1、November 2023Private Equity&Principal Investors PracticeThe secrets of outperforming family-owned businesses:How they create valueand how you can become oneFamily-owned businesses that combine four critical mindsets with five strategic actions have a chance to quadruple their value in the next decad

2、ewhile maintaining resilience.This article is a collaborative effort by Eduardo Asaf,Igor Carvalho,Acha Leke,Francesco Malatesta,and Jose Tellechea,representing views from McKinseys Private Equity&Principal Investors Practice and its Family-Owned Business Special Initiative.These days,organizations

3、across industries and geographies are doing everything they can to bounce forward from recent economic,geopolitical,and technological disruptions.For them,resilience may be a relatively new concept.For family-owned businesses(FOBs)companies in which founders or descendants hold significant share cap

4、ital or voting rightsits just business as usual.1 Regardless of what the world throws at them,many of these companies have survived and thrived over multiple decades.Some,such as Levi Strauss and Lreal,have been operating for well over a century.FOBs have long played an outsize role in the global ec

5、onomya role that often goes unnoticed or underestimated.They account for more than 70percent of global GDP,and they generate turnover of between$60 trillion and$70trillion annually.They are responsible for about 60percent of global employment,and they play a critical role in supporting education,hea

6、lthcare,and infrastructure development across their communities around the world.2McKinseys own recent research confirms FOBs adaptability,resilience,and impact:they have the structures and best practices required to withstand business challenges in uncertain times.And in general,they exhibit strong

7、er performance than businesses that are not family owned,although the extent and drivers of that outperformance vary(Exhibit 1).To understand FOBs history of outperformance and how the best among them create value and impact,we analyzed 600 publicly listed FOBs,compared their performance with that o

8、f 600 publicly listed companies that are not family owned,and surveyed another 600 primarily private FOBs around the world.Additionally,we interviewed leaders of more than 20 FOBs globally.The findings were surprising.For instance,while it has been widely known that FOBs deliver higher total shareho

9、lder returns(TSR)compared with non-FOBs,the root causes of this outperformance have been less well-knownuntil now.Our analysis shows that the higher TSR results from better underlying operational performance by FOBs,as compared with non-FOBs.The research also demonstrates how the performance and val

10、ue creation strategies of FOBs shift as these businesses get bigger and older.The data tell a compelling story of outcomes and impact,but they also begin to reveal what the highest-performing FOBs are doing differently when compared with peers,in two areas:mindsets and strategic actions.They demonst

11、rate four mindsets that are common to all FOBs but that take on outsize importance within the high performers,allowing them to gain and sustain a competitive advantage.The critical mindsets are a focus on purpose beyond profits,a long-term view and emphasis on reinvesting in the business,a conservat

12、ive and cautious stance on finances,and processes that allow for efficient decision making.The high-performing FOBs then combine these mindsets with five strategic actions in ways that others do not.Specifically,they actively diversify their portfolios,and they dynamically reallocate resources to th

13、e most promising businesses,regions,and channels.They are both efficient investors and operators.They maintain a relentless focus on attracting,developing,and retaining talent,and they continually review their governance mechanisms to ensure strong business performance across generations.Well unpack

14、 this“4+5”formula further in this article.Its important to note that the formula and the lessons it imparts are applicable to both FOBs and non-FOBs alikeand our research suggests 1 Refers to companies in which the family controls at least 20 percent of owned capital share or voting rights;note that

15、 voting rights may be controlling or noncontrolling.2“Empowering family businesses to fast-track sustainable development,”United Nations Conference on Trade and Development,April 13,2021.2The secrets of outperforming family-owned businesses:How they create valueand how you can become onethat deployi

16、ng it effectively can pay off over the long term.When we applied the formula to the family-owned companies in our research base,we estimated that it could create a 2.5-to 5.5-times increase in economic profit for them.Indeed,FOBs around the world that successfully follow this formula have an opportu

17、nity to quadruple their value over the next five to ten yearsbolstering their market performance,sharpening the resilience edge that has allowed them to keep the lights on for generations,and making an even greater impact across their communities.FOB outperformance by the numbersOur research shows t

