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Etude PwC sur les entreprises familiales (2012)
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Etude PwC sur les entreprises familiales (2012)

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Selon l’étude mondiale de PwC Family Business Survey 2012, les entreprises familiales ont prospéré en 2011. 81% d’entre elles prévoient d’ailleurs une stratégie de croissance ambitieuse au cours des cinq prochaines années. Cependant, elles font face à des défis très spécifiques à leur structure : la recherche de la taille critique, la gestion des talents, et les questions de succession notamment.

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Etude PwC sur les entreprises familiales (2012) Document Transcript

  • 1. www.pwc.com/fambizsurvey Family firm: A resilient model for the 21st centuryPwC Family BusinessSurvey 2012October 2012
  • 2. ContentsIntroduction 4Taking the long view: The unique qualities of the family business 5The family firm in 2012: So what has our survey told us? 7Looking ahead: Emerging issues for 2017 8Scale, skills and succession: Special challenges for the family firm 10A unique social contract: Are governments supporting family firms? 18Conclusion 22Key Contacts 23 Family business survey 3
  • 3. Introduction The results of this year’s PwC Family In this short report, we’ll go through PwC1 has worked extensively with Business Survey prove that there is a the results of this year’s survey, and take family firms across the world for great deal the wider corporate sector the temperature of the family business many years, so we appreciate how could learn from the family firm, just sector across the world. It will come as distinctive these businesses are, as there is far more that governments no surprise that family firms are feeling could do to support them. But it’s not the strain of the current economic compared with today’s publicly- all one-way. We believe there’s much environment, or that government listed corporates. Decision-making more the family business sector itself regulation and bureaucracy are barriers is very different when it’s your own could do to take greater control of its to growth; but there are distinctive money that’s at stake, and as a own destiny, not least by working challenges for this sector which are the result family firms tend to have a together to press governments for a direct result of the unique strengths long-term commitment to jobs and more constructive tax policy. – and potential weaknesses – of its local communities, which gives a particular business model. significant but often under-rated This sort of collaboration is stability to national economies. In already happening in some markets, The results of PwC’s 2012 Family the face of the current uncertain but family business networks rarely Business Survey show that family firms economic environment, wield as much influence as the are robust, vigorous and successful – governments around the world have conventional trade bodies and they’re ambitious, entrepreneurial, and business networks. Ironically, delivering solid profits, even in the been looking for ways to encourage the family firm’s internal culture continued uncertain economic – in broad terms – exactly the same and ethos can be an obstacle in environment. These businesses are ‘patient’ and responsible approach this respect, because it can prevent making a substantial but under-valued to business that the family firm has them from seeing the influence they contribution to stability and growth, and been practising for centuries. could have if they acted collectively. we believe governments could do more Indeed, a longer-term community- to offer the sort of targeted support that focused approach to business can would make a significant difference. We lead to an unwillingness to take also believe that family firms can do risks for what might be perceived more to help themselves, firstly by to be a short-term gain, or a failure adopting some of the professional to seize immediate opportunities processes and practices of their publicly- quickly enough, and these are areas listed corporate competitors, but also by where the family firm can learn being more proactive in finding and from other corporates. securing the assistance they need. Norbert Winkeljohann Eric Andrew Member of PwC’s Network Global Network Middle Market Leader Leadership Team Canada Germany 1  wC refers to the PwC network and/or one or more of its member firms, each of which is a separate P legal entity.4 Family firm
  • 4. An entrepreneurial mind-setTaking the long view: 63% of our respondents think that family businesses are more entrepreneurial than other sectors ofThe unique qualities of the economy, and the larger the family business the stronger that conviction is. Likewise 47% believe that familythe family business businesses have the ability to reinvent themselves with each new generation. A greater commitment to jobs and the community 77% of those surveyed believe family We can summarise these firms feel a stronger sense ofThis year’s PwC Family Business characteristics as: responsibility to create jobs, and willSurvey covered almost 2,000 Longer-term thinking and make more strenuous efforts thanfirms across the world, from both a broader perspective other companies to keep their staff,developed and emerging markets, The family firm is in many ways the even during tough times. Thisrepresenting sectors as diverse as epitome of ‘patient capital’ – these translates into greater loyalty andmanufacturing, retail, automotive, businesses are willing to invest for the commitment from those they employ.and construction. The respondents long term, and do not suffer from the 70% agree that community initiativescould not have been more varied in constraints imposed on their listed are important to the family firm.their size, location, and industry, competitors by the quarterly reportingand yet there was a marked similarity cycle and the need for quick returns. A more personal approach to 72% of respondents believe that family business based on trustin their approach to business, businesses contribute to economic 78% of respondents consider that theand in what they considered to stability, and this belief is stronger in family firm is notable for the strengthbe the distinctive characteristics longer-established businesses of threeof businesses like theirs. of culture and values, and this belief generations or more, and in mature grows stronger with time, rising to 85% markets like Europe and North America. for third generation firms. Many 53% consider that businesses in this believe that they win business because sector are notable for taking a longer they are closer to their customers, and term approach to decision-making. have a more personal relationship with them – indeed that they are chosen Quicker and more flexible precisely because they are not decision-making multinationals. Family businesses often believe that they are more agile and flexible Family firms consider these than their multinational competitors, distinctive qualities to be a source which means they’re better able to of real competitive advantage and exploit gaps in the market. Some integral to their business model. businesses cited the current downturn This sentiment is just as strong among as a business opportunity – they’ve those who have been brought in from been able to move quickly to acquire outside to manage the firms as it is businesses or competitors at among family members, as the Wates historically low valuations. case study overleaf illustrates. But it is also clear that other aspects of this business model can be a hindrance“In a family owned business you tend to think on a long term basis, not a to growth, whether by generatingshort term basis. You tend to think about your business over generations internal conflict or rendering theand not just only based on profits” (Austria) business too risk-averse. We will look at some of these issues in more detail“Each family business is different, but the ambition and dedication of the in due course, after a brief resumé offamily to grow the business is always there” (India) the current state of sentiment in the family business sector.“When you are a privately held company you have the ability to changethe direction rapidly and do not have a board of directors that dictateswhat you have to do” (USA)“Family businesses will have the chance to fill niches that the corporatecompanies cannot cover because they are not as flexible as self-ownedcompanies who can realise new ideas” (Switzerland)“We have a more autonomous decision-making capacity. And especiallymore flexible management” (France) Family business survey 5
  • 5. Building on strong foundations: Wates Paul Drechsler James Wates Piers Wates Name: Paul Drechsler, Chairman and CEO, Wates legacy to the local community, so we’re Name: James Wates, Deputy Chairman, Paul Drechsler is the first Executive always involved in community projects, Wates Chairman from outside the family to run the sometimes one-off, but very often Wates business after four generations in James Wates has been deputy chairman of we’re involved in creating employment the family firm for six years, and has never family control. The Wates family is still opportunities for the long-term unemployed. passionately involved in the day-to-day worked anywhere else. His son Piers will be We’ve had nearly 600 candidates through the fifth generation to become involved in its running of the business, with a fifth our Building Futures programme over the generation keen to become involved. growth and expansion, but he plans to gain past five years. The Wates family have experience outside the business, as well as a Sector: Construction had a long tradition of charitable giving broad range of skills within it, to prepare him and a few years ago they set up a family for the challenge of leadership in the future Market: UK trust to give to causes that resonate with the company’s strategy and priorities, Founded: 1897 How has the business changed since such as helping the long-term unemployed you brought in an external CEO? Turnover: £1bn or disadvantaged children. When we made the decision to appoint a And how many family members are non-family chief executive it was a brave What are the main differences that move, but absolutely the right one, because you’ve seen of working in a family business involved in the business now? the dynamic definitely changed. Previously versus working within a public company? There are five active shareholders, and people were empowered to make decisions, First is that in a family business the three of the previous generation who are but they would often look to the family to shareholders are unambiguous about the less active, but are still deeply interested, take the lead. Whereas now, people get on fact that they want to be invested in the because I think that in a family business and make their own decisions, and take enterprise. Secondly, they