over management, whether younger generations should study or take time out before joining, and how divorce may affect operations.

“There’s the importance of getting succession right. They know they employ hundreds of people in the community and they want to keep their jobs.”

He says family businesses are generally driven by long-term success rather than short-term profits.

They also tend to keep employees for longer.

For son, jewellery’s a gem of a job

TOBY Bensimon was born into the jewellery trade, going to work with his father Albert on weekends and learning about diamonds, gold and silver.

“I was always drawn to jewellery from when I was really young,” Bensimon says. “You always look up to your parents as your inspiration. My dad was my hero and I wanted to grow up to be like him.”

Bensimon, 35, took over 18 months ago as managing director of Shiels, the largest family-owned jewellery chain in Australia.

There are 50 stores in Brisbane, Perth and Adelaide under the Transworld Enterprises umbrella, employing 516 staff, which Bensimon says is not bad for a family company that started with a costume jewellery kiosk in Adelaide’s Central Markets more than 30 years ago.

Bensimon has been working for his father’s company since he was 15, starting in a retail outlet and later moving into store management when he finished his commerce and arts degree.

“I never was interested in anything else. I was a bicycle mechanic when I was 16 but in terms of my profession I had a one-track mind,” he says. “Dad has always been there to answer my questions and advise me.”

Albert Bensimon, 67, is still the company’s chairman, working on strategy and future direction, and still offers advice to his son if and when needed.

Toby Bensimon says he is lucky to have had similarly ambitious plans to his father, and has been supported as he seeks to double the number of stores nationally across the next decade following further expansion into Queensland and NSW.

With similar business philosophies the succession from first to second generation has gone smoothly, and Bensimon also credits his advisory board.

“One board member had so much experience, he’d seen businesses transition and fail, he had an extremely valuable insight to guide me,” he says.