In Praise of Family Business
In his 1954 classic, The Practice of Management, Peter Drucker[i] wrote that ‘the purpose of a business is to create customers’. It is a wonderful insight. In contrast, the nightly fare on A Current Affair or Today Tonight always includes stories about businessmen who are ripping off their unsuspecting customers – overcharging, or providing dodgy products, or charging for services not supplied.
Recently, when staying at our son's house in Sydney, I tried using Julian’s exercise bike. Unfortunately, the pedals were slipping, so I visited Exagym, where Julian had purchased the bike, expecting to buy a replacement part for one that had worn out. The proprietor, Chris Quinn, quickly diagnosed the problem, checked the details of Julian's bike and his address, and volunteered to come around and fix the problem. This he did, and then he declined my offer of payment saying, ‘it is all part of the service’.
As we chatted, I found out that Exagym was part of Infiniti Fitness Systems, a family business founded by his father in 1982. I was not surprised. Many of our clients at my consulting business, Fenwick Software, are family businesses, some into the second or third generation. Colleagues such as David Bilston at MFB who make steel cabinets, Adam Hazeldene at Hazeldene’s Chicken Farms and Helen Ward at Ward McKenzie, who make the bi-carb soda we all have in our pantries, instinctively understand Peter Drucker's wisdom. They have been looking after their clients well for decades.
Vaclav Havel wrote:
It is a great mistake to think that the marketplace and morality are mutually exclusive. Precisely the opposite is true: the marketplace can work only if it has its own morality – a morality generally enshrined in laws, regulations, traditions, experiences, and customs.[ii]
Any business that behaves unethically, or illegally, or simply not in the interest of its customers fails because very soon it has no customers.
So next time you see one of the rip-off stories on TV, check the longevity of the business. In many cases, you will find that the business is bankrupt, or in receivership, or simply not operating anymore. And the proprietors will be gone or in hiding, and certainly unwilling to talk to journalists.
Family businesses operate on a value system of doing the right thing by the customer. It is in their blood. That is why they thrive and grow.
[i] Peter Drucker was a prolific writer, consultant and teacher. He had a profound influence on the theory of management and the role of the manager in society. He invented management by objectives and he coined the term ‘knowledge worker’. He explained that the goal to maximise profit was a false one for the businessman – it provided no guide for action - whereas to create a customer guided everything.
He wrote about forty books, most of which are still in print.
My favourites are: The Practice of Management (1954); Managing for Results (1964); The Effective Executive (1967). [ii] Vaclav Havel, Summer Meditations, p. 67.