want to be your interest grows the older you get. ownership of the consequences. It’s invested for the long term, and the great There are a lot of other family members – definitely a crisper, more agile business family businesses see themselves as brothers, sisters, uncles, aunts, nephews, today than it was then. being good stewards of the enterprise for nieces – but the family have focused the next generation. So they take a very on maintaining a narrow shareholding How did the decision come to be made? long term perspective, and find the right base through the course of their history, and each generation has reduced the The previous generation of owners balance between long-term and short-term number of shareholders to keep it highly was structured as five equal partners, performance. In addition to all of that, concentrated, which is a source of strength. and while there was no constitution per se, they can offer customers a commitment they had evolved a way of working during and a continuity that public companies What are the challenges of being a their term of stewardship. But when we can’t offer because they are at the beck non-family CEO? came to transition from one generation and call of their shareholders, who can to the next, it was clear that there would change their minds on ownership tomorrow For a family business to appoint a non-family no longer be five equal partners, so we morning. Our true USP is the fact we are chief executive is an extraordinarily big needed some guidelines and parameters totally committed to the industry where decision. It shouldn’t be taken lightly, and within which we would work. That’s still we operate, and to our relationships with while it will work for some families, it won’t evolving and being fine-tuned, now that we customers and communities and the for others. I would strongly advocate that have non-family executives running things people who work for us. family businesses have external non- on a day-to-day basis. I think it hasn’t been executive or advisory directors, but that‘s really stress-tested yet, mainly because Could you talk about the company’s still a huge decision for a family business to the business has been going very well. values – their attitudes to the local take. Each family has to find the leadership The challenge will come when things community, and to employees? and governance model that will work for don’t go quite so well, but I am confident In Wates above all it’s about people. them in their context, for their stage in that the structure we’ve got in place now It’s about creating a culture and work development, and for their stage of evolution will help us to manage that. environment where people will be highly as a family. I think it’s a great privilege engaged, and highly motivated to deliver for a non-family member to lead a family our promise for customers. More than that, business, but it’s also a huge responsibility, wherever we build and operate we want to which can be just as demanding as leading leave a positive contribution and a positive a public company. “Family-run businesses tend to have more loyalty toward their staff – people are not just a number” (Malta) “The things that are really powerful about family businesses are the values, which are genuine corporate responsibility” (UK) “A lot of our customers like doing business with us because we have good values. We can adapt more readily to customers’ needs because we are flexible” (USA) “Our commitment is that we’re going to be here for 20-30 years plus. So we will be there for our customers. I can’t say that about many of our competitors” (UK)6 Family firm
  • 6. The family firm in 2012So what has our survey told us?Here are some of our key findings:Family businesses arethriving globally65% of family businesses have grownsales in the past year, compared withless than half in 2010, and there wasparticularly strong growth in EasternEurope, Latin America, and MiddleEast. Only 19% of our respondents sawa reduction in their sales in the lastyear, as against 34% in 2010.Family businesses areambitious and confidentabout their prospectsOver 80% of the businesses we spoketo anticipate steady or aggressivegrowth in the next five years,and 39% of those who aim to grow arevery confident about their company’sprospects over that period. Thisincreases substantially for companiesin India, the Middle East, Singapore,South Africa, and South Korea. Giventhe low levels of confidence in othersectors of the economy, we believe this Internally, the main issue isis powerful proof of the significant role the recruitment and retention “We need to make sure the businessfamily businesses can play in creating of skilled staff model can cope with change in thejobs and stimulating recovery. market” (Australia) The recruitment of skilled staff and shortages of labour have become moreThe economic environment acute challenges than they were inremains the key external 2010, increasing from 38% to 43%.challenge By contrast, the need for companyJust like every other business, the reorganisations or restructuring isfamily firm is facing major challenges no longer so pressing, though largerin the current downturn, and in this companies with a turnover of morerespect there is little change from the than $100m were more likely to citelast survey we ran in 2010. The three this as an issue. Cashflow and costissues identified by most respondents control has also reduced significantlywere market conditions (54%), as an issue from 30% in 2010 to 17%competition (27%), and government in 2012, which suggests to us thatpolicy and regulation (27%). The latter many businesses have now taken thecategory, however, showed a very wide action needed to streamline internalvariation on a market-by-market basis, processes, improve inventory control,ranging from 64% in Greece and 46% and reduce debtors. A number ofin the Middle East, to as low as 6% for businesses also cited the importanceAustria and 3% for Sweden. of establishing or improving their internal and IT systems, especially in relation to regulatory compliance. Family business survey 7
