Social Impact in Hundred-Year Family Businesses

By Dr. Dennis Jaffe

BanyanGlobal Family Business Advisors

10th September 2019

Long before the words “stakeholder value”, “triple bottom line” and “impact investing” entered business schools and boardrooms, Centennial family conglomerates were pioneering growth strategies that incorporated and put these concepts in action. Their commitment stemmed from shared values.

Centennial business families provide operational models and enduring examples of social impact. Our new working paper, Social Impact in Hundred-Year Family Businesses, looks at their philanthropy activity, corporate social responsibility, and community investments as expressions of business families’ values and purposes and at how this commitment is transmitted across generations.

Our approach to social impact looks at how business families strategically combine philanthropy (through family foundations or informal giving), impact investing (most often through the family office), and corporate social responsibility programmes to maximise social impact. They drive social change through a mix of charitable, investment and business decisions driven by a set of core values, as well as the skills and interests that form the family’s DNA. Framing goals not just around the family, but through the lens of local (and for some families, national and international) communities gives the family a clear purpose and focus for how they want to use their wealth.

For this ongoing research project we interviewed more than 100 large, global family enterprises (extended families who have a family business, family office or multiple shared assets) from 20 countries. The average net worth for these families was close to USD 1 billion. The families had been together as partners for more than three generations, approaching 100 years, and had been able to maintain a shared identity and close personal family bonds among growing numbers of people. While the families owned businesses in every sort of industry, and represented many cultures, these “generative” (e.g. continual value-creating) families had some remarkable similarities in their values and purposes. This is the 6th working paper from the research that focuses on their social, community and environmental commitments and values.

What We Found

The families who participated in our study realise the power of these socially impactful programs to engage all generations within the family, as well as other stakeholders like employees and customers. Without clear values and purpose for their wealth, families tend to fragment and split up, struggle with entitlement and feel disconnected from the communities they live in. Building a strong sense of purpose and mission around social impact helps foster long-term success and family cohesion.

There is often a personal connection between business families and the communities in which they operate. Because the family is concerned about these communities and the business’s reputation, investments in these communities are likely to have both a social and economic rationale. Hundred-year (centennial) families view social impact and sustainability as core strategic activities, rather than activities peripheral to the business, initiated just to improve the business and the family’s reputation.

Our centennial families find that the benefits of engaging in values-driven social impact extend way beyond fostering “familiness” and cross-generational connections. This engagement also creates a strong sense of shared purpose and alignment between the family, the business and their communities. This in turn contributes to long-term business success and legitimises the role of the family in the communities they are embedded in. For these centennial families, “profit”, “people”, and “planet” are not just words on the cover of their glossy CSR reports; they are criteria by which to evaluate options, make decisions, and measure success. This creates more purposeful and meaningful work, fosters client and employee engagement, engagement and leadership development in the rising generation, and drives innovation and resilience. Overall, these families find that social and environmental concerns are powerful and effective drivers of growth and family engagement with the family enterprise.

Most academic and practitioner research on social impact is focused on US-based families. The US encourages pursuit of social impact through the tax advantages conferred by family foundations. However, this is not the case in most other countries. As a result, business families based outside of the US (more than half of our total sample) have no incentive to develop foundations. Instead, they more often employ business structures to support the growth of their local or national communities or give informally and directly to individuals and organisations.

We also found major differences in the way non-US families define and practice sustainability and social impact, in the extent to which they disclose and communicate their philanthropic activities, and in the degree of formalisation and professionalisation of giving and impact investing.

We found that US companies view CSR as more akin to philanthropy, and focus on actions outside the business’s main focus, for example, by supporting a local soup kitchen or sporting events. By contrast, non-US companies tend to think more strategically of how to create local ecosystem that strengthen the business beyond reputation. Focusing on partnerships with schools or building health care and housing is a common example.

The families in our study are “sustainable” by definition: they have adopted a long-term view and care about the future of the business just as much, if not more, than immediate profitability. This may be reinforced by cultural differences: the European, Middle Eastern, and especially Asian firms included in our study value business longevity. Most are privately held firms or, where public, controlled by the family, so they care less about quarterly reports and are more concerned about survival for the next generation and are focused on more than profit from their ventures. Their social mission is at the core of their activities, and this allows them to model, teach, and transmit these values to each new generation.

Dr Dennis Jaffe is the Senior Research Fellow at BanyanGlobal Family Business Advisors.