Five Areas of Focus are Key for Family Business Success
Several weeks ago The Practitioner featured a blog introducing the EY/St. Gallen study of the world’s largest family business. This week’s blog takes another cut at the data, the blog is focused on a new study by EY and Kenessaw State which identifies key areas of focus for family business success. Thanks to Joe Astrachan, from Kennesaw State University, and Carrie Hall, from EY, for this précis and for providing FFI members and friends with a link to the complete executive summary.
Yours in Practice,
Family businesses have always been an important part of our social and economic fabric, accounting for more than two-thirds of all companies around the world and 50% to 80% of employment in most countries.
However, today’s business environment is more competitive than ever, putting family businesses under increasing pressure to adapt to market conditions and navigate new challenges.
To understand what makes family businesses successful, EY recently partnered with Kennesaw State University’s Cox Family Enterprise Center to survey the largest family businesses in the top 21 global markets. Below are five areas of focus that family-owned businesses and their advisors should pay attention to:
- The world’s largest family businesses are intensely proud of their companies and their families, with 76% reporting that they refer to themselves as a family business in their advertising, websites, social media, press releases and other promotional materials. Additionally, 64% of survey respondents say that family business branding helps differentiate them from competitors and improves their reputation with customers. Branding as a family business provide limitless value for connecting to stakeholders and for business success and family health.
- A surprising majority (90%) of family businesses are confident that their business is effectively addressing cyber risk, yet this likely under estimates how severe and imminent the threat truly is. Many large enterprises have already fallen victim to cyber-attacks; many family businesses are at risk if they don’t take the proper steps to protect important data. The good news is that 83% of family businesses expect to spend more on cyber-security in the next year.
- There is widespread interest in corporate social responsibility (CSR) and sustainability practices across the business world, with many family businesses leading the way. More than 50% report a high commitment to CSR practices and 81% are engaged in philanthropy. Moreover, 85% have a code of ethics, compared to only 57% of the world’s largest companies overall. Effective CSR and sustainability practices tend to result in increased operational efficiency and product differentiation, as well as reduced waste, all of which improve business processes and profitability.
- Women in leadership. Our survey participants are far ahead of the curve in gender parity in leadership. Globally, 70% of the world’s largest family businesses are considering a women for their next CEO and more than half (55%) have at least one woman on their board. Research shows that women in leadership and strategic roles benefit the business. The family businesses in our study appear poised to reap performance benefits.
- Family businesses can avoid uncomfortable succession transitions by developing an ongoing succession plan that ensures all relevant stakeholders are informed and prepared to take over specific roles when the time comes. More than 87% of the businesses we surveyed have clearly identified who is responsible for succession, a task that is most often (44%) assigned to the board of directors.
Read the survey executive summary, “Staying power: How do family businesses create lasting success?.”
About the contributors:
Carrie Hall is an assurance partner and the EY Americas Family Business Leader. Carrie has worked with entrepreneurial family-owned businesses for more than 28 years, providing audits and advising on matters such as growth strategies, sustainability, succession and governance. Carrie can be reached at [email protected].
Joseph Astrachan is Wells Fargo Eminent Scholar Chair of Family Business, professor of management & entrepreneurship at Kennesaw State University. An FFI fellow, he is a former editor of the Family Business Review and the recipient of the FFI Richard Beckhard Award and the International Award. Joe can be reached at [email protected].