  • 7. Looking ahead: Globalisation will be crucial to success – or failure The issue that emerges more strongly Emerging issues for 2017 for 2017 and beyond is that of globalisation. There is clear apprehension about the impact of an ever more international approach to business, and the growing power of global megabrands, though many businesses remain confident that local knowledge, agility, and the ability to exploit profitable niches will keep the The economy remains a family business buoyant: Even though most family firms are cause for concern confident about the prospects for 59% of our respondents cited price Innovation will be vital to their business, there is still some pressures as a likely future issue, secure competitive advantage uncertainty about what the future and this was particularly prevalent Turning to the internal management of holds. in the construction and automotive the business, the key emerging issues industries. 40% pointed to increased were innovation, skills, and succession competition within the market, often planning. 62% of respondents cited the driven by the entry of new players, need to continue to innovate, and 37% and 66% cited the general economic anticipated the need to invest in new situation – those companies technology. Companies in Italy, Turkey, anticipating a business contraction and South Korea were particularly tended to cite this as the cause. 39% concerned about innovation, and firms believed regulation would continue planning to grow aggressively were to be an issue, and 27% anticipated also more likely to focus on this. growing challenges relating to their supply chains. The war for talent is still waging – certainly for family businesses That the economic crisis we are experiencing will restrict liquidity in all Attracting appropriately skilled staff enterprises, including family ones.” (Mexico) (58%) and then retaining them (46%) “If globalisation and mergers keep taking place in every business, then were also high-profile concerns for the that is a big challenge for family businesses” (Malta) future, and again, especially for those planning high levels of growth. Many “We need more international thinking – it’s a challenge not to limit the respondents said that it is particularly company to the local market” (Belgium) difficult for family businesses to attract talented employees with the right “International competition is now much more structured, much more qualifications, because the brightest professional, but on the other hand, this leaves large market niches that candidates tend to prefer working for large companies are not attacking, precisely because of the agility of listed multinationals, where the career family businesses” (Mexico) path is clearer, and there is the “It is the era of the multinational” (Romania) possibility of equity at some stage. “Our short product life cycle means that we need to constantly produce The transition between new ideas and new products to stay in the market” (South Korea) generations can build the “Potential employees think that within a family business they will not family firm – or break it have a future. In order to attract and retain talent we must create an 32% of our respondents were already enabling environment for the future” (Singapore) apprehensive about the transfer of the business to the next generation, “Some families may be ready to withstand the storms of the economic and 9% saw the possibility of family crisis but more likely to collapse at the first dispute among family conflict as a result. Some family members” (Middle East) businesses are planning to manage the transition process – and reinforce the business for the future – by bringing in8 Family firm
  • 8. Equipped to succeed: President and CEO role over 10 years ago. Similarly, Leon is preparing for an LL Bean eventual transition of family leadership. He has established a 3-member family Name: Chris McCormick, CEO Governance Committee made up of Chris McCormick is the first non-family fourth-generation family members. member to run the LL Bean business. The mentoring and development process The company sells its distinctive outdoor is underway as family members remain apparel and equipment to 160 countries active in board and committee matters, across the world, and has retail outlets in and now the fifth-generation of family the US, Japan, and China. are becoming involved with orientation Sector: Clothing sessions around the business and learning opportunities about their future Market: US responsibilities. At the executive level, Founded: 1912 we have a very structured leader development process with each of our Turnover: $1.6 billion current senior leaders being reviewed and evaluated on their contributions to Has being a family business helped preparing leaders to assume these senior you through this economic climate or roles. This process has been moved affected it differently from