How world's oldest family businesses have survived for centuries

Family values form the core of any family. In a business family, the values of the family become intertwined with the business of the family. Studies have shown that these values are the foundation of a successful family business. In fact, the common thread that binds all multi-generational family businesses is the focus on the core family values.

It is worthwhile to note that family businesses fail to perpetuate beyond a generation. Only 30 per cent of all family businesses make it to the second generation and only 3 per cent last for more than four generations or beyond.  In this context, the Japanese family businesses stand out like a shining example for others to follow. The oldest family business in the world is a Japanese one -  Hoshi Ryokan - a hotel which is owned and run by the same family since the year 718.

It is a business which is 46 generations old! Further, out of the total 5,000 companies in the world that are more than 200 years old more than 60 per cent (approximately 3,000 companies) are in Japan.  Sudo Honke - makers of the Japanese wine sake, is another example of an old family business. It is in its 55th generation.

Is there some special ingredient that the Japanese have that makes their businesses go on for generations? Research carried out globally points out that the adherence to family values is the key reason for Japan to have the distinction of having the oldest family businesses.  The core value in any family, anywhere in the world, is the trust between its members. In Japan this core family value is taken into the business very seriously.

If anyone has ever worked with Japanese, they know that the early stages of the relationship are focused on building trust. This does not happen in a day or even weeks. Building trust is a process that takes time. It cannot be hurried nor imposed on either party. However, once the trust is established between the Japanese and their partners, then the relationship becomes a life-long one. The core ingredient in 'trust' is transparency and the Japanese are clear about it. (no puns intended!)

Generally , trust needs to be built not only within the individual family members but even with the non-family employees of the business. The recent fracas between the Infosys board and the main promoter was based on the issue of trust or the complete absence of it between the two sides.

Trust can be seen as involving two qualities - character and competence. It is generally believed that character is inherent and is the result of an individual's values, attitudes and behaviour. Competence, on the other hand, can be acquired andis more granular and comprises of education, skill-sets and capabilities. Family business owners, typically, look for character within the family and expect competency from the non-family members. However, this is a mistake.

Successful family business owners build trust within and outside of family by focusing on both qualities equally.

For non-family executives, competency needs to be combined with the understanding of the character of the person. Similarly, for family members having the right character need not be the only quality for them to qualify to join the business. Competency must be evaluated as well. Further, trust is a two-way street - both sides need to trust each other. It is not enough for the family business owner to tell his senior employees "trust me"; he should be ready to trust the employees when they say the same thing.

Trust is delicate, but it can be built, measured, even tested. Repairing of broken trust is not impossible but takes an enormous amount of effort and time. It is important though as it is absolutely necessary for a productive and cohesive professional relationships. Family business owners need to remember that trust is an effective way to reduce uncertainty in interpersonal relationships. They also need to be aware that when the level of trust starts to go down, people will generally start to display self-protection behaviours and will be less open in their dealings.

Since trust is the key factor in fostering longevity in family businesses, the owners need to actively work on building this quality among their family and non-family members. They could remember the following to help them as they focus on trust:

Communicate openly and honestly:  The communication needs to be open and honest both within and outside the family members. For example, the owner needs to be open and clear about the role of various family members in the family business. Not all family members will have equal roles. This communication will help not only the family members but even the non-family executives, who very frequently get caught between different family members. This will also bring in a shared sense of certainty which will only augur well for the family business.

Be fair and be seen to be fair: It is ancient wisdom that the king needs not only to be fair in his dealings with his people, but he should also be seen to be fair. Trust is built by displaying fairness in dealings with employees and family members. The set of rules should be the same for everyone. It is when there are different rules for different people that distrust starts setting in. It could be as small a matter as coming to the office on time. A family business owner told me that he insisted that his son come to work punctually each day. He wanted his employees to see that he was fair in his dealings irrespective of whether it was his son or an employee. Giving his son the leeway to come at any time while insisting that all non-family employees came on time would have made him seem unfair. He admits that this one small step helped him build trust within his employees.