What are the Benefits of Community Engagement for Family Businesses?

By Fiona Geng and Martin Kemp, Family Business Research Foundation

16th April 2021

The Family Business Research Foundation’s 2002 Sector Report shows that family firms play a critical role in the UK economy. We have seen the strong and resilient qualities in families and businesses throughout business history, and their success has made them the backbone of the economy and major tax contributors.

However, the social and community impact of family businesses has not been widely examined in the family business research field. Community engagement is becoming more important for family business governance.

The Family Business Research Foundation worked with researchers from the Universities of Birmingham and York to carry out an in-depth study of the how family businesses in the UK engage with their diverse communities. The report from this research Family Business and Community Engagement looks at the benefits for family firms of closer involvement with their communities and examines the different ways they engage with them. It shows how family firms’ community activities are grounded in long-term relationships with a variety of different communities and organisations, and not only those local to where they operate. Family businesses often make significant contributions to the communities they are embedded in, including making financial and in-kind donations, encouraging employee volunteering, providing business management advice and expertise as well as sharing other skills, making environmental improvements, and supporting local business and community organisations.

From family business perspective, there are several benefits that family firms could gain from such activities. For example:

First, community engagement activities and collaborating with community-based organisations can foster trust between the business and its stakeholders, and there can be reputational benefits as well. Such activities can help to communicate the business family’s core values to its communities and stakeholders, and develop their understanding of both the family and the business. As well as reputational benefits, investing in such relationships and social impact may make the firms more resilient and sustainable in the long-term.

Second, community engagement and action to improve social outcomes may help to engage the next generation of the family business. It may facilitate the communication of the business family’s values to younger members of the business family, offering them valuable opportunities to gain new skills and experience, learn more about the family business and its relationships with key stakeholders, and contribute to enhancing the business’ reputation and social impact.

Third, there can also be benefits for the family firms’ employees. After all, many of the people living in the community may be employees or directly related to employees. There are potential benefits for both professional development and motivation. Encouraging employees to participate in activities that contribute to positive social or community outcomes may enable them to develop new skills, can help build confidence, and increase their motivation and loyalty to the firm. Providing young people from the local community with opportunities to work in the family business, to learn and develop their skills, may bring benefits for the business in long run.

A central focus of the research was to understand what UK family firms can do to enhance their social and community impact. For example, it is important to plan community engagement activities carefully, defining clear goals and the desired outcomes for both the community partners and the family business, identifying how these outcomes will be delivered. The firm’s community engagement priorities may sit within a broader corporate social responsibility strategy. A key challenge is how to define and measure the outcomes of a firms’ community engagement activities and the social impact of its activities, and the new report and guidance provide some practical suggestions for how to do this. It is important for family firms to communicate how they are engaging with their communities and the outcomes of such activities, particularly among those communities themselves. For example, activities and their impact can be reported through a corporate social responsibility report, a separate community engagement or social impact report, through press releases, social media and website news pages, as well as internally within the organisation. Finally, the research also showed that family firms can successfully deliver their community priorities and enhance their social impact by supporting business umbrella organisations or work in partnership with charities, NGOs and grassroots community organisations, such as community foundations. This can potentially benefit family businesses that want to raise awareness of their brand in other regions or countries.

In summary, community engagement and a focus on social outcomes can provide significant benefits for family firms and the communities they form part of. Community engagement is becoming more important from a corporate governance perspective. But we still need to understand more about the impact of family businesses’ operations on communities and how they engage with their communities as well as ‘what works’ in different circumstances and for different types of family business.

The full report from the Family Business Research Foundation, Family Business and Community Engagement, was published in August 2020 and can be downloaded here

A short checklist to assist in the planning of community engagement activities can be accessed here

The Family Business Research Foundation’s 2020 Family Business Sector Report can be accessed here