public down through the organization with companies? leaders at all levels expected to contribute to succession planning. It has definitely helped – we don’t play to the Street, or to the quarterly results cycle. In fact, in 2010 we went to the Do you believe your family-run Board and recommended that L.L.Bean business gives you an advantage have an ‘investment year’ and allow over your competition? profits to fall – we needed to make a big I think we do have an edge. We stick investment in marketing and attracting to our core beliefs – customer service, younger customers, and they agreed. quality, outdoor recreation and our family ownership. We work as a team withexternal management. Taken overall, Family members understand we want shared values. The people part of our to be around for another 100 years and business is very important to us –64% of family businesses have whether employees, customers or investments in growth are critical tonon-family members on the board, the long-term financial health of the communities – and the ownershipa figure which increases to 75% for business. As a private company, we can structure encourages this focus. Additionally, these shared values havefirms with turnover of more than maintain the balance between retained earnings – for an adequate level of allowed the business to maintain a$100m. However, this overall figure consistent point of view, a consistent investment in the business – and themasks considerable differences across earnings requirements of our family experience, a consistent message.the world – for example, the numbers shareholders. That collaborative This is what differentiates our brand in approach with shareholders to business the marketplace and keeps us relevant.with non-family directors are very high strategy is tough to accomplish in a We believe that to sustain our successin Denmark (92%) and India (96%), over time, we have to add value to the public company.and also high in Asia Pacific as a interests of all our stakeholders –whole (74%), partly because a very employees, the outdoor recreation How does succession work at LL Bean? community, our local communities,high proportion of family businesses Leon Gorman chairs our family Board of vendors and of course, our customers.in this region are listed, and are Directors following his 40-year leadership If we do these basics well, profitabilitytherefore required to have independent of the company as President and CEO. will follow, as it has now for over He oversaw the seamless transition of the 100 years.Board members. By contrast, thenumbers are as low as 49% for theUK and North America. Family business survey 9
  • 9. Scale, skills, and succession: Special challenges for the family firm Long-term growth and profitability As the survey results make clear, family firms are a vigorous group of depend on the successful negotiation extremely ambitious entrepreneurs, many of whom are running high- of these tipping points, which is why growth successful companies. However there are particular hurdles to we’ve issued a quick-reference guide overcome, if the family business sector is to fulfil its full potential, and for family businesses in parallel with this report, entitled Scale, skills, and achieve its ambitious growth plans. Some of these are specific to their succession: Tackling the tipping points particular business model – such as succession planning – but others are for family firms. more general commercial challenges, which give rise to particular difficulties for a family business. As the LL Bean case study illustrates, Tipping point 1: Scale these present themselves in the form of ‘tipping points’: moments in a The first of the tipping points is scale: firm’s evolution where key decisions have to be made, and the future the moment when a business achieves direction of the business is determined. a certain size but can only progress further by making a significant step change. This may take the form of a new opportunity in its domestic market, prompted by the actions of a competitor or the introduction of a new product or innovation, but by far the most common tipping point relating to scale arises when the business begins to export for the first time. “We have an amazing culture in There are some big differences by country in terms of how much family the business. And I think part of the business currently export reason why that culture is so good International sales as a % of total sales (by market) is because of that family feel. So it’s Singapore 60% 9% the trick now of keeping that feel Hong Kong 58% 0% and that culture but also evolving Taiwan 49% 7% beyond the family business, because Austria 48% 4% to me as a family business it was Italy 43% 9% quite reactive and I think now we Belgium 43% 5% Denmark 41% 7% need to be a little bit more strategic” Turkey 33% 6% (Australia) Switzerland 32% 2% Germany 31% 5% “[The greatest challenge is] South Korea 28% 8% consolidation through globalisation. Finland 28% 6% Greece 27% 12% Customers are getting bigger, which India 27% 7% will put greater pressure on size Sweden 27% 3% of the family businesses as against Ireland 20% 6% large multinational or publicly Malta 18% 9% owned corporates. In other France 17% 2% Romania 15% 12% Current exports words, scale” (Australia) Middle East 15% 4% Increase in 5 years South Africa 14% 7% Mexico 13% 6% Western Europe: 29% + 6% UK 11% 4% Eastern Europe: 12% + 10% Russia 11% 8% North America: 8% + 2% Brazil 9% 6% Latin America: 10% + 6% Canada 9% 2% Middle East/Africa: 14% + 6% Asia Pacific: 36% + 6% USA 7% 3% BRIC: 23% + 6% Australia 5% 5% Source: PwC Family Business Survey 201210 Family firm
