MARCH 30, 2023, marked a significant day in the life of family-owned businesses (FOBs) in Jamaica. After 33 years at the helm, the founder of one of Jamaica’s outstanding and high-performing FOBs ‘passed the CEO baton’ to the next generation.
The significance of this occasion was measured in many ways, including the ‘passing of the baton’ to a non-family member, placing in the public domain an untried model for the changing of the guard in a family business, and pulling together persons from different sectors of the Jamaican society to talk about FOBs. Such a setting provides a fertile place and space for a litmus test of the level of interest in, and knowledge of FOBs.
Measuring from the comments and questions which followed the presentation on generational transition in FOBs, there is evidence of increased interest in issues relating to FOBs. This is good news for those who have been clamouring for more interest and support to be given to FOBs.
The following sample of the comments and questions provided the ground for fruitful conversation on FOBs.
“I had no idea that the study of family-owned businesses was a thing”; “I thought the idea of family-owned businesses was confined to small businesses”; “Is it still a family business if the CEO is not a member of the family which owns the business?”; “If not the bank, how are FOBs funded?”
A response to each of these is in order, because being in the know is always useful.
Compared to disciplines such as human resource management, decision sciences, accounting and economics, academic research in FOBs is a newbie. Serious academic research on issues in FOBs started in the 1980s and has mushroomed over the years, as evidence in the reams and reams of peer reviewed journal articles and books on FOBs.
Over the last 5-10 years, many business schools and centres have joined the discussion in the adding of courses and programmes in FOBs to their menu. A sample of business schools and centres outside of North America offering courses and programmes in FOBs include Adelaide Business School (Australia), Bocconi University (Italy), CUHK University (Hong Kong) and China Europe International Business School (China), ESADE (France), IE Business School (Spain), and London School of Business.
Alberta School of Business, Harvard Business School, Kellogg School of Management, Coles College of Business and Wharton are among the business schools with courses and programmes in FOBs.
Universities in Jamaica offer different courses and programmes in entrepreneurship, with increased focused on issues relating to family businesses. For example, at UWI, Mona School of Business and Management (MSBM) has a course on its books that provides a panoramic view of FOBs. The current research activities among Doctor of Business Administration (DBA) students at MSBM and academicians across UWI and other universities in the Caribbean should result in family businesses becoming part of the core on the menu of courses and programmes in business schools in the Caribbean. MSBM is leading the way in ensuring that the study of FOBs remains ‘a thing’ in Jamaica and the Caribbean.
Using the number of employees as a metric, Jamaica’s Micro Small and Medium Enterprises (MSME) policy defines small businesses to be those with 6-20 employees, and 21-50 employees as medium-sized businesses. Large businesses are therefore those with more than 50 employees.
While approximately 70per cent of FOBs are small, there are many which are categorised as large. A number of large FOBs have been in operation for more than 30 years, with one celebrating over 100 years. Yes, FOBs are older than the moms and pops!
There is no consensus on the definition of a family-owned business. However, while most the commonly adopted definitions found in the literature recognise different relationships among family, business and ownership, none of the definitions stipulate that a family member of the owners should be the CEO.
Unfortunately, the demise of many FOBs can be attributed to the insistence that family members occupy key positions in the business when they are neither willing nor capable.
Kudos to founders who are bold enough to go against the grain of expectation and make the decision that will ensure continued success of their FOBs.
The input of financial institutions, such the banks and credit union, is critical for the sustainability of FOBs. There are many stories of the pivotal role these financial institutions have played in the startup and growth of FOBs.
However, the data shows that for a high percentage of FOBs, financing of the business comes mainly from personal savings and loans from family and friends, with the banks serving as a stop of last resort.
Reasons for this include the high interest rate charged by banks, demand for too many collaterals, too much bureaucracy, and, for women business owners, the thinking that women are not treated in the same way as men.
There is the need for new or revised engagement between financial institutions and business owners, especially small FOBs. Investment in FOBs is important for the growth of the economy; the banks should see themselves as partners in this process.
When all is said and done, a point of convergence in this conversation is that the success of FOBs is dependent on the coming together of the interested parties – owners and their families and friends, the banks and other players in the private sector, government and researchers.
Yes, the study of FOBs must continue to be ‘a thing’!
Lawrence Nicholson, PhD, is a senior lecturer at the Mona School of Business & Management, The University of the West Indies and a director of the RJRGLEANER Communications Group. He is passionate about FOBs, as is reflected in his writing on the topic, including in his book: Understanding the Caribbean Enterprise: “Insights from MSMEs and Family-Owned Businesses”. Send feedback to firstname.lastname@example.org