Family businesses weakened, hurting
Published:Wednesday | November 9, 2011 | 12:00 AM
New research on family-owned businesses points to a recession-battered sector characterised by falling revenue over three years, poor inventory levels, and limited financing.
The research, led by the Private Sector Organisation of Jamaica with the backing of the Inter-American Development Bank, is part of a three-year project launched in March 2009 to deliver a more efficient family business structure.
The PSOJ/IDB FamBiz project identified about 80 Jamaican businesses which named themselves as owned, managed or controlled by one or more families, and has worked closely with about 30 of the companies.
Six of the 30 were selected for case studies published in a manual that was released on Monday at a FamBiz workshop in Kingston.
The six were named as: Stewart and Sons, Garbage Disposal and Sanitation Systems Limited, Jamaica Small Loans Limited, Versan Educational Services Limited, The Empire Hotel, and Prism Communications Limited. Some of the company names were changed to protect the businesses' identities.
Family businesses are said to contribute 32 per cent to Jamaica's GDP.
The research suggests that increased competition and reduced aggregate demand - occasioned by a cumulative 14. 9 per cent decline in the goods-producing sector, which was led by a 50 per cent decline in mining and quarrying and a 9.6 decline in manufacturing, during the economic downturn — has served to highlight existing problems among family businesses.
Among the project participants, none had revenues in excess of US$2 million (J$172m). The businesses ranged in nature from start-ups to mature companies involving mostly first generation, but some second and third generation family members.
Dr Robert Blunden, project consultant and Associate Professor of Strategy Management at the School of Business Administration at Dalhousie University in Canada, said Monday that the range of issues affecting family companies were, most commonly, a lack of strategic planning, succession planning, financing, organisation structure, marketing/sales/business development, human resource systems/policies and staffing, boards of directors and advisers, and turnaround planning.
"Financing appears to be a bigger problem for Jamaican family businesses than in Canada. The Jamaican economy is in recession and interest rates are much higher than in Canada or the US," Blunden said at the FamBiz workshop.
However: "There is generally strong family commitment to the businesses, their survival and success; families are strong, committed and loving, but family members sometimes have differing goals and working together can be difficult. Family members are uniquely able to push each other's buttons," the consultant said.
The PSOJ project is aimed at improving family business competitiveness.
The IDB's Multilateral Investment Fund, which runs a cluster of similar projects in Latin America, provided a technical cooperation grant of US$526,050 for the 36-month FamBiz project.