March 19, 2015 | Simon Barrow

Why Entrepreneurs often create greater Employer Brands than plcs do

I once heard two well known business leaders talking on management at an RSA event. The first was John Manzoni, then a senior exec in BP. As of October 2014 he became CEO of the UK Civil Service. It was a confident talk and one he’d clearly given many times before.

Next up was Jeffery Swarz, then CEO of Timberland, who told the story of his grandfather Nathan Swarz, a Russian cobbler, who emigrated to the United States with nothing but his shoe making skills. His son became a cobbler too. In 1952 they changed the name of their little business to Timberland. Jeffery went to Harvard.

But that in no way hampered his pride in the boots and the brand the family had built and the employment experience they gave to their 5,600 people. ‘Doing well and doing good’. However good an employer BP may be it was Swarz who made the connection with me. Now that Timberland is owned by VF Corporation, the multi brand retailer, who speaks like that there? In a Timberland store recently I could find no history.

Entrepreneurs can often build great employer brands which are more powerful that those of large corporates. I say CAN because entrepreneurs are also responsible for most bad HR behaviour, exploitation and uncertainty particularly when the cash starts running out.

So what helps entrepreneurs and private businesses build great EBs?

First of all they can be very powerful. According to the Economist 19% of the Fortune Global 500 are family controlled eg Samsung, BMW, Mars and Walmart up from 15% in 2005.

According to McKinsey by 2025 there will be 15,000 companies with revenues of over $1billion of which 37% will be emerging market family firms. In 2010 there were only 8,000 firms of this size and only 16% were in this category.

In Europe 40% of stockmarket listed companies still have a controlling family.

What makes family firms so successful? The Economist 1st Nov 2014 had four reasons:

  1. They are often the product of a superbly talented individual. Ability and freedom as controlling shareholders can give them a strong competitive advantage.
  2. They can take a long term perspective in contrast to corporates under pressure to maximise short term profits.
  3. They are less likely to load up on debt so they are more resilient when the going is tough.
  4. Here’s the big one from an EB standpoint – they have better labour relations. According to Mueler and Philippon of NYU’s Stern Business School, workers are readier to believe promises that they will be rewarded in the long run if pledges are made by founder families not by outsider bosses who may be gone in a few years. Furthermore, family businesses will act more firmly than salaried bosses.

On McKinsey’s index of organisational health, family firms scored significantly higher on culture, worker motivation and leadership. On image, Edelman’s research showed 73% of people trusted family owned firms versus 64% who trusted plcs and 61% for private equity owned and state firms.

I have worked with some great privately owned businesses – Chanel, Vestey, Wagamama, the public affairs company Westbourne and, while now a public company, Hiscox. All have demonstrated the reasons for success which the figures above reveal.

What these individuals and their families have done on their own should not be an impossible dream for leaders within the plc world who want to build an EB whose reality is truly compelling and distinctive.

My thoughts and questions for them are these:

  1. If this was your business what would you do differently?
  2. What really stops you? Most investors are desperately keen for leaders who can think as entrepreneurs and change agents. The door is wider open than you think.
  3. Demonstrate that the people side of the business, and I mean the coherence and holistic nature of the Employer Brand not just the HR processes, is at least as important to a leader as finance, legal, operations, marketing etc (the usual backgrounds of CEOs).
  4. Whatever your skill on the way up has been make PEOPLE the one you will be remembered for. Anita Roddick did that when she led Body Shop and said ‘My people are my first line of customers’. Why not demonstrate that the same is true for you?

Finally, study the management priorities of leaders who are particularly people focussed e.g. Steve Holliday CEO of National Grid or Carolyn McCall CEO of Easyjet. On ‘Desert Island Discs’ I felt she was talking to Easyjet people as much as customers or investors and I am sure that was instinctive rather than planned.

I quoted the Economist at the start of this talk with the No. 1 success factor is the presence of a superbly talented individual. Such people can transform the employer brands of great corporates too. Be one of them and when you see the case for a better way stand up and make it.