  • 10. The challenge of Finding the finance This problem becomes even moreinternationalisation Almost every business faces a version complex with each succeedingWhile a quarter of our respondents of this particular tipping point at some generation since many long-establishedplan to remain steadfastly domestic, stage in their growth, but for family family firms have large numbers ofanticipating no exports now or in the businesses the decision is often more family shareholders, many of whom willfuture, a significant number of the complex. These businesses can feel be reliant on their dividends and verybusinesses in our survey are looking disproportionately nervous about risk-averse, which means there areto achieve their growth plans by taking such a step, and a firm run only unlikely to be many family membersstarting to export overseas: the by family members will generally lack who are willing or able to invest newcurrent average proportion of foreign any experience of doing so. They may funds of their own. At the same time,sales is 25%, but respondents also be reluctant to contemplate a the mainstream capital markets are notpredicted this to rise to 30% within significant re-structuring of their open to family businesses that arefive years, and this rises operations, partly because they could wholly privately-owned, which meansto 35% for those hoping for radical fear this could lead to a dilution of that often the only practical option isgrowth. The variation by market is, their distinctive culture and values. bank debt, though in the current markethowever, extremely wide, ranging this is both restricted and expensive.from 60% for a small externally- Even more crucially, family businesses Mortgaging either physical assets or thefocused market like Singapore, to 7% often face difficulties accessing receivables book can help reduce thefor the USA and 5% for Australia significant levels of new capital to costs, but many family firms see this as fund expansion. ‘selling the silver’, and are wary of theCutting the figures another way, message it sends to their customers.67% of respondents had some level of Most family businesses have aninternational sales in 2012, but 74% instinctive aversion to leveraging The difficulty in accessing financeexpect to be in this position by 2017. their balance sheet, and manage may be one reason why there is aThe countries most likely to see an their borrowings very tightly. marked tendency for family firms toincrease in exports are Romania Under these circumstances raising focus their export efforts only on(77%), Greece (70%), Turkey (64%), substantial growth capital will neighbouring countries, or those withand Italy (67%). always be a problem, and the firm’s historical ties to their home market, options necessarily limited. A more such as India with the UK. Likewise,When they were questioned about the conventional start-up will aim to family firms can struggle not only tochallenges of becoming an international grow fast in anticipation of a quick fund but to staff their overseasbusiness, our respondents cited sale, and will finance that growth operations, since family members mayunderstanding the business culture from high levels of debt or by offering be reluctant to relocate, but equallyoverseas (20%), competition (19%), substantial equity stakes to venture reluctant to hire someone sufficientlylocal regulations (19%), exchange rate capital investors or business partners. senior and experienced to do the jobfluctuations (16%), and local economic In theory, a family business could do for them. This can become aconditions (16%) as the main ones. A the same, but family businesses will stumbling block to long-term growth.number also referred to the difficulties usually be growing more slowly, withof managing a far more complex low debt, and very few of them areinternational supply chain. prepared to offer the equity stake external partners would require. “Operating in many places is hard work. We operate in 50 countries and they all differ from each other. We have to learn local cultures and habits and financial legislation and taxation vary from country to country” (Finland) “Family businesses tend to finance their growth from their profits, so you need to be more careful. Family businesses have to compete with global companies or public companies where resources tend to be much bigger” (Middle East) “Limitations in their skills base [is an issue]. They may be lacking some skills amongst the family members. This could be particularly evident in the next 5 years when Dad moves on” (Ireland) Family business survey 11
