The entrance of high-profile family offices in Singapore, alongside the rise of a new generation of family business leaders, signals the enduring power of such enterprises. What is it that enables family businesses to stay ahead of the competition? And how do they keep their founders’ entrepreneurial spirit alive, growing successfully from decade to decade and generation to generation?
Between September and November 2021, KPMG Private Enterprise and the STEP Project Global Consortium surveyed 2,439 family business leaders from 70 countries and territories to understand how they continue to flourish in good times, while adapting to change during times of disruption.
Our report, titled “The regenerative power of family businesses”, is a culmination of the survey data and insights drawn from a series of roundtable discussions held in February 2022 with family business chief executive officers, academics and professional advisers.
Global survey findings
There are 4x as many male CEOs as female CEOs leading family businesses globally.
Only 59% of respondents have a formal board of directors in place, and just 24% have a family council. Of those that do have formal boards, more than 60% reported that their businesses performed better than competitors over the past three years.
The fuel igniting successful family businesses
Our survey and series of discussions uncovered two key factors to the growth and preservation of family businesses: a strong spirit of entrepreneurialism and family influence. A deep dive into these components uncovered five aspects that influence their capacity for lasting success.
Fuelled by a desire to keep their founders’ entrepreneurial spirit alive through contemporary lens, next-generation family members have accelerated the adoption of new technologies to respond swiftly to changing market demands. They are also seizing opportunities to take risks and make judgments on their own to advance their business into the future. The report found that 25% of family businesses globally reflect high levels of entrepreneurial orientation in their companies. The Americas and the Middle East reported the highest levels of proactiveness and risk-taking.
A family’s socioemotional wealth — the emotional value they derive from owning and managing the business — is critical to their sustained growth and continuous renewal. This comprises the family’s control and influence, their emotional attachment to and identification with the family business. High levels of socioemotional wealth were linked to a drive for innovation, family loyalty and positive impact. Conversely, the overall level of socioemotional wealth in family businesses is generally low when the CEO is not a member of the owning family.
The sustainability of a business is reliant on both financial and family success. To strive for peak performance, family businesses should aim for growth in five areas: financial performance, entrepreneurial orientation, external social performance, internal social performance and non-financial performance. The highest levels of financial performance were achieved in companies with high levels of innovation and proactiveness and companies with high levels of family control and influence.
External social performance
Internal social performance
Leaders can make or break an organisation. At the same time, no leader has just one style of leadership. It changes depending on the circumstances, age and stage of the business, and the economic and social environment it operates in.
In our survey, we invited respondents to choose their preferred or most prevalent leadership style from three options: transformational, charismatic and authoritarian. CEOs from the Silent Generation (those born between 1925 and 1945) displayed high levels of authoritarian leadership, while younger family business leaders tend to adopt a more transformational or charismatic leadership style. Family businesses with a high level of entrepreneurial orientation, diversity and a charismatic leadership style typically show higher financial and non-financial performance.
Our survey reflects that companies perform well in every aspect of the business and family when levels of entrepreneurial orientation and socioemotional wealth are high. Inversely, low levels of entrepreneurial orientation and socioemotional wealth are linked to low performance across every measurement.
Recognising that there are many variations in performance, we have created four family business profiles: entrepreneurial families, business-first families, family-first businesses and underperforming businesses. Each profile illustrates the contributing factors to their performance and the actions that can be taken to sustain and improve it.