A new study highlights the unique structure of family businesses that is helping them respond to the impact of COVID-19.
The report, Mastering a comeback: How family businesses are triumphing over COVID-19, found that the involvement of the family and their long-term mindset has enabled them to show resilience in the pandemic, putting them in a key position to lead the economic recovery.
Compiled by the STEP Project Global Consortium and KPMG Enterprise, the research includes insights from nearly 2500 family businesses and more than 500 non-family businesses across the globe, including Australia.
Robyn Langsford, Head of Family Business at KPMG Enterprise Australia said that multi-generational change, with a focus on digitisation and diversity, has driven improved governance and productivity even in the midst of COVID-19.
“In Australia, family businesses and private enterprises comprise more than 70 per cent of all businesses,” Langsford said. “The ability of families to leverage the past experiences of older generations represents a crucial component of their reactive pivots such as deferring or reducing executive pay.”
The study reveals that families were able to draw on support from multiple generations, leveraging the past experiences of older generations to help manage critical challenges and utilising the insights of younger members to drive modernisation. In addition, next-generation family members helped advance two critical agendas: their company’s rapid digital advancement and putting ESG in the strategy spotlight.
“Being able to draw on intergenerational knowledge and experience meant that 70 per cent of families reported that they maintained their R&D investments and continued to launch new products and services throughout the pandemic,” Langsford said. “The pandemic opened up opportunities for young, tech-savvy family members to take on prominent roles in introducing digital technology solutions that streamlined their business operations and launched a host of new products into the market.”
Maintaining a focus on governance and implementing meaningful KPIs, to track performance and productivity, is vital for the future success of Australian family businesses.
“Unregulated private companies such as family businesses are not subject to the same regulatory and legislative direction as ASX-listed companies and therefore can act with a higher level of autonomy and flexibility,” Langsford said. “However, this means that they may not necessarily capture the benefit of diversity, by having independent directors on board. Typically, these entities may appoint friends as board members and resist the unfamiliar. Diversification of appointments to their Boards can benefit the whole sector.”
KPMG pointed out that strong governance supports thriving family enterprises. Having a focus on gender bias, for example, is vital to building resilience for both the family and their business in the future, according to Langsford.
“Around one-third of all Australian businesses are owned or operated by women, yet females remain under-represented in large family businesses,” Langsford said. “Strategies to improve diversity could include introducing positive quotas, enabling deliberative decision making, and building diverse boards for family and private offices.
“Now is the time for family businesses to commit to the future and use the competitive advantages of purpose, community and patience as guideposts to make a long-term comeback and help drive Australia’s economic recovery,” Langford concluded.