Historical Notes: United family of Benetton

BY THE beginning of the 20th century, the family business was at its height as driver and beneficiary of national economics around the world.

In Britain and other countries, many such businesses survived world wars and recessions only to be destroyed by the imposition of centralised controls over wage bargaining, staffing and management during the 1970s. Those which survived to the 1980s were often fatally weakened and vulnerable in a "free" market where predators masqueraded as capitalist heroes. Now, on the edge of the new millennium, the Government is preaching the virtues of both family and the return to work; and perhaps it is time we looked again at the family business.

The real-life rags-to-riches story of the Benettons is a case study in point. Just over 30 years ago, the four Benetton siblings started out with a locally proven idea and an ambition which no bank would lend them money to fulfil. Today they supply 8,000 clothing shops in 120 countries.

What makes such a successful family business? As was the case in pre- Welfare State Britain, it took a dose of straitened circumstance for every measure of hard work. The lack of a safety net, even near-anarchy, would seem to be a prerequisite for the rise of such a phenomenon. Nowhere are family and the family business more proverbially the rocks of society than in Italy, in whose postwar ruins the Benettons grew up, and amidst whose political chaos they remain happily centred today.

This is a circumstance-based recipe for success, and it includes a hefty dose of fate of the kind against which you cannot legislate. Luciano Benetton was only 14 years old when his father died after a debilitating illness and a business failure, forcing the son to leave school and become the family breadwinner. Had his father lived, it would have been a different story. "I am convinced," he has said, "we would not be here today."

The most successful family businesses are also the most flexible. In a move which most likely would have been impossible in a business in thrall to institutional shareholders and market analysts, they have hedged their bets by building a separate and parallel empire based on motorway and airport services, restaurants and hotels. This may be a mountain with one of the best-known names in the retail world, yet the summit is not named Benetton, but Edizione: an all-powerful holding company, the 16th biggest in Italy, yet owned by a mere five members of the family.

This ability to preserve the interests of family while introducing new blood, be it human or in the form of information technology, is disastrous in its absence. When a family business goes wrong, it goes very wrong indeed, and excessive or misdirected exercise of family control is usually to blame.

The successful family business, like the successful family, brings returns for workers and worker-owners. In the case of Benetton, success has also brought legalised xenophobia in the form of American protectionism, and schadenfreude on the part of envious advertising agencies when the brand strategy backfired and the advertising went out of control. It has brought the sharp side of the tongue from the chattering classes, whose residual contempt for "trade" belies the fact that their own prosperity is founded on the same.

What is the moral of such a family saga? It may not be possible to clone such a phenomenon, but it is possible to learn from it. It may be possible, but not desirable, to be a retail giant that feels it has to be a cultural icon in order to keep it in the family. Either way, if a family keeps a well-managed business, the business will keep the family, if not always together, at least functioning through the inevitable hazards of death, depreciation and divorce, all of which and more it has done in the case of Benetton, to the next generation.

Jonathan Mantle is the author of `Benetton' (Little, Brown, pounds 17.99)