Family businesses are well-positioned to lead the revival of the global economy
Family businesses positioned to lead economic revival
KPMG Private Enterprise and the STEP Project Global Consortium release analysis of family business responses to the COVID-19 crisis.
A new report from the STEP Project Global Consortium and KPMG Private Enterprise has demonstrated how the unique structure of family businesses has empowered them to respond to the impact of COVID-19. The study found that the involvement of the family and their long-term mindset has enabled them to demonstrate resilience in the pandemic, placing them in a key role to lead the economic recovery.
The report, titled Mastering a comeback: How family businesses are triumphing over COVID-19, includes insights from nearly 2,500 family businesses and more than 500 non-family businesses. It uncovers three core strategies used by family businesses to address the immediate impact of COVID-19:
- Exercising patience: Family businesses are focused on protecting their succession plans and long-term future for the next generation. This long-term mindset has enabled them to leverage their patient capital to understand the full impact of COVID-19 on their business and others in their industry, with a view to adopting plans for the long term, rather than just mitigating the short-term impact of the pandemic.
- Social responsibility: They took steps to address the impact of the pandemic not only on their family and business, but on the welfare of society, and the needs of all their stakeholders including employees, customers, suppliers and local communities.
- Business transformation: Family businesses were found to be 42 percent more likely to implement business transformation strategies than non-family businesses during the pandemic. Family businesses with multiple generations in the firm were 45 percent more likely to implement a business transformation strategy than single-generation family firms.
Harish Gopinath, Partner, KPMG Enterprise at KPMG in Bahrain, commented on the report finding and said “Family businesses are the economical backbone within the global marketplace, and more so in the Kingdom of Bahrain. The pandemic has had a unique domino effect over the past year, which has impacted the financial success of all businesses including family businesses. To ensure steady growth while sustaining their existing operations during these turbulent times, family businesses need to tackle the challenges of COVID-19 to stay resilient and emerge even stronger. It is critical that family businesses also focus on other objectives, such as governance and transgenerational succession. After the initial action and strategy to cushion the business from the financial impact from COVID-19, families need to shift their attention to their longer-term strategies for sustaining the purpose and non-economic value that the family derives from owning and managing the business. Family businesses in the Kingdom are already closely integrated within the community through the products and services they provide, the jobs created, and their philanthropic initiatives. This crisis is a test of time, and we truly believe that the more mature and professionally run family businesses will not just survive the impact but thrive beyond it.”
Key findings from Mastering a comeback: How family businesses are triumphing over COVID-19
- Sixty nine percent of family businesses reported that COVID-19 resulted in an initial revenue decline, 9 percent reported an increase specifically due to actions taken to pivot their business, and 22 percent reported no revenue changes.
- There was an 8.56 percent workforce reduction among family businesses globally, compared to a 10.24 percent reduction in non-family businesses.
- Three quarters (76%) of family firms globally made use of government support programs, primarily in the form of low-cost loan arrangements. There was less interest in government subsidies among family firms compared to non-family businesses.
- More than 70 percent reported that they maintained their R&D investments and continued to launch new products and services.
Multiple generations working together have accelerated business transformation
The study reveals the pivotal role that multiple generations of the family have played in their response to COVID-19. When two or more generations of the family are involved in the business, next-generation family members have helped to advance two critical agendas: their firms’ rapid digital advancement and putting ESG in the strategy spotlight. This meant that 70 percent of families reported that they maintained their R&D investments and continued to launch new products and services throughout the pandemic.
Jonathan Lavender, Global Head, KPMG Private Enterprise, “The pandemic opened up opportunities for young, tech-savvy family members to take on prominent roles in introducing digital technology solutions that streamlined their business operations and launched a host of new products into the market.
“These NextGen influencers also recognized that implementing an ambitious ESG strategy was an essential ingredient in the transformation of the family business. As a result, they have expedited the operational changes necessary for achieving their firms’ environmental and societal goals and firmly embedded ESG as a strategic business priority.”
Learn more by accessing the full report.
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