The business advantage for family-owned construction firms

Did you know that 14% of construction firms are family-owned? And when you consider the number of self-employed contractors who involve family members in the business, that number is surely higher. To understand the benefits of being a family-owned enterprise, we asked Josh Baron, a senior lecturer at Harvard Business School and co-founder of the family business advisory group BanyanGlobal, for his perspective, along with advice for capitalizing on your family-business status. 

—Interview by Margot Lester, edited by Bianca Prieto

What are the competitive advantages of being a family-owned construction company? 

The main advantages are the ability to have engaged, long-tenured employees that are committed to your company; invest in your business based on what creates value rather than pleasing financial investors; build authentic and trusted relationships with customers, suppliers and communities; and make quick decisions about how to pivot your strategy as conditions change. Those advantages are not guaranteed.

As a family business leader, you need to work to activate and sustain them. That is especially important because family businesses also have competitive disadvantages, such as access to outside capital to grow. 

How can contractors leverage being a family-owned enterprise?

If you’re interacting with end-consumers, consider whether to brand your company as a family business. The research shows that the public tends to trust family companies more than others. It is also likely that many of the other companies you interact with—suppliers and customers—are also family businesses. With those that are, lean into that shared family connection. Talk about your values and goals and where they come from. 

Look for the kind of win-wins that only come from playing the long game in your negotiations. Foster connections between the next generation of families who are working in the business. For example, can you provide an internship to the child of your supplier and vice versa? Treat your shared family business heritage as a common bond that can benefit everyone involved.

What's a tendency family business owners should avoid?

The most common mistake is assuming that the next generation needs to do things the same way that you did. As businesses grow and markets evolve, different skill sets and approaches may be required to lead into the next era. There are some aspects of a company that should never change, such as the values that make your company successful. But many other aspects of the business must evolve—and that may require a different approach than you are taking to it. As you think about the future, imagine what the business will need over the next 20 years to continue thriving. What will have to change? What must stay the same?

What has the most impact on family-owned business longevity?

A willingness to talk about the difficult issues that come along with transitioning from one generation to the next. Most problems can be solved if they are constructively put on the table. If they can’t be, it is much better to know that and exit before relationships deteriorate. It’s easy to avoid tough conversations about the future because there’s always more work to do in the company, and these topics are challenging to discuss because they touch on mortality, legacy, fairness, etc. It’s essential that you create the space to have these conversations early on and work towards alignment. If you find it difficult, as many do, consider using a facilitator to help you.

What else should family business owners know?

As a family business, you have to play to your strengths in terms of attracting and retaining the talent your company needs to thrive. Family businesses can’t always offer ownership or the opportunity to rise to the very top of the pyramid—though some do both. But you can provide a culture where employees feel like they matter, they are part of something larger than themselves and they have an ability to have real influence since the owner of the business is there on a regular basis.

Make sure you have defined the kind of culture you want inside your company, demonstrate your commitment to it through your actions, like compensation and benefits and measure it through surveys or other tools. 

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The Level is curated and written by Margot Lester and edited by Bianca Prieto.