Deloitte survey: Over half of family businesses are ready to face challenges posed by disruption, despite unclear leadership pipelines
Striking the right balance between short-term initiatives and long-term goals will be the key differentiator for those that succeed
- Of the 791 family business executives we surveyed in 58 countries, a little more than one-half believe their organizations are fit for the future in terms of ownership, governance, and strategy— but only 41 percent feel similar confidence in their plans for succession.
- 68 percent of surveyed executives intend to keep the business in the family; however, slightly more than one-third of respondents would trade at least some measure of family control over the business for even greater long-term financial success.
- 35 percent of respondents hold formal family meetings, and an additional 44 percent hold informal family meetings
- More than 70 percent of respondents say their strategy looks two to five years ahead
- Only 35 percent of respondents said that business objectives align with family goals
- Less than one-third of respondents (30 percent) say their families agree about the business’s future development
- With respect to governance of the business, about one-third of the respondents reported that a majority of their board members were non-family members
Zagreb, 15 July 2019. - Family businesses tend to lean toward a long-term view rooted in shared values, vision and culture, which can help them maintain family control over years. However, family ownership, by itself, doesn’t guarantee a business’s longevity. This is according to Deloitte’s new survey, Global family business survey 2019: Long-term goals meet short-term drive, released today.
In the survey, Deloitte interviewed 791 executives from 58 countries about the challenges and opportunities they are currently facing. Retaining family ownership is one of the key elements of their long-term goals, yet only 41 percent feel confident in their plans for succession.
“Despite the focus by most executives on the long-term goals, family-run businesses appear just as prone to pursuing immediate priorities that, necessary as they may seem at the time, can fail to support the company’s ultimate vision and objectives”, says Vedrana Kašić Jelušić, Financial Advisory Services Partner and Deloitte Adriatic Region Private Leader. “Such disconnect between long-term aspirations and short-term priorities can jeopardize the preservation of family tradition and legacy—as well as family capital.”
Maintaining ownership, ensuring the legacy and preserving family capital are three of the main challenges for every family business, but many have not yet created a formal succession plan. For instance, despite 68 percent of executives saying they intend to keep the business in the family, only 26 percent have a stated plan for the CEO position—and even fewer have this for other C-suite positions.
Moreover, less than one-third of respondents believe their families share a common vision on the business’s future development. Furthermore, the same amount of respondents would be willing to trade at least some measure of family control over the business for even greater long-term financial success.
What they should keep in mind is that selling minority stakes to other family businesses or family offices can be used as an alternative way to attract capital, while remaining true to its vision as a family-owned company.
Innovation and agility, keys to success
When asked about the drivers for stability and future success of the business, executives tend to point to agility (61 percent) and innovation capabilities (39 percent), even though the possibility of a negative outcome and a reduction on family’s wealth is what keeps some of them from fully embracing their potential.
While some companies are committed to expanding their business by industry or geography, only 26 percent saw diversification of as a way to sustain the business over the next 10 to 20 years.
Zoom out to zoom in
To help family-run companies connect the present to the future, Deloitte has developed a framework that proposes a “zoom out/zoom in” approach to strategy development, which aligns short-term initiatives with the leaders envision of the market in 10 to 20 years.
“Synchronicity of vision and values is achievable for virtually any family business, provided they have the right discipline, governance structure and communication practices in place”, adds Natko Sertić, Partner at the Tax Department and Deloitte Croatia Private Leader. “Families that can appropriately define both their 10- to 20-year aspirations and their 6- to 12-month initiatives-and maintain a clear line of sight from the one to the other-will stand a far greater chance of staying ahead of the game for years to come.”