18、hat FOBs have created more value and impact than non-FOBs over the past decadea dynamic that has largely held true regardless of which metrics we used to assess companies performance and despite the unique challenges FOBs face(see sidebar,“Unique challenges on the road to outperformance”).3Between 2

19、017 and 2022,FOBs posted an average TSR of 2.6 percent,compared with 2.3 percent for non-FOBs.In that same five-year period,FOBs achieved average economic profit of$77.5 million,surpassing the non-FOBs average economic profit of$66.3 million.4 FOBs also generated(on average)an economic spread that w

20、as 33 percent higher than that of non-FOBs in the same period.5A broader look at performance among both FOBs and non-FOBs reveals further variations based on the size,age,and maturity level of these companies.Exhibit 1Web Exhibit of Average economic spread for family-owned businesses(FOBs)and non-FO

21、Bs,1%1The performance of 600 publicly listed FOBs was analyzed and compared with that of 600 publicly listed companies that are not family owned.Another 600 primarily private FOBs around the world were also surveyed.Family-owned businesses have survived and thrived over decades because they are adap

22、table and resilient.McKinsey&Company01234520002005201020152020Non-FOBsThe Great RecessionCOVID-19downturnFOBs3 Non-FOBs are defined as any company that does not meet a 20 percent threshold for family ownership in either share capital or voting rights.4 Economic profit is the difference between reven

23、ue received from the sale of goods and services and the costs of producing those goods and services,including opportunity costs.5 Economic spread is the difference between a companys return on invested capital and its weighted average cost of capital.3The secrets of outperforming family-owned busine

24、sses:How they create valueand how you can become oneFor instance,the midsize FOBs in our research base,with annual revenues between$150 million to$5 billion,performed better than non-FOBs by being more efficient investors.They have delivered 10 percent higher capital turnover over the past five year

25、s compared with non-FOBs.Why?These midsize FOBs face fewer of the traditional market pressures to deliver short-term results.Their focus on the long term and their streamlined decision-making processes allow them to be more effective than non-FOBs at identifying investment opportunities that are in

26、line with their purpose and goals,acting decisively,and quickly allocating resources against those opportunities.Meanwhile,the large FOBs in our sample,with annual revenues between$5 billion and$100billion,tend to be efficient operators that have delivered 1.5-percentage-point higher operating margi

27、ns over the past five years compared with non-FOBs.The numbers likely reflect large FOBs ability to take advantage of process-related efficiencies and supply chain relationships developed over successive generations(Exhibit 2).In addition,the family-owned businesses in our research base that are 25

28、years old and younger tend to have an aggressive growth mindset,increasing revenues twice as fast as non-FOBs as they channel the entrepreneurial energy of the Its important to acknowledge the unique challenges that all family-owned businesses(FOBs)faceall the better to appreciate how the very highe

29、st-performing FOBs in our research base have managed to ascend.A cautious approach to finances is a trademark of FOBs that helps them weather economic shocks,although it can also delay their recovery.An aversion to taking on debt,for example,might constrain an FOBs ability to enact critical process

30、changes,or it could hinder expansion plans.Additionally,FOBs tend to underinvest in R&D,which can limit innovation and entrepreneurial initiatives.This challenge can be compounded as the business moves further and further away from the founders entrepreneurial vision and prioritizes value preservati

31、on over high-risk business bets.Family-owned businesses also face unique governance challenges relating to their ownership.For instance,all FOBs,regardless of size,industry,or regional focus,are confronted with succession-related questions as the business passes from one generation to the next.The f

32、ounding generation may have been focused on aggressive growth,but subsequent generations may wrestle Unique challenges on the road to outperformancewith maintaining or even transforming the company.It has been posited that the largest wealth transfer in history will take place over the next 25 years

33、,with an estimated$100trillion moving from baby boomers to their heirs and charities.1 Inheritors may find themselves grappling with several new challenges,including a changing global order,a push toward sustainable and inclusive investing,and the AI revolution.2 How they lead through these disrupti

34、ons will have a lasting impact on their companies,on business generally,and on society.1“The transfer of wealth from boomers to zennials will shape the global economy,”Financial Times,August 22,2023.2“Global flows:The ties that bind in an interconnected world,”McKinsey Global Institute,November 15,2

