Family businesses are by nature flexible, dynamic and adaptable. Especially the largest and longest-lived ones have confirmed this in practice, as they survive and grow in conditions of intense competition. As a result, they are well positioned to take advantage of the forces that are currently transforming the business landscape and the economy in general and to play a leading role in the coming changes.
This is according to the latest edition of EY's regular survey, Family Business Survey. The survey captures the views of executives from 589 family businesses in 23 major international markets.
Although only 12% describes its businesses as agents of transformation of the economy and entrepreneurship, the opposite is true. 68% consider that their enterprises are characterised by an entrepreneurial spirit, 67% that they embrace flexibility and change, while 61% that they accept failure in the context of continuous improvement. Family businesses keep pace with developments. 68% uses social media, 65% leverages big data and 50% uses robotic process automation.
In this way, large family businesses have been able to develop an adaptive and flexible corporate culture, create an environment that encourages flexibility, and reward innovation. They are therefore ideally placed to play a leading role in the creative transformation of the economy.
Strong growth with equity.
The flexibility and adaptability of family businesses is enhanced by their capital structure and reduced dependence on foreign capital. Two out of three report that they grow and innovate by investing only their own capital. Interestingly, 62% state that they have never issued new shares to third parties to fund investment. The rest say that they have only taken this step for a short period of time, lasting four to six years on average. This control of their capital needs allows them to react immediately when circumstances dictate.
The combination of this flexibility and a long-term view leads family businesses to invest in sectors and activities that will enable them to cope with, or even harness, the transformative forces of the economy. The areas where family businesses are focusing their investment plans for the coming years are. New products - services (59%), IT and control systems (57%), human capital (53%) and production capacity (48%).
Making the most of the younger generation and human resources.
Survey respondents recognise the role of the next generation in identifying and addressing the challenges of transformation. The 45% responds that it leverages the newer generations in this direction to a great or fair degree. However, based on the responses of the remaining 55%, there appears to be significant room for further utilization of younger family members. The forces that are currently transforming the business landscape, e.g. digital technology, are much more easily understood by these members. A more systematic use of this generation would help to accelerate the transformational business agenda. At the same time, it would bring younger family members closer to the business.
Family businesses are equally aware of the importance of human resources and the need to attract, develop and retain the best people. Around 50% of global respondents plan to create jobs this year, while 10% anticipate an increase of more than 5%. Respondents' estimates of job growth are based on their optimism about the growth of the global economy. Almost 59% predict growth in their local economies and just 7% predict contraction.
Key priorities.
According to the survey, family businesses should focus on the following priorities to meet the challenges of transformation:
- The company, the family, and future plans should be flexible, but also resilient. So that they can adapt to any kind of transformation of the business and economic environment.
- It is essential to cultivate a dynamic environment, where those who make mistakes or fail, in their search for the next step, will still be rewarded.
- The creation of cross-functional teams at different levels is necessary to study every aspect of the business and the market. The study of competitors or similar companies in other sectors and how they might affect products, services and planned innovations, hides useful information for the strategic planning of family businesses.
The next generation will be the first truly digital generation. This could be a huge advantage as the business adapts and adopts new technologies.
- Familiarising younger generations with the ever-changing digital landscape is an advantage. This will help them in the transition from the role of a good owner to that of a good leader.
- The dynamic education of the new generation, which will improve their digital skills, will enhance the advantage of the business.
Alongside the next generation of the family, family businesses will need to attract and retain good managers.
- The company must be recognised as a family business and, at the same time, as an excellent employer.
- Showcasing the success of the company's entrepreneurial culture and how it rewards those who contribute to its growth and longevity will attract talent.
Commenting on the findings of the survey, Mr Andreas Hadjidamianou, Partner and Head of the Family Business Sector of EY Hellas, notes. «The forces that are transforming the economy and entrepreneurship are not leaving our country unaffected. At the same time, Greek family businesses are called upon to play a leading role in the creation of a new business model. This model will be largely based on innovation and new technologies. At EY, working with family businesses large and small on a daily basis, we see that younger generations are ready to meet this challenge.».
Source: www.fortunegreece.com
