Family businesses are both pragmatic and futuristic. While their immediate response to the impact of COVID-19 was to protect their business, they quickly shifted their focus to the future once it was on more stable ground. They began to invest more time and effort in anticipating the changes that not only their company will face, but often their entire industry and even society at large.
Their short-term survival instincts – combined with an enduring, long-term business horizon – are distinguishing features of family businesses. Their perseverance has proven to be a powerful combination of pragmatic decision-making and an extraordinary ability to envision the future.
We saw both qualities on full display in a recent special report on the impact of COVID-19 on family businesses across Europe. The report “Taking the long view: Lessons in endurance from European family businesses” was produced through a collaboration between KPMG Private Enterprise, the STEP Project Global Consortium and European Family Businesses (EFB), and is based on the survey responses of 1,332 European family business leaders.
The leaders who responded to the survey shared that one of the first actions they took was to address the employment challenges resulting from a rapid drop-off in their revenues and the impact it had on their cash flow. Despite these financial challenges, only 16 percent of family businesses in the survey reported the need for employee lay-offs, with the majority putting employees on furlough or reducing their hours purely as a temporary measure. Fewer than 1 percent reported that they had to close their business permanently.
Several business families also made short-term decisions to preserve their capital by deferring some planned investments in order to protect the financial resources needed to keep their employees, customers and suppliers engaged and ready to move the business forward into the future.
The burning platform for change
While witnessing these immediate survival instincts, I was inspired by the speed at which many family businesses were able to pivot their focus to the long-term outlook that has been hardwired into their families across generations.
In fact, many families discovered that the changes they had to make in response to the impact of the pandemic actually opened up a variety of new opportunities. Many of these opportunities were brought to the surface thanks to the participation and influence of next generation family members who were able to identify new market opportunities and advance their company’s digital transformation efforts to revolutionize their operating models.
Through these transformation efforts, these businesses are opening up new sales and delivery channels to better serve their customers and streamlining the efficiency of their operations from the front office through to the back office, while also sustaining the productivity and connectivity of employees who are continuing to work remotely.
With a laser-sharp focus on the future, they have shown that the burning platform for change is not exclusive to their companies’ operations. The pandemic has also created greater recognition that profound changes in social responsibility should be made. In many business families, that awakening has been influenced by the social values of younger generations of the family who are making the environmental, social and governance (ESG) agenda an essential element of their companies’ business priorities and transformation strategy.
Critical factors for success
I believe these interconnected business, digital and social transformation efforts have been supported by several critical factors that have enabled family businesses to respond successfully to the impact of COVID-19 while they lay out their plans for the future:
- their deep resolve to keep the business and the family fit for the future
- leadership’s agility and foresight in recognizing the need for change
- involvement of multiple generations in identifying opportunities and solutions
- powerful governance mechanisms for informed and fast decision-making.
I also believe there are boundless opportunities ahead as family businesses continue to persevere against COVID-19. As family businesses continue to shape their future, I’d like to suggest three important questions to consider right now for the journey ahead.
Based on your family’s collective plans for the future of the family and the business:
1. How does the family need to adapt and change?
2. How does the business need to adapt and change?
3. How does the relationship between the family and the business need to change?
I would welcome hearing from you at Kirsi.Adamsson@kpmg.fi to learn about your own experiences in persevering against COVID-19 and your insights on the future.
Interested in learning more about the key issues impacting family businesses and how KPMG Private Enterprise can help your family business? Visit our Insights page or contact your KPMG Private Enterprise adviser to continue the discussion. You can also find a KPMG Private Enterprise Family Business adviser near you.