The Future of Work: what can we learn from family businesses?

Family businesses account for 80-90% of firms worldwide. In a timely report for the post-Covid recovery, a new KPMG study explores the factors behind their resilience and enduring performance.

Mixed group of business persons talking in the office
Aside from a handful of notable exceptions to the rule, leading, investing in or being employed by a family-owned firm is likely to have more successful outcomes – individually and collectively – than involvement with other types of companies.KPMG Private Enterprise and The STEP Project Global Consortium’s new report, the Regenerative Power of Family Businesses, highlights what makes the difference.
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Transferable insights for post-pandemic recovery

The study of almost 2,500 family business leaders in 70 countries is especially relevant now for leadership across all internal functions. It highlights key areas of leadership, management and Organisation Development focus in the post-pandemic recovery, many of which will be discussed in June's Future of Work Festival:
  • strong entrepreneurial orientation
  • emotional attachment to their business
  • motivational leadership 
  • an holistic view of measuring performance.
Sub-titled “Transgenerational entrepreneurship”, the report also highlights how age-inclusive workplaces are part of the dynamics of success.
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Age-inclusive, entrepreneurial and risk-positive

“The multi-generational entrepreneurship capability of family businesses has become well recognised as a source of significant competitive advantage,” says the report, which was moderated in a series of roundtables. “Sustaining it is key to their continued strong performance.“We were not surprised to find that many of the survey respondents reported high levels of innovativeness, proactiveness and their families’ ability to take action on well-considered risks throughout the pandemic. This was especially true among companies that have Millennial leaders (those born between 1981 and 1996) who are less risk-averse than many of their predecessors.”Having a broader outlook and gaining experience externally in other companies is also a critical success factor for future leaders of family businesses if the tradition of innovation, agility and resilience are to continue. Also vital is a trusting culture that is a safe space for calculated risks to be discussed, made and enacted.“We have several nephews and nieces who graduated from university, many of whom joined the family business,” observes John Mok, co-founder and Chairman of AML Holdings Limited (Hong Kong SAR, China), an electronic products manufacturer in the medical, healthcare, telecommunication and office equipment, home automation and industrial control markets.“Others went to work for unrelated international companies, and we discovered an interesting insight. Those who worked for the first eight years of their career in several unrelated companies had more innovative perspectives and higher levels of self-reliance, confidence, and performance than those who joined the family business right after university.“We have come to realise that to achieve high entrepreneurial performance, the next generation must be given opportunities to take risks and make judgments on their own — and not to simply follow the older generations’ lead forever.”

Digitisation, diversity and demographics in family firms

One of the many impacts of the pandemic is the heightened speed at which workplace tasks and processes are digitising and the rollout of new platforms, particularly as remote and hybrid working establish themselves as the new normal.As evidenced in HR and now Global Mobility, technology is enabling companies and employees to focus on the strategic and high-touch, interpersonal aspects of their role, and better manage their time and resources, including when and where they work.Family-run businesses are no exception, according to KPMG Private Enterprise and The STEP Project Global Consortium. The next generation of leaders are highly digitally aware, particularly among women. Four in ten female CEOs surveyed record high levels of digitalisation – using digital technologies to change business models and provide new revenue and value-producing opportunities – in their companies (39%). This compares to 32% of their male counterparts.“The number of female CEOs promoting digital solutions and products in their businesses definitely goes against old stereotypes that women in family businesses are more oriented towards ‘soft’ tasks and competencies,” says the study.“We argued against this stereotyping in our previous report on The Power of Women in Family Business – A generational shift in power and influence, which included references to several studies showing that the superior governance and effectiveness of women in management and board positions can lead to better firm performance.”

Socioemotional connections, purpose and performance

In this age of the people-focused business, environmental, social and governance (EGS) goals weigh heavily on decision making. For publicly listed companies, this means balancing these demands with those of shareholders. It is also perhaps where family-owned businesses, with their strong sense of original purpose, vision and values, have another head start and an opportunity for insight and practice sharing.This interplay of external and internal focus, and the connection between people and the business - including around employee wellbeing - is an important aspect of family-run enterprises’ success, as Vivek Chinoy, Director of Sigma CapSeal (India), a packaging solutions provider, describes in the report.“Financial performance is paramount, and it cannot be ignored by the leader of the business, whether that’s a family or non-family CEO. Social performance is also important because it represents the beliefs, value systems and culture of the company and the family.“Concern for employees, vendors and the family’s socio-economic circle should be the role of a mature family member because the internal and external social performance of the company not only builds family loyalty, but employee loyalty as well. Operating responsibly reinforces the company’s reputation with all its stakeholders.”Similarly, this balanced, purpose-driven approach has instilled meaning in the workplace and informed leadership decisions in times of economic headwinds.“Family business performance is based on the original founder’s vision and personal beliefs,” says Kenneth Loh, Business Development Manager at Oilfield Services & Supplies PTE Limited (Singapore). “For example, our founder wanted to create a family-oriented environment that would be meaningful to all levels of employees. That purpose has permeated to the current generation of leaders and influenced how we perform as a management and ownership team.“When the oil sector crashed in 2016/2017, management took a significant pay cut to reduce operating expenditure. No employee redundancies were made; instead, we created special events and sports days to keep everyone’s morale high in the company. We know that’s what the founding father would have done so himself.“Financial performance was no doubt every firm’s objective, but it is as important to recognise champions in the company. He made sure to always to share the fruits of his success with every employee. That’s why we evaluate our performance based on what he had in mind – not only to make the company thrive, but to create a rewarding experience.”As with the characteristics associated with entrepreneurial orientation, these characteristics of socioemotional wealth — the emotional value derived from owning and managing the business and maintaining the family’s control and influence — are seen in every aspect of family business performance.In essence, strong entrepreneurial capabilities, together with the family’s positive support, results in a healthy business, and social and family performance.

Transformational leadership

Fuelling the success of family businesses around the world is a preference for a leadership style that taps into the values and beliefs and attitudes of their people, promotes stakeholder engagement and encourages discretionary effort. This is very much in tune with the times, highlighting the ability of family-run companies to be agile and adapt according to business needs.“I think that as generations change, the leadership style changes to meet the needs of the hour. For example, we’ve seen all three leadership styles in our business,” explains Abdulla Ajmal, COO of Ajmal Perfumes (United Arab Emirates).“With the third generation starting to come into the business, we’re looking at the business as it is today and how we see ourselves in 2030. I’m playing the transformational leadership role with a third-generation committee of brothers and cousins, and I can see how every generation works through different leadership styles depending on the needs of the business and the business environment at different points in time.”

Conclusions: Factors influencing the regenerative power and success of family businesses

  • The strength of a firm’s entrepreneurial orientation is one of the most important keys for unlocking the ability of a family business to continuously adapt, innovate and grow. How would you score your company’s current level of entrepreneurialism? Is your company investing in research and development? Are you looking for opportunities to create innovative products, services and processes? Are you exploring untapped markets to develop new revenue streams?
  • What impact are next-gen family members having on the direction of your business? Are they given opportunities to take risks and make judgments on their own?
  • There is evidence that next-gen leaders, particularly young women, are digitally savvy. Have you recognised that capability in your company, and are you actively leveraging it to help drive technological innovations in your operations?
  • A second critical component of transgenerational entrepreneurship and the regenerative power of family businesses is the family’s socioemotional wealth. Are family members well connected with the business? Are there new ways to keep them engaged in the business, through formal or informal roles or activities such as family events?
  • Are your family members growing up in a stewardship climate to impart the purpose and values of the business and help each succeeding generation keep the business revitalised?
  • How strong is their identification and emotional attachment with the legacy of the business and is its value as a family asset being encouraged? Are they motivated to contribute?
  • Is it time to revitalise the leadership approach in your business? New leadership capabilities are emerging among Millennials and increasing numbers of female family members. Has their potential been recognized in your business? Are you taking steps to prepare them for future leadership roles? Is the value of increased diversity a factor in the long-term outlook for your company?
Read the full report, Regenerative Power of Family Businesses: transgenerational entrepreneurship.

We will be exploring many of these themes at the Future of Work Festival.

Marc Burrows from KPMG is joining other Global Mobility, HR and OD experts, including Teresa Boughey, Dr Linda Holbeche, Dr Vlatka Ariaana Hlupic, Sarah Rozenthuler, John Rasen of Santa Fe Relocation and Kervin Guillermo of Hewlett Packard Enterprises in inspiring and thought-provoking panel and hub sessions.

Book your tickets now for what promises to be a truly pioneering and transformative event in the international management and global mobility space.

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