35、022.4The secrets of outperforming family-owned businesses:How they create valueand how you can become onefounder.As they mature and transition into new generations of leadership,however,some FOBs start thinking less about big bets and more about preserving value.Others just lose the founders entrepr

36、eneurial edge.Their growth slows,falling more in line with that of non-FOBs(Exhibit 3).Exhibit 2ROIC contributors,by size,family-owned businesses(FOBs)and non-FOBs1Midsize companies in our sample have annual revenues of$150 million to$5 billion,while large companies have annual revenues of between$5

37、 billion and$100 billion.Midsize family-owned businesses tend to be more efcient investors while large family-owned businesses tend to be more efcient operators.McKinsey&CompanyROIC,%Capital turnover,multiplesOperating margin(EBIT/revenue),%11.713.012.510.69.110.311.910.0Midsize FOBsMidsize non-FOBs

38、1.14x1.05xLarge non-FOBsLarge FOBsMidsize1 FOBsMidsize non-FOBsLarge1 FOBsLarge non-FOBsMidsize1 FOBsMidsize non-FOBsLarge1 FOBsLarge non-FOBsLarge FOBs outperform non-FOBs throughMidsize1 FOBs outperform non-FOBs due to 9.9 percentage point higher capital turnover1.51x1.48x+1.5 percentage point hig

39、her operating margins5The secrets of outperforming family-owned businesses:How they create valueand how you can become one4+5 equals FOB outperformanceOur research also revealed a notable gap in performance among FOBs and non-FOBs on our economic profit power curve,with a performance edge appearing

40、across all quintiles.And the best-performing FOBs fared much better than the best-performing non-FOBs:the top two quintiles show a performance gap three times larger than the average of the lower quintiles.Whats more,the highest-performing FOBs capture the largest share of economic profit and drive

41、outperformance across the entire FOB category(Exhibit 4).Exhibit 3Revenue year-over-year growth,by age,%Younger family-owned businesses target aggressive growthat frst.The focus changes to value preservation as they mature.McKinsey&CompanyNon-FOBsYears since foundedYears since founded+8.7percentage

42、points0258.116.84.73.6051015200510152026+Family-ownedbusinesses(FOBs)Non-FOBsFOBsThe highest-performing FOBs capture the largest share of economic profit and drive outperformance across the entire FOB category.6The secrets of outperforming family-owned businesses:How they create valueand how you can

43、 become oneWho are these outperformers?They comprise more than 120 FOBs in our research base,with ages ranging from under a decade to several centuries.They span ten sectors and operate across the world.Their average annual revenues range from$1billion to$95 billion,with average economic profit of$7

44、30million and average EBITDA margin of 20percent.Through our analyses,we learned that these top FOBs display four mindsets that are common to other FOBs but that are more pronounced in the outperformers.And,unlike most other FOBs,the outperformers combine the four critical mindsets with five strateg

45、ic actions that help them achieve and sustain top-quintile performance that truly differentiates them(Exhibit 5).Four critical mindsets of outperforming FOBsTraces of the following four critical mindsets can be found in the DNA of all family-owned businesses,but these mindsets are more pronounced in

46、 the highest-performing FOBs relative to others.1.They focus on purpose beyond profitsOur research shows that 93 percent of respondents from the highest-performing FOBs believe their company has a clear purpose beyond creating value for shareholders,as compared with 86 percent of the overall group o

47、f FOBs we surveyed.This sense of purpose can take many forms.It can be inward looking and focused on building the companys legacyfor instance,by maintaining a strong reputation,protecting the brand image,or nurturing a strong company culture.Or it can be outward facing,focused on maximizing value fo

48、r customers or generating positive impact in their communities.Whatever its nature,FOB respondents say they are willing to spend the time and resources needed to bring this purpose to life.Of the respondents from the highest-performing FOBs,91 percent say they have formal mechanisms to ensure that e

49、mployees understand,appreciate,and role model their purpose and values,as compared with 84 percent of the overall group of FOBs surveyed.Exhibit 4Non-FOBsFamily-owned businesses(FOBs)Economic spread created,by company in every quintile,$million,5-yearaverageThe gap in performance between businesses