  • 11. Exporting is clearly an area where Tipping point 2: Skills Mind the gap family businesses can learn from other Some family businesses may be wary This lack of skills can lead to a lack of multinationals, but they don’t always of exporting because they lack the confidence, and hence to a more general have to bring in staff from those specific skills and experience they unwillingness to try new approaches, companies to achieve this. Partnerships need to do this effectively, but their or experiment with new ideas. and alliances are a powerful way reluctance may also spring from of gaining insights from academic an understandable caution, or an According to our survey, the majority of institutions or larger corporates, and inadequate understanding of the real family businesses recognise that skills this can range from formal business nature of the risks that international shortages can be a problem, and address agreements or agency arrangements expansion would entail. It’s clear it by bringing in external managers to in new overseas markets to informal from our survey that the identification, either supplement or replace family networking, to the sort of creative assessment, and management of members in key positions. collaboration which is facilitated in risk – in its broadest sense – is one of the UK by the National Endowment the wider skills that many family firms Hiring professional managers can solve for Science, Technology and the Arts need to develop. Others cited by our many of the commercial issues a family (NESTA). Through programmes like respondents range from specific areas business may face, and supplement any Corporate Connections and the P&G like innovation, Intellectual Property, lack of home-grown skills, but it can Corporate Open Innovation Challenge, and IT, to the need for a more focused raise challenges of its own, which may NESTA provides opportunities for and strategic approach in managing not always be immediately obvious. small firms and entrepreneurs to the business. Anticipating and work with – and learn from – large addressing regulatory requirements Our experience shows that there are multinationals such as Procter & and changes are a particular concern. many senior people in family firms Gamble, BASF, GlaxoSmithKline whose actual role and responsibilities and Virgin Atlantic. bear little relation to the title they hold: we’ve come across COOs who are in reality chairmen, and many CEOs who hold that title by virtue of age and Countries are polarised when it comes to whether they have the seniority. Some family businesses solve right skilled people entering the job market. Attitudes on this issue the interpersonal issues that can arise are more negative in Eastern Europe, the UK and South Africa. at succession by allocating specific job Net agreement that young people entering the job market within your industry sector titles by way of ‘compensation’, but this have the right skills and education* can make it extremely difficult to Taiwan 33% Switzerland 28% discern where the real skills gap lies, Finland 22% which leads to a lack of clarity both Hong Kong 22% within the management team, and India 22% for the business as a whole. Without a Ireland 17% Greece 15% comprehensive and objective assessment Germany 13% of skills the decision to hire in from the Singapore 12% outside can mean that the wrong Denmark 8% person is recruited, which will make Malta 5% it all but impossible for that executive Mexico 2% USA 2% to do the job they were hired to do. Australia 0% Canada -5% Likewise it is a very different matter Belgium -7% to own a business than run it, and some Sweden -10% Turkey -10% first-generation entrepreneurs can find NET agreement it particularly difficult to ‘let go’. Austria -14% Middle East -14% Western Europe: -4% South Korea -19% Eastern Europe: -45% France -26% North America: -1% Italy -30% Latin America: -20% Brazil -31% Middle East/Africa: -42% Romania -42% Asia Pacific: +8% Russia -47% BRIC: -13% UK -51% South Africa -61% *NET agreement = proportion of those agreeing and subtracting the proportion of those disagreeing Source: PwC Family Business Survey 201212 Family firm
  • 12. Re-engineering the family Have you considered recruiting a professional management team to run the name: Wikov Wikov group? I do not run the company day-to-day. The company has a CEO and I no longer wield the powers of an Executive Director. I have not completely withdrawn from an active role, but 90% of the business happens without me. I get involved of course when we are negotiating important deals and the Name: Martin Wichterle, Owner customer wants to talk to me, and in key Does being a family firm with close ties Martin Wichterle began his career by investments and finance, but the running to a particular local area give you an studying geology, and founded his own of the company is in the hands of the extra sense of responsibility towards business with a partner in 1990. The Wikov professional management team. that community and your employees? family firm had started life as an I do feel a sense of responsibility towards agricultural machinery-maker in the 19th Do you feel that a family firm has an two things: I don’t just feel it towards the century and enjoyed international success advantage compared with the multinationals, employees who work here, which is before being nationalised in 1946, and especially in terms of decision-making logical, but I also feel a sense of later being acquired by another and taking a longer-term view? responsibility about how the company [conglomerate] which subsequently went I would definitely agree with that. When you works with the local community. There is a into liquidation. It was a stroke of luck that deal with any family firm, it is relatively difference if you have a company in a big Martin was then able to buy the easy to reach a deal – the decision-making town, or somewhere where there are 500 trademark, and reorganise his own is quicker and more flexible, and those people and the local community depends growing group of engineering companies firms are also far more likely to lay their on your factory. When I started work at under the old family name. cards on the table. That’s one advantage. firms which had previously been state- