Family businesses in Canada and worldwide are harnessing their unique strengths to rebound from COVID-19 and are positioned to help spur a post-pandemic recovery, finds a new report by KPMG Enterprise and the STEP Project Global Consortium.
The KPMG Global Family Business Report: COVID-19 edition, titled Mastering a comeback: How family businesses are triumphing over COVID-19, provides insights into how family businesses navigated enormous challenges and why these firms are better positioned to play a key role in revitalizing the global economy. The recently released report analyzes survey data from nearly 2,500 family businesses and more than 500 non-family businesses, including a selection of Canadian family enterprises, as featured in a new Canadian benchmarking report.
"The study revealed that the dynamics and structure of family-owned businesses made them more resilient and responsive to the initial shock of the pandemic, and enabled them to adapt and recalibrate to pursue new business opportunities," says Mary Jo Fedy, National Enterprise Leader, KPMG in Canada. "The pivotal role of the family helped to safeguard both financial investments and family legacies. A long-term mindset and other key differentiators helped many family-owned firms gain a competitive advantage and positions them to drive future economic growth.
"The skillsets and perspectives of a younger, more tech-savvy generation were highly influential and instrumental in reimagining the strategic direction of the business,'' adds Fedy.
Key report findings:
- A majority (53 per cent) of Canadian respondents experienced an initial decline in revenue, compared to 69 per cent globally.
- 17 per cent of Canadian firms saw revenues increase (vs. 9 per cent globally), frequently by taking action to pivot the business, while 30 per cent reported no revenue change (22 per cent globally).
- Only 8 per cent of Canadian family firms surveyed reported a workforce reduction, consistent with the global average among other family businesses. By comparison, non-family firms were slightly higher at more than 10 per cent.
- Globally, family businesses were 42 per cent more likely to deploy a business transformation strategy than non-family firms.
- Three quarters (76 per cent) of families surveyed worldwide accessed government support programs for their business, primarily low-cost loan arrangements.
- 87 per cent of family businesses surveyed globally had a family CEO, reflecting the integral role of the family members.
By comparison, a KPMG survey of small- and medium-sized Canadian companies conducted in September 2020 found that over half (54 per cent) of business owners were focused on survival and nearly a third (31 per cent) had deep concerns about capital and future liquidity. "Due to prolonged lockdowns, many SMEs have been pushed to their financial limits and had to take on debt. Even now that restrictions are easing, it will take time for these businesses to recover," says Fedy.
Although most family-owned firms reported revenue declines, 17 per cent of Canadian respondents reported a revenue boost, faring better than the global average (9 per cent). The most significant revenue increases were reported in companies that benefited from the acceleration of technology and the digitization of their business models.
Taking swift, decisive action
The report documented a series of initial actions to protect and stabilize the family business during the early phases of the pandemic. In Canada, the most widely implemented actions involved: cutting office expenses (40 per cent); shifting employees to remote work (35 per cent); renegotiating vendor contracts (15 per cent); and reducing or deferring executive compensation (10 per cent).
The decision to reduce the pay or bonuses of family members involved in the running the business was one of several actions that both supported the firm and upheld family values.
Three strategies for a comeback
The report uncovered three core strategies used by family businesses to respond to the impact of the pandemic on the business and family legacies: business transformation, social responsibility and exercising patience. Business transformation ranked as the number one priority for Canadian firms, highlighting a strong focus on long-term strategic planning.
"Family business owners tend to look beyond short-term profits and measure success by the ability to sustain and protect the longevity of the business and succession plans for the next generation," says Yannick Archambault, Partner and National Family Office Lead, KPMG Enterprise. "Many leaders took the opportunity of a slowdown to fully understand business and industry impacts, carefully leverage their patient capital, and explore new business models and markets.''
Corporate social responsibility was often an immediate, short-term response to the pandemic, reflecting a commitment to the welfare of employees and society, and to upholding the reputation of the firm, notes Archambault.
Rallying multi-generational strengths
"The next generation understands that digital adoption and ESG strategies are necessary to sustain business operations and achieve future business and family goals," says Daniel Trimarchi, Director, Family Enterprise Advisory, KPMG in Canada. "Overall, the pandemic accelerated conversations within families on governance to enable faster decision-making on these types of issues and better engagement with family members and shareholders.
According to a 2019 report by the Family Enterprise XChange Foundation, family businesses accounted for approximately 7 million jobs in Canada, 90 per cent of the employment generated by small and medium-sized companies, and nearly 50 per cent of private sector gross domestic product.
"Given how much economic impact family-owned business have in Canada, their ability to rebound strongly and achieve their full potential will be a powerful factor in revitalizing our economy," adds Archambault.
About the Global family business report: COVID-19 edition
KPMG Private Enterprise and the Successful Transgenerational Entrepreneurship Practices (STEP) Project Global Consortium joined forces to conduct a confidential global survey of family business leaders to capture the insights and lessons learned in guiding their businesses through COVID-19. Global survey data was collected between June and October 2020, and bolstered by additional input from business leaders, advisers and academics in early 2021. The research team collected responses from nearly 2,500 family businesses, including 76 business leaders in Canada, and over 500 non-family businesses from 75 countries, regions and jurisdictions, and five macro-regions (Europe, The Americas, Asia Pacific, and the Middle East & Africa).
Learn more by accessing the Canadian benchmarking report.
About KPMG in Canada
KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs nearly 8,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.
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