50、that are family-owned and those that are not grows across quintiles.McKinsey&Company1086420240.5%0.1%0.5%1.1%1.1%0.7%TotalDeltaAverage deltaEveryone elseBest performers0.37%1.1%3x7The secrets of outperforming family-owned businesses:How they create valueand how you can become oneOne place where this

51、 mindset is most strongly reflected is in the highest-performing companies efforts to support their communities.In our survey,leaders in 58 percent of the outperforming FOBs strongly agree with the assertion that their companies“embrace social responsibility and sustainability,”compared with 39 perc

52、ent of leaders of other FOBs.One example of community support is a family-owned financial-services company in Latin America that tracks its environment,social,and governance efforts as closely as it does its financial performance.To foster transparency and accountability,it participates in all major

53、 market indexes that monitor sustainability and governanceboth domestically and abroad.The purpose-driven mindset is also reflected in the outperforming companies approach to hiring,promotion,and retention.Loyalty is a key value in most of these companies and,in our interviews,leaders revealed an ab

54、ility to look“through the cycle”and avoid layoffs in crisis periods.One Indian conglomerate with roots dating back to the 1800s has basically adopted a“never fire”approach to talent management.2.They take a long-term perspective and reinvest in the businessLeaders of outperforming FOBs cite their lo

55、ng-term perspective as one of the top three reasons for their success,alongside the ability to innovate and to expand into new markets and regions.They ruthlessly optimize for the longevity and resilience of the organization,even if it comes at the expense of short-term performance.Ownership structu

56、re plays a critical role in the outperformers ability to maintain this long-term perspective:92 percent of outperforming businesses in our research base have at least a 40 percent family ownership.Since they are not beholden to the demands of shareholders or the Exhibit 5Four critical plement 5 stra

57、tegic actionsFamily-owned businesses can apply a 4+5 value creation formula.+McKinsey&CompanyPurpose beyond proftsPurpose is embedded in the culture and is a guiding force for the organizationLong-term perspective Leaders look beyond short-term results and invest in the futureCautious fnancial stanc

58、e Leaders conservative approach afords them independence and resilienceEfcient decision makingProcesses are centralized and streamlinedDiversifed portfolio A signifcant share of revenues comes from beyond the core businessDynamic resource allocationLeaders actively reallocate resources to businesses

59、 and regions that create growthCapital efciency and operational excellence Outperformers are both efcient investors and operatorsRelentless focus on talent Outperformers are committed to attracting,developing,and retaining the best talentStrong governance processesOutperformers have robust mechanism

60、s for ensuring continued high performance across generations1321234548The secrets of outperforming family-owned businesses:How they create valueand how you can become onepressures of quarterly earnings reports,they can take a more patient and strategic approach to investing,which can ultimately lead

61、 to sustainable growth and success.One family-owned European retailer,for instance,had for decades remained resolutely focused on an“always buy,never sell”philosophy.In the late 1990s,it acquired an unprofitable brand,and,over a six-year period in which the acquired brands performance remained low,t

62、he company weathered public scrutiny and pressure to sell.Over time,however,the waiting game eventually paid off and the brand became one of the companys most successful acquisitions.Our research also revealed that FOBs,in general,tend to reinvest in the business rather than extract as much as they

63、can from the company through dividends(Exhibit 6).They are not under the same pressures that non-FOBs are increasingly under to prioritize higher dividends to meet shareholder expectations.Indeed,over the past five years,FOBs worldwide delivered dividend yields that were 12percent lower(on average)t

64、han those of non-FOBs.3.They are financially conservative and cautious about debt and high-risk investmentsIn general,FOBs tend to be financially cautious,with leverage ratios that are,on average,six percentage points lower than those of non-FOBs.The outperforming FOBs have even lower leverage ratio

65、s,by nearly ten percentage points(Exhibit 7).Interestingly,however,the outperformers say they take on more debt compared with other FOBs.For instance,about 40 percent of the outperformer respondents told us they use debt to finance more than 50 percent of their investments.By contrast,other FOB resp

66、ondents told us they use debt to finance only 12 percent of their investments.Given that they are using their own money,FOBs often prefer to invest their funds in marketing,sales,manufacturing,and other parts of the business where there are clear paths for growth and some precedent for returns,rathe

