Family Business Excellence & Award

Hermès S.A.

Founded 1837
Paris, France
www.hermes.com

Known as the world’s ultimate luxury business, Hermès SA is a French manufacturer and marketer of upscale luggage, apparel and accessories. From a 19th-century foundation in leather goods, the company has since diversified into silk goods, ready-to-wear clothing, watches and perfumes. Its ongoing dedication to family ownership and management, impeccable craftsmanship, and careful protection of the brand’s mystique set Hermès apart from most other companies.

From the late 1980s until today, Hermès has been led by Jean-Louis Dumas, a fifth generation family member. He has been credited with building Hermès’ worldwide retailing empire by directing an intense program of geographic expansion. Hermès’ trademark – a horse-drawn carriage – harkens back to its original saddlery business.

Founded in 1837 by Thierry Hermès, the firm gained reputation as a producer of one-of-a kind saddlery for European noblemen and the first two generations focused on this business.

Based on family consensus, Hermès made its first stock offering in June 1993. But the family retained over 80% of the equity in the hands of 56 family members. Hermès has been able, despite being risk takers, to stick to the principle of self-financing. To avoid financial dependence on the banks, but still have the capital needed for new projects, Hermès traditionally reinvests approximately 15% of the profits in the company.

Best Family Business practices from Hermès

  • Throughout the generations, Hermès has maintained a balance of tradition and creativity.
  • Hermès continues to undertake large scale training in the traditional way of manufacturing highest quality leather goods.
  • The physical closeness of the various functions -production, administration, sales- creates a special team spirit and reinforces the pride the employees have in working for Hermès.
  • Members of the owning families are allowed to work at all hierarchical levels, thus encouraging the special Hermès “big family” spirit inside the company.
  • Only those family members who are professionally competent are allowed to join the company.
  • Whilst majority ownership is intended to stay with the family, management control may be family or non-family.
  • Going public addressed the needs of the growing numbers of family owners.
  • Important decisions are taken in good time before a crisis exists -thus avoiding many potential conflicts (for example, going public).
  • Business expansion is autofinanced -avoiding bank debt- and this is a deeply engrained family tradition.
  • Profits are seen as necessary for the survival of the business.
  • The dividend payment ratio is a function of the business requirement, and not the shareholders’ needs.
  • The family’s values (fulfilling duties, best use of talents, respect for biblical values) are transmitted through family education from generation to generation.