Explore differentiators that help family businesses to thrive and the areas of focus that will make a critical difference as we look ahead.
Our value creators discussion built on the themes in our recent Mastering a comeback report. Insights from thousands of family and non family firms help to explain the resilience of family businesses during the pandemic.
In conversation with Dominic Samuelson, CEO of publisher Campden Wealth, and Hannah Cool from KPMG’s ESG practice, I explored this and the areas of focus that stand to make a critical difference for families and their enterprises during the coming months and years.
Family businesses have not been immune to the challenges of the last year or so, but the influence of the family is their special ingredient, compared to other business structures, when it comes to resilience.
In a host of different ways, long termism is the theme:
The benefit of multi generations – enabling them to lean on the history and experiences of previous generations and the skills and mindset of the younger generations as digital transformation and ESG play a bigger part in strategy.
An approach of stewardship rather than quarterly results in sustainable solutions not quick fixes.
The motivation to invest for the next generation could explain why R&D spend has largely continued.
Being less highly geared and encumbered to third parties, many family businesses have the financial flexibility to call on patient capital for both weathering a storm and investing in transformation.
In some cases, we have heard that the crisis of the pandemic has pulled the family closer together and allowed more focus than ever on their purpose.
Dominic was clear that the nature of leadership in family businesses can be key: “It matters that leaders are in post for considerable periods, sometimes three times as long as in other corporates. This experience helps them to see past the storm.”
He referenced speedy decision making giving some businesses first mover advantage during COVID-19 when it came to innovating, pivoting and indeed cost cutting.
Communication is also a key differentiator according to Dominic. Not only do family owned firms tend to have values or core principles that set them apart from non family businesses – such as giving greater consideration to external stakeholders – but they understand the importance of communication with stakeholders, having handled issues like succession during their tenure. It tends to be more embedded in the culture and comes into its own during challenging times.
Hannah was in no doubt that family businesses perform strongly in an ESG context. After all, so many already understand that purpose and profit are not at odds with each other. With an eye on their legacy, business owners are comfortable operating in an arena that prioritises both generating returns today and proving the operation is sustainable long term. After all, it’s often forgotten that ESG considerations are not just about your impact on the planet but its impact on you – so resilience to climate change and a low carbon agenda, for example is a practical and relevant subject.
ESG a value creator given it is impacting customer decisions and access to capital. It may be incumbent on family businesses to tell their story at a greater volume in order to maximise the competitive advantage their social, community and sustainability credentials should garner.
Additionally, in recent years family businesses have told us the war for talent is one of their biggest challenges. They stand to benefit from the changing appetite of talent about what they want in an employer, with ESG principles moving up the agenda post COVID-19.
So, what should those leading family businesses focus on for future prosperity?
Dominic urged them to remain true to their roots, warning against drama: “Allow yourself to continue to be patient by nature, and adhere, where possible, to your long-term vision. Also, reflect on what has been done well and on what has been learnt during the crisis.”
He suggested four areas of focus:
- Cash flow
- Assessing where investments should and could be applied
- Workforce – building on their reputation for looking after staff well
- Risk management – given the times remain very uncertain
Hannah encouraged business leaders to think about what they are already doing, how that fits with an ESG narrative and to elevate it with the senior team.
For myself, I think there’s an opportunity to take advantage of the burning platform the pandemic has created in a couple of areas:
- Informal governance structures have been challenged and as we get back to a new normal it may be an opportune time to review purpose and governance structures to ensure they are fit for the future.
- We have seen the next gen find their voice more speedily in many firms; critical to the business’ response to a changed market and I am excited about the prospects for families that continue to tap into multiple generations.
Finally, continue to be brave. This may mean identifying skills gaps and looking outside the family to meet those needs, for the benefit of the business of the future.