67、r than invest in high-risk areas such as R&D.This cautious approach to finances also helps the outperformers weather significant economic Exhibit 6Exhibit of 10Average dividend yield,family-owned businesses(FOBs)and non-FOBs%Family-owned businesses on average distribute lower dividends than business

68、es that are not family owned.McKinsey&CompanyNon-FOBsFOBs3.32.93.33.02.72.33.02.63.83.42.6 2.22.02017201820192020202120222.53.03.54.09The secrets of outperforming family-owned businesses:How they create valueand how you can become oneshocks such as the 2008 global credit crisis and the recent COVID-

69、19-triggered downturnand emerge in better shape than other FOBs and non-FOBs.For example,a family-owned logistics business in Europe credits its financial conservatism as a critical factor in its relatively quick recovery from global supply chain shortages in 2021.Through the crisis period,the compa

70、ny held a steadfast focus on the long term and prioritized preserving its strong cash position,which allowed it to avoid bankruptcy the past few years while others were falling prey to industry contraction.4.Their internal processes allow for efficient decision makingOur conversations with leaders i

71、n outperforming FOBs point to greater efficiency in decision making,in part because of two factors:centralized but flexible processes and engaged employees.Despite the existence of investment committees,for instance,the big decisions taken by leaders and teams in outperforming FOBs are usually highl

72、y influenced by a single individual or several members of the family who can act more decisively than leaders in non-FOBs.The non-FOBs usually rely on multistage,multiparty processes that can be difficult and time-consuming to navigate.Interestingly,the outperforming FOBs distinguish between efficie

73、nt decision making and fast decision making:when family members agree,they make choices quickly.But when family members disagree,the outperformers take advantage of their flexible structures and processes to consider all the different points of view.They understand that decision making can be both q

74、uick and deliberateand that the ability to adjust as needed is a true differentiator in performance.The benefit of having engaged employees is that“once the CEO has a strategy in mind,it is easier to implement any changes,”leaders at one Japanese FOB told us.This approach to decision making has allo

75、wed the company to execute major category and market expansions every ten to 15 years.Five strategic actions that set outperforming FOBs apartThrough our analyses,we discovered that the very best FOBs combine the four critical mindsets just Exhibit 78581787786837770917474847672708173696783787365Exhi

76、bit of Average net debt-to-equity ratio,family-owned businesses(FOBs)and non-FOBs%Family-owned businesses on average have lower leverage ratios than businesses that are not family owned.McKinsey&CompanyOutperforming FOBsFOBsOutperforming non-FOBsNon-FOBs20172018201920202021202260657075808590958210Th

77、e secrets of outperforming family-owned businesses:How they create valueand how you can become onethat programmatic M&Athat is,carefully choreographing a series of deals around a specific business case or M&A theme,instead of pursuing more organic,episodic,selective,or large transactionsis far more

78、likely to lead to stronger performance and less risky for any organization.FOBs seem to be taking this message to heart:when asked about their M&A activity,about 40percent of all FOBs told us they had pursued two or more small or midsize deals per year for the past ten years.The current findings sup

79、port previous McKinsey research that shows FOBs tend to make smaller but more value-creating deals than non-FOBs.Leaders at a family-owned industrials company in Europe told us they actively try to avoid“core myopia.”For years,they said,they had failed to recognize growth opportunities in recycling

80、and sustainability.Now,they prioritize and pursue small acquisitions that they think can enhance their market position.They decide which companies they intend to acquire and for how much,“remaining patient and avoiding rushing into transactions until the opportune moment arises.”Further,many of the

81、outperforming FOBs seemed more willing than peers to take bolder risks on occasion,with 58 percent indicating they had pursued at least one large deal in the past ten years,compared with 36 percent of other FOBs indicating the same.described with five strategic actions that truly set them apart.1.Th

82、ey actively diversify their portfoliosThe outperforming FOBs in our research base have highly diversified portfolios.One conglomerate reaches more than one billion customers across its consumer goods,agriculture,and real estate divisions,among others.Another FOB started in waste management but has e

83、xpanded into logistics,clean energy,and mobility solutions.Indeed,our research shows that 40 percent of the outperformers garner more than half of their revenues from streams outside their core businesses.By contrast,only 7 percent of other FOBs had a similar share of noncore business revenues(Exhib

84、it 8).Moreover,70 percent of the outperformers told us they will prioritize expansion beyond the core over the next five years by moving into new industries or geographies or by targeting disruptive businesses.M&A seems to be the go-to diversification strategy for these organizations.Some 66 percent

85、 of respondents to our survey told us they pursued M&A to access new technologies,63 percent to enter new industries,and nearly 60 percent to tap into new geographies.Of course,not all M&A pursuits yield the same returns.Previous McKinsey research has found Exhibit 8Share of company revenues that co

86、me from activities outside core businesses,%of respondentsOutperforming family-owned businesses have a substantial share of revenues that come from beyond their core businesses.McKinsey&Company50%7603341473050%30%OtherOutperformingWeb Exhibit of 1211The secrets of outperforming family-owned business

87、es:How they create valueand how you can become onefrom petrochemicals to energy,retail,and telecommunications.But to balance out its strategic pursuit of growth,the conglomerate has also built into its finance and strategy discussions formal reevaluations of business performance.It periodically dive

88、sts underperforming divisions and reduces its ownership interests while reinvesting those resources in higher-growth opportunities.This culture of growth through continuous improvement is so strong that last year the company announced a multibillion-dollar plan to transition from its core business i

89、n petrochemicalswhich at one point accounted for more than three-quarters of the companys revenuesto new opportunities in renewables.Leaders attribute the companys success to the founders direct,personal involvement in identifying big bets and building the financial,operational,and talent competenci

90、es required to reallocate resources and act on those bets.3.They are efficient investors and operatorsAs mentioned earlier,at the outset of their tenures,FOBs tend to perform better than others because they can allocate capital more efficiently.But as they grow and scale,their outperformance tends t

91、o come more from efficient operations.Interestingly,the very best FOBs can do both.Our data shows that the high-performing FOBs have a capital turnover ratio of 1.4in line with that of outperforming non-FOBs and higher than that of all other FOBs in our sample.The high performers also 2.They dynamic

92、ally reallocate resourcesPrevious McKinsey research confirms that dynamic resource allocation is one of the best ways to achieve growth in an organization.Companies that reallocate more resources more often have been shown to generate significantly higher returns to shareholders,experience less long

93、-term variance on returns,and have a higher likelihood of avoiding acquisition or bankruptcy.Our analyses show that outperforming FOBs aggressively and dynamically allocate their resources toward businesses,regions,and channels they believe will drive the most growth.In fact,about 60 percent of the

94、outperformers said that,over the past five years,they had shifted more than 30 percent of their capital across businesses or regions,targeting higher-value opportunities.By contrast only 20 percent of other FOBs had done the same(Exhibit 9).In general,FOBs enjoy an advantage in this area compared wi

95、th non-FOBs.Their focus on purpose along with their longer-term perspective and efficient decision-making structures allow them to avoid the politics and inertia that can drive allocation discussions off the rails.Leaders from outperformer FOBs we spoke with say they take specific actionsin some cas

96、es,even cultural changesto guard against inertia.A centurys worth of diversification has given one family-owned conglomerate in Asia footholds across a wide range of sectorsExhibit 9Capital that has shifted between businesses or regions,past 5 years,%of respondentsOutperforming family-owned business

97、es reallocate resources more aggressively than others.McKinsey&Company30%2072859411030%10%OtherOutperforming12The secrets of outperforming family-owned businesses:How they create valueand how you can become oneset of data to evaluate organizational performance.For instance,these businesses used more

98、 key performance indicators(KPIs)to measure executive performance,including top-and bottom-line figures and valuation metrics.When we asked all the FOB respondents in our research base which of seven designated metrics they had considered in evaluating executive compensation,the outperformers were 1

99、0percent more likely,on average,to indicate that they were tracking all the KPIs we listed.The last and arguably biggest differentiator is that outperforming FOBs focus on innovation.They invest twice as much in R&D as other FOBs do,and back up those investments with performance management systems.O

100、ne US-based family-owned company that provides telecommunications and automotive services established a series of programs to support the creation of a tech-venture ecosystem in a part of the country that has not traditionally been a tech hub.The company launched an accelerator for tech start-ups an

101、d a not-for-profit program to drive job creation in adjacent industries.Through direct and indirect investments in these programs and companies,the company is report operating margins that are almost 10 percent higher than that of outperforming non-FOBs and nearly twice that of other FOBs in our res

102、earch base(Exhibit 10).Their higher-than-average investment and operating performance is driven by three factors.First is their operating DNA,which is passed down through generations and shapes the way their businesses operate,including decision making,customer service approach,talent management,and

103、 even developing functional expertise.In South Korea,for instance,the chairman of a family-owned apparel and footwear manufacturer has visited the production line daily for decades and knows each worker by name.Such direct involvement from the company founder has helped foster a sense of loyalty and

104、 ownership among employees.Through this access,workers are also getting a first-hand perspective on the operational challenges and opportunities across the organizationand,as a result,are deeply motivated to weigh in with potential solutions.Second,compared with the other FOBs in our research base,t

105、he outperformers use a broader Exhibit 10Outperforming family-owned businesses(FOBs)are asgood as outperforming non-FOBs in capital efciency.and are much better than them in operational efciency Outperforming family-owned businesses are efcient at both investing and operations.McKinsey&CompanyOther

106、FOBsOther non-FOBsOutperformingnon-FOBsOutperforming FOBsOther FOBsOther non-FOBsOutperforming non-FOBsOutperforming FOBsAverage capital turnover,201722,multiplesAverage EBIT margins,201722,%per year9.49.317.716.21.34x1.25x1.4x1.4x13The secrets of outperforming family-owned businesses:How they creat

107、e valueand how you can become oneto develop the next generation of family members.A family-owned electronics retailer in Africa,for instance,puts all family members interested in joining the company through a rigorous interview process(even tougher than their standard recruiting process)and places t

108、hem in jobs that are aligned with their skill sets.An Asian FOB in the apparel industry mandates that family members do a series of role rotations,periodically tasking them with initiating new M&A deals,ventures,or resolving existing challenges to evaluate their problem-solving skills.5.They continu

109、ally review their governance mechanisms to ensure strong corporate performance across generationsOur research reveals that outperforming FOBs take the separation of family and business matters very seriously.About 80 percent of the outperformer company respondents reveal there is formal documentatio

110、n in their companies with clear guidelines on the roles and responsibilities of family members.More than 90 percent of the outperformer respondents told us there is an effective and independent board of directors in place,compared with 72 percent of respondents from of all other FOBs who say the sam

111、e.And 85percent of respondents from outperforming FOBs report that their companies have a formal forum that meets regularly to discuss family and business issues,compared with only 66 percent of all other FOBs in our research base.In interviews,leaders in the outperforming FOBs touted the benefits o

112、f having strict guidelines about family member roles and responsibilities,especially if the business is still family-led.At a second-generation 100 percent family-owned healthcare services business in the United States,two siblings share leadership roles.One is the president and focuses on strategic

113、 responsibilities across three business units,while the other is the chief growth officer and focuses on sales.Their positions very intentionally intersect but dont overlap.And the siblings bring unique and complementary skills to the leadership team.Before they reached their current positions,howev

114、er,the siblings spent time in different parts of the company to develop a sense of ownership and connection to the company culture,deepen their understanding of processes,develop their management skills,and most importantly,earn helping others while ensuring its own access to top technology innovati

115、ons and talent in the region.4.They maintain a relentless focus on attracting,developing,and retaining talentTalent management is an obsession for the highest-performing FOBs.In our survey,86 percent of respondents at outperforming FOBs agree or completely agree that their company attracts the best

116、talent.More than 90 percent either agree or completely agree that their company successfully identifies,trains,and develops top performers.One family-owned luxury retailer in Europe takes an end-to-end approach to talent management.To attract recent graduates and younger workers,the company develope

117、d and launched a two-year,nine-part social media campaigna series of“day in the life”posts filmed by and with existing employees.It also established a program to identify and train thousands of internal ambassadors to help and onboard newer workers.Partly due to these initiatives,the group has been

118、voted a top employer among business school students for 18 years in a row in the retailers home country.At the senior-leader level,the company focuses on offering competitive salaries,which it benchmarks constantly.It also provides leaders exclusive proximity to members of the founder family,which c

119、reates a sense of personal attachment and accountability for the companys results among senior leaders.As a result of these efforts,the company boasts an average length of service between six and seven yearsabout three times higher than the typical tenure for employees at luxury retail companies.Alm

120、ost one-quarter of the companys workforce has been employed there for more than 15 years,and of these,more than 70 percent have been with the company for more than 20 years.The leaders perspective is that recruiting exceptional talent and retaining them for long tenures has allowed the company to bu

121、ild and maintain a strong culture of artistic expression,attention to detail,and long-term visiontraits that are crucial to success in a business that hinges on creativity and reinvention.Also in our survey,more than 80 percent of outperforming FOB respondents report that their companies have built

122、effective training programs 14The secrets of outperforming family-owned businesses:How they create valueand how you can become oneThis formula of four critical mindsets plus five strategic actions can help to ensure that FOBs capitalize on the potential for significant,profitable,and sustainable gro

123、wth.The value at stake is substantial:companies that have implemented this formula successfully have been able to climb higher on the economic-profit curve over the past five years,moving up one or two quintiles.Others that follow this formula can do the same and potentially realize a fourfold incre

124、ase in value creation over the next decade,according to our estimates.The implementation will of course look different depending on the organization.Companies facing imminent generational transitions may need to focus first on shoring up their governance mechanisms and succession planning.Businesses

125、 in stagnant or vulnerable industries may want to focus first on dynamic capital allocation practices to boost their investments in R&D,new business building,and M&A.The formula must be applied judiciously,and with careful attention to what will be most effective given their specific circumstances.R

126、egardless,the 4+5 formula provides a path for FOBs(and non-FOBs),of all sizes and ages,to improve their performance and continue to do what they have done for decadessupport sustainable and inclusive economic growth,raise employment,and improve healthcare and education in communities around the worl

127、d.the trust and respect of the broader organization.Whats more,this pathway to leadership has been institutionalized at the company:a third-generation family member is on a similar development journey and currently serves as chief of staff.Family governance,when well-executed,can be a powerful way t

128、o build corporate culture.However,FOBs may also want to look outside blood lines for leadership.Research has shown that professional management,when well identified and given the right conditions to prosper,can produce better results than family-only structures.6 Indeed,FOBs are increasingly tapping

129、 into the expertise of professionals from outside the family,and our research shows that the outperformers do so even more.For instance,95 percent of the outperforming FOBs in our research base indicated that they actively involve nonfamily executives in setting portfolio strategy,compared with 85 p

130、ercent of all other FOBs in the research base.One outperformer,a CPG company based in Latin America,decided last year to break a generations-long sequence of family leadership and hire a CEO externally.A family-owned European pharmaceutical company did the same.Both organizations followed practices

131、that would be standard for any company,family-owned or not.For example,both engaged a global recruiter to conduct their searches and asked them to focus on talent rather than cultural fit.As FOBs grapple with the question of succession,they would do well to keep their focus more on longevity of the

132、business rather than on continuing family stewardship.Designed by McKinsey Global Publishing Copyright 2023 McKinsey&Company.All rights reserved.Eduardo Asaf is a partner in McKinseys Mexico City office,where Igor Carvalho and Jose Tellechea are consultants;Acha Leke is a senior partner in the Johan

133、nesburg office;and Francesco Malatesta is an associate partner in the Dubai office.The authors wish to thank Aliyah Allie,Michael Birshan,Fredrik Dahlqvist,Gemma DAuria,Heinz-Peter Elstrodt,Avinash Goyal,Franck Laizet,Ari Libarikian,David Quigley,Liz Hilton Segel,and Sergio Waisser for their contrib

134、utions to this report.Scan Download PersonalizeFind more content like this on the McKinsey Insights App6 Nicholas Bloom,Raffaella Sadun,and John Van Reenen,“Family firms need professional management,”Harvard Business Review,March 25,2011.15The secrets of outperforming family-owned businesses:How they create valueand how you can become one