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Skills Shortages Worry For Family Firms

13th November 2012 Paul Andrews

Recent survey by PwC highlights family business concerns

UK family businesses say labour and skills shortages are their greatest internal challenge, ahead of cash flow, margins and financing. This focus on talent comes despite a difficult year for many family firms, with only 40% experiencing any growth in demand for their products or services.
 
The findings come from PwC’s Family Business Survey, Kin in the Game, based on interviews with executives in more than 1,600 small and mid-sized family businesses in 35 countries, including 100 UK firms.
 
Michael Rendell, head of HR services at PwC, commented: "Skills shortages are currently a huge problem for all employers but for family firms, fighting the war for talent is arguably more challenging. Smaller businesses have fewer resources to throw at training or marketing, for instance. It’s a vicious cycle, as improving skills often requires funding that firms don’t have right now, yet without vital labour businesses will find it hard to move out of the doldrums."
 
"Our report shows that family firms recognise the importance of talent for future growth, and this is why they rank skills shortages as their most significant challenge."
 
Given that family firms appreciate the value of skilled staff, it is perhaps surprising that 32% of the UK sample do not have succession plans in place for key senior roles. However, UK businesses are more prepared than many of their counterparts globally. For instance, 39% of US firms, 51% of Canadian ones, and around 60% of those in Italy and France, do not have such plans in place. Germany is the main exception to the rule, where half of firms have succession plans for every senior executive role.
 
Michael Rendell, head of HR services at PwC, commented: "In family businesses, knowledge and skills are often built up over generations and become firmly entrenched, so there’s a huge amount at stake when someone leaves. Our experience suggests succession planning is being taken increasingly seriously, but there’s still some way to go. The best succession plans are working documents that clearly define the skills required and map these continuously against potential candidates."
 
PwC’s survey suggests successors might increasingly lie outside the family. Some 22% of UK firms anticipate a change of ownership within the next five years. Of these, just 36% plan to pass the business on to their descendants.
 
Perhaps reflecting changes on the horizon, the future direction of the business is the most likely cause of conflict among family firms. The second most likely source of tension is around the performance of family members.
 
Michael Rendell, head of HR services at PwC, added: "Conflict can be particularly divisive in family firms so it’s concerning that seven out of ten businesses do not have conflict resolution procedures in place. Of the firms that do have an established means of diffusing tension, third-party mediation is the most popular option. An impartial adviser can often provide the best means of diffusing conflict, particularly where emotions run high."
 

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