Daughters Step Up in Family Businesses
The American family business landscape has long been dotted with companies ending in the phrase “& Sons.” Not long ago, women might have taken support jobs within family businesses as bookkeepers or secretaries. But these days, many women are increasingly stepping into leadership roles — in all kinds of companies, including family businesses. According to one study by MassMutual Financial Group and Babson College, the percentage of women-owned family companies across the U.S. increased 37 percent in a recent five-year period.
The study examined how men and women compare as leaders and found some interesting comparisons. Although women-owned businesses were generally active in the same industries, they exhibited differences in a number of areas critical to performance, organizational structure and family cohesion:
Productivity – Family businesses run by women tend to be smaller yet more productive than male-run companies. In other words, they do more with less. The study measured productivity based on average annual sales per employee. Male-run companies produced average sales of $30 million with 50 employees. Female-run companies produced lower sales of $25 million on average, but needed only 26 employees to achieve this level.
Commitment – Family loyalty and pride in the business tends to be stronger in companies headed by women. The study showed that female CEOs are twice as likely to hire and employ at least one other full-time female family member, and three times as likely to hire more than one. Female-run businesses also experienced 40 percent less family member attrition among the staff.
Fiscal Restraint – Female CEOs of family businesses are more apt to shy away from outside financing (other than trade payables) than male CEOs. A low debt load can result in advantages and disadvantages. When tough economic times hit, a business that is not overburdened by debt can generally weather the storm more easily. On the other hand, the refusal to seek outside financing can curtail some opportunities for growth. This may account for the larger size of male-run companies.
Good Corporate Citizenship – When it comes to social responsibility, female-run businesses take the lead. This can take the form of support for philanthropic programs involving educational or community issues and responsible treatment of the environment.
A few other points of comparison:
- Most woman-owned family firms are in the second generation of operation. In general, female-run businesses are 10 years younger than male-run family companies.
- Daughters who take the reins of the family business tend to be five years older at the time they take over, compared with their male counterparts.
- Women who run businesses tend to view the future of their companies with greater optimism, regardless of the nation’s economic landscape.
- Women CEOs are more likely to plan for and be involved in the choosing and grooming of their successor.
What could all this mean? Multigenerational planning is critical to the long-term success of family businesses. As more women show they have the skills and desire necessary to lead, a larger percentage of family companies may endure through generations. And who knows? The American business landscape may soon be dotted with signs ending in the phrase “& Daughters.”
A Significant Share
Woman-owned family businesses have become substantial enterprises. According to the latest Census Bureau figures, women own 7.8 million businesses in the U.S. (nearly 28.7 percent of all businesses), generating $1.2 trillion in receipts. They are primarily active in the same industries as male-owned firms: manufacturing, wholesale, retail, service and construction. But they control a majority share of certain industries. For example, 52 percent of the businesses in the health care and social assistance sector are owned by women.