Australian family businesses: Issues (and opportunities) that can guide long-term success has been saved
Australian family businesses: Issues (and opportunities) that can guide long-term success
A new Deloitte Global report, that includes input from Deloitte Australia private market specialists, looks at 12 key issues relevant to family businesses. It includes actionable insights on topics ranging from succession to social responsibility, preserving family capital to assessing the health of family businesses, and innovation to the future of work.
Peter Pagonis, Deloitte Asia Pacific Family Enterprise Consulting Leader, said: “Not unlike their overseas counterparts, few family businesses in Australia survive into the third and fourth generations, with the culprit often being misalignment between the goals, wants, and needs of the business and individual family members.
“In this Private company issues and opportunities 2020 report, we examine the common traits of family businesses around the world that have solved the puzzle to long-term success.
“And regardless of where a business is based, and the markets in which it operates, we believe that successful family businesses tend to have one quality in common – a sense of purpose beyond just being profitable.
“That doesn’t mean that making enough money to sustain a business isn’t important, but family-owned enterprises are also increasingly driven by more than this. Whether it’s a commitment to giving back to their community, becoming environmentally sustainable, or producing a perfectly crafted product, purpose resonates with many of their stakeholders and informs so much of what they do.”
Four issues (and the opportunities they present) included in the report are particularly relevant for the Australian market.
1. Good communication and good governance
“Communication is probably the single most important ingredient in building and managing a sustainable and successful family enterprise,” Pagonis said.
“By their nature, family enterprises are complex, and as they evolve past the first generation founder-manager, business and family issues become intertwined.
“Before effective governance structures can be put in place, open and transparent family communication and the resolution of issues is vital, but business families often lack the skills and capability to navigate tough discussions together, particularly those that involve both business and family matters.
“Yet allowing management, succession, and ownership discussions to slide can place not only the business, but the owning family, at risk. Effective family communication can be learned, and more and more families are committing time and budget to facilitate and improve on this front.”
2. Social responsibility
“At a certain point in the lifecycle of many family businesses, owners ask how they might be able to support their communities as the places where they have historical, economic, and social ties,” Pagonis said.
“Giving directly to charities and setting up foundations are traditional ways to achieve philanthropic goals. But family-owned businesses are also increasingly giving back through the relatively new phenomenon of social impact investing.”
Key considerations for any family business in this area should include being open to new approaches to philanthropy, setting up a mechanism to ensure accountability from the organisations being supported, and continually evaluating investments in terms of both return and impact.
3. Ecosystems and innovation
“Family-owned companies are increasingly debating the value of owning assets compared to sharing them with strategic partners in their ecosystems,” said Pagonis.
“This is being driven, in part, by generational shifts in family companies, where the next generation is less wary of the unknown and disruptors, and more open to new kinds of business relationships that can drive value.”
4. Succession planning
“Particularly in the context of such a continually changing business, technology, economic and political environment, many families are still not fully prepared to transfer their business to the next generation,” Pagonis said.
“A succession plan can’t be set and then put on the shelf. It needs to be updated regularly as company focus and strategy change, and key questions need to include is there a process to identify members of the extended family or professional managers who can be groomed to lead the enterprise, and ensuring that person fully aligned with existing plans for the business.”