Fam­ily busi­nesses need to adapt, in­no­vate be pro­fes­sional

Financial Mirror (Cyprus) - - FRONT PAGE -

Fam­ily busi­nesses must adapt faster, in­no­vate sooner and be­come more pro­fes­sional in the way they run their op­er­a­tions if they are to re­main suc­cess­ful, ac­cord­ing to the find­ings of the lat­est PwC survey of 2,378 fam­ily business ex­ec­u­tives in more than 40 coun­tries world­wide.

The re­port ti­tled “Up close and pro­fes­sional: the fam­ily fac­tor” is PwC’s sev­enth survey of fam­ily busi­nesses with a sales turnover of US$5 mln to 1 bln.

Over­all, this year’s survey in­di­cates that – de­spite a tough eco­nomic en­vi­ron­ment, with pres­sures around skills short­ages, in­no­va­tion and gov­er­nance – fam­ily firms re­main dy­namic and re­silient, ac­count­ing for 70 - 90% of GDP glob­ally and an ef­fec­tive barom­e­ter of the health of the econ­omy.

One eye-catch­ing find­ing from this year’s survey is that the need to pro­fes­sion­alise the business is gain­ing ground as a key con­cern for fam­ily firms. It scarcely regis­tered in 2012, but this year 40% of re­spon­dents agree this is a key chal­lenge over the next five years. And it must be ac­com­pa­nied by an equally rig­or­ous ap­proach to pro­fes­sion­al­is­ing the fam­ily.

More com­pet­i­tive, more volatile: In gen­eral, fam­ily busi­nesses are in rea­son­ably good shape, with 65% re­port­ing growth in the last 12 months and 70% ex­pect­ing to grow steadily over the next five years. About 15% are seek­ing ag­gres­sive growth, com­pared to 12% in 2012. Growth am­bi­tions are par­tic­u­larly strong in China (57%), the Mid­dle East (40%) and In­dia (40%).

How­ever, the num­ber of re­spon­dents ap­pre­hen­sive about their abil­ity to re­cruit skilled staff in the next 12 months has risen from 43% in 2012 to 49% to­day. And the pro­por­tion cit­ing the gen­eral eco­nomic sit­u­a­tion as a key chal­lenge in the com­ing year has risen slightly from 60% in 2012 to 63% in 2014.

Di­ver­sify to sur­vive? This year’s survey shows that 68% of fam­ily busi­nesses are ex­port­ing, with over­seas sales ac­count­ing for about a quar­ter of turnover for all re­spon­dents. Around three quarters of those sur­veyed ex­pect to be ex­port­ing within the next five years, and pre­dict this will ac­count for over a third of all sales. The most in­ter­na­tion­ally am­bi­tious are those: push­ing for ag­gres­sive growth, with a turnover of $100 mln+, and based in the man­u­fac­tur­ing and agri­cul­ture sec­tors. Ge­o­graph­i­cally, the most am­bi­tious are those in East­ern Europe, the BRIC coun­tries, and the ‘MINT’ quar­tet of Mex­ico, In­done­sia, Nige­ria and Turkey.

But few busi­nesses ex­pect to be ex­port­ing to a larger num­ber of coun­tries than they do now, with most tend­ing to stick to neigh­bour­ing coun­tries or those with the same lan­guage and sim­i­lar cul­ture.

The dig­i­tal im­per­a­tive: In this year’s survey, 81% cited tech­no­log­i­cal ad­vances as one of the top three trends most likely to trans­form their business over the next five years. And fam­ily busi­nesses sim­i­larly recog­nise the grow­ing im­pact of dig­i­tal tech­nolo­gies, with 79% plac­ing this in the top three trends.

Pro­fes­sion­al­is­ing the business: What does ‘pro­fes­sion­al­is­ing the business’ mean? It’s about giv­ing struc­ture and dis­ci­pline to the vi­sion and en­ergy so of­ten ex­hib­ited by the en­tre­pre­neur­ial fam­ily business. This helps them in­no­vate bet­ter, di­ver­sify more ef­fec­tively, ex­port more and grow faster.

Pro­fes­sion­al­is­ing the fam­ily: But get­ting the business on a pro­fes­sional foot­ing is not in it­self enough; it has to be ac­com­pa­nied by an equally rig­or­ous ap­proach to pro­fes­sion­al­is­ing the fam­ily. This means, for ex­am­ple, putting pro­cesses in place to gov­ern how the fam­ily in­ter­acts with the business – in­clud­ing es­tab­lish­ing an in­fra­struc­ture for de­ci­sion­mak­ing and for­mal chan­nels for com­mu­ni­ca­tion. Th­ese will be es­sen­tial dur­ing times of ten­sion or con­flict. It’s about pro­tect­ing the fam­ily’s in­ter­ests, and safe­guard­ing the firm’s sur­vival.

Mak­ing a suc­cess of suc­ces­sion: Nowhere is this pro­fes­sional ap­proach more crit­i­cal than when it comes to suc­ces­sion. Far too many fam­ily busi­nesses have still not fully grasped this po­ten­tially de­struc­tive is­sue, with 53% say­ing they have suc­ces­sion plans in place for some if not all se­nior roles, but only 30% of th­ese ‘plans’ are prop­erly doc­u­mented. Only 16% say they have a ro­bust suc­ces­sion process. The re­port on the find­ings of the fam­ily business survey can be down­loaded at www.pwc.com/fam­ily­busi­ness­sur­vey

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