SME horizon

Over half of family biz are ready to face challenges posed by disruption: Study

Family businesses tend to lean towards a long-term view rooted in shared values, vision and culture, which can help them maintain family control over years. However, family ownership, by itself, doesn’t guarantee a business’s longevity. This is according to Deloitte’s new survey, Global family business survey 2019: Long-term goals meet short-term drive, released recently. Deloitte is a global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. 

In the survey, Deloitte interviewed 791 executives from 58 countries about the challenges and opportunities they are currently facing. Retaining family ownership is one of the key elements of their long-term goals, yet only 41 percent feel confident in their plans for succession.

“Despite the focus by most executives on the long-term goals, family-run businesses appear just as prone to pursuing immediate priorities that, necessary as they may seem at the time, can fail to support the company’s ultimate vision and objectives”, says Carl Allegretti, Global Deloitte Private Leader. “Such disconnect between long-term aspirations and short-term priorities can jeopardize the preservation of family tradition and legacy—as well as family capital.”

Family legacy

Maintaining ownership, ensuring the legacy and preserving family capital are three of the main challenges for every family business, but many have not yet created a formal succession plan. For instance, despite 68 percent of executives saying they intend to keep the business in the family, only 26 percent have a stated plan for the CEO position—and even fewer have this for other C-suite positions.

Moreover, less than one-third of respondents believe their families share a common vision on the business’s future development. Furthermore, the same amount of respondents would be willing to trade at least some measure of family control over the business for even greater long-term financial success.

What they should keep in mind is that selling minority stakes to other family businesses or family offices can be used as an alternative way to attract capital, while remaining true to its vision as a family-owned company.

Innovation and agility, keys to success

When asked about the drivers for stability and future success of the business, executives tend to point to agility (61 percent) and innovation capabilities (39 percent), even though the possibility of a negative outcome and a reduction on family’s wealth is what keeps some of them from fully embracing their potential.

While some companies are committed to expanding their business by industry or geography, only 26 percent saw diversification of as a way to sustain the business over the next 10 to 20 years.

Zoom out to zoom in

To help family-run companies connect the present to the future, Deloitte has developed a framework that proposes a “zoom out/zoom in” approach to strategy development, which aligns short-term initiatives with the leaders envision of the market in 10 to 20 years.

“Synchronicity of vision and values is achievable for virtually any family business, provided they have the right discipline, governance structure and communication practices in place”, adds Carl Allegretti. “Families that can appropriately define both their 10- to 20-year aspirations and their 6- to 12- month initiatives—and maintain a clear line of sight from the one to the other— will stand a far greater chance of staying ahead of the game for years to come.”

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