The shock of an unexpected global pandemic provided an opportunity for the Successful Transgenerational Entrepreneurship Practices (STEP) Project Global Consortium and KPMG Private Enterprise to come together to examine how family businesses respond in a time of crisis.
Global survey data was collected between June and October 2020, followed by input from family business leaders, academics and family business advisers in January 2021. The experiences and insights from family businesses in the Americas, Asia, Europe and the Middle East & Africa have revealed a roadmap, not only for mastering a comeback in their businesses, but for leading a global economic recovery.
Nearly 2,500 family businesses globally, including 59 in Ireland, and more than 500 non-family businesses, participated in the survey. The family businesses surveyed in Ireland were predominantly larger businesses, with 68 percent having more than 200 employees. Respondents spanned industries from services, manufacturing, construction, agriculture, fisheries and mining.
COVID impact in Ireland
In Ireland, 68 percent of family businesses say that revenues have decreased due to the COVID-19 pandemic. The findings also show that employment in Irish family businesses was more severely impacted, with 15 percent saying there was a decrease in the number of employees in their business compared to pre-COVID levels, versus 8.5 percent globally and just 4.3 percent in Europe.
The survey examined what specific actions businesses took to mitigate the impact on their business. In Ireland, actions predominantly focused on reducing labour costs. However, Irish respondents indicated that they favoured placing employees on furlough above implementing a hiring freeze or reducing pay. This is perhaps reflective of the range of supports provided by Government over the past 12 months to support retention of employees.
Similarly, Irish family business sought to consider alternative types of incentive compensation for top management during the crisis above deferring or reducing executive pay, which was also the main strategy implemented by family businesses globally.
Olivia Lynch, Partner, KPMG Private Enterprise said, “The supports offered by Government over the past 12 months have no doubt contributed to keeping family businesses in Ireland afloat, but what comes next in supporting the re-opening of our economy will be critical for their long-term survival. This is perhaps even more stark when we consider that most of these businesses have stood the test of time and are now third generation, employing substantial numbers of people. It is interesting to note in the survey that Irish family businesses were more likely to look externally than their European and US counterparts for new collaboration opportunities with customers and suppliers in response to the crisis. This demonstrates their agility and willingness to adapt and I have no doubt that with the right supports, Irish family businesses will use the benefit of their multi-generational experience to bounce back strongly from this crisis.”
The experience passed through generations is one of the things that makes family businesses unique and positions them strongly to make a recovery from this period of crisis and economic uncertainty.
The Irish businesses surveyed have stood the test of time, with almost half being a third-generation business, and a further 13 percent comprised of a fourth or subsequent generation. In comparison, globally the majority are first generation businesses and less than 15 per cent are third generation businesses. This places Irish firms in a good position for recovery.
Globally, the findings show that multi-generational firms were 45 percent more likely to deploy a business transformation strategy than single-generation family firms, and that 42 percent of family businesses were more likely to deploy a business transformation strategy then non-family firms. With business transformation set to be an integral part of survival for any business post COVID-19, it is encouraging to see that family businesses embrace this mindset.
Camilla Cullinane, Partner, KPMG Private Enterprise, said, “A stand out finding for me is that family businesses are embracing the transformation agenda. Agility will be key for businesses emerging from this crisis, especially those who are gearing up for our economy re-opening in the coming months. In our experience family businesses have proven time and time again to be extremely agile and we have seen great examples of family businesses pivoting successfully during the pandemic. The value of family businesses to our economy cannot be understated.
Lessons in resilience
The actions that family businesses have taken to respond to COVID-19 from a business, family and societal level demonstrate, once again, their extraordinary competitive advantage in being able to act and adapt quickly. They have shown their resilience in making a comeback – even in the face of the most challenging of times.
Get in touch
If you have any queries on the impact of COVID-19 on Irish family business, please contact Olivia Lynch of our Private Enterprise team.