Family-owned firms show resilience during economic crises | Business| Economy and finance news from a German perspective | DW | 10.06.2010
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Family-owned firms show resilience during economic crises

Huge DAX-traded companies in Germany dominate media reports of economic strife, but behind the scenes a surprisingly powerful force of family-owned businesses is doing its part to keep the country's economy afloat.

The Oetker brothers of Dr. Oetker GmbH

The Dr Oetker family food dynasty survived two world wars

As the global economy struggles to recover from recession, all eyes are on the fates of publicly traded, multinational conglomerates. In Germany, the 30 largest DAX-listed companies like Deutsche Bank, Siemens, Deutsche Post or Deutsche Telekom tend to dominate media coverage.

But behind the scenes a significant economic force goes largely unnoticed. Family-run enterprises make up more than 50 percent of Germany's gross domestic product, and experts say they provide a catalyst for job growth.

Nine out of 10 companies in Germany are owned by families. Those companies are often marked by flexibility, long-term planning, responsible business practices and a willingness to give young people that valuable first job.

But that is not to say all family-owned businesses in Germany are quaint operations reflecting pristine ethics. Some relentlessly ambitious families grow their businesses into national chains and occasionally run afoul of the law.

For instance Anton and Christa Schlecker, owners of the international drugstore chain bearing their last name, were each sentenced to 10 months probation and a million-euro fine in 1998 for cheating some of their employees.

Long-term planning

Employees at work at Halberstadter sausages

Halberstadter sausage is made by a family-owned business

But according to Johann Eekhoff of the Institute for Small Business Research in Bonn, family-run enterprises tend to follow better business practices than their publicly-traded counterparts. They tend to think in terms of generations rather than quarters and hope their businesses will also provide their children with a livelihood.

"Companies which operate in terms of quarters are basically forced to bring the data about their businesses to a point where the individual quarters do not reflect a decline," he told Deutsche Welle.

"Family enterprises are in the position to say: 'We're dealing with a phase here and we need to survive. Something went wrong, and now we need to fix it. We'll do so calmly and stabilize our business for the long-term. We may have to invest again for the short-term and, yes, maybe we'll lose some money,'" he said.

In a time of economic difficulties, family-run enterprises are helping to keep unemployment in check. Thanks to a system of vocational training, young people in Germany are in a comparatively good situation compared with Spain and France, where nearly 50 percent of their counterparts are unemployed.

"The problem is that those countries don't do vocational training. Young people are expected to go straight from school into a fully-paid job, as if they had completed training. Most companies shy away from hiring them," Eekhoff said.

An employee at Moeck, which makes recorders

Moeck recorders have been produced by the same family since 1930

Stabilizing element

But family-run enterprises do not only appeal to young people. According to the Emnid market research institute in Bielefeld, 60 percent of all German employees work for a family business, and 90 percent say they would like to.

Patrick Adenauer of the Association of Independent Entrepreneurs and Family-Owned Companies in Berlin says the power of family-run enterprises comes from the basic human need to participate in a group.

"(We recently visited a company) where the family really takes close part in the business. Every employee knows that and feels the connection," he told Deutsche Welle. "In a world which is a bit out of control, that is an important, stabilizing element. Employees feel very obligated to family-run businesses."

"And that is why remarkably resilient family-owned companies help keep the German economy afloat and are "market leaders worldwide, often in small niches," Adenauer said.

Author: Jutta Wasserrab / gps
Editor: Sam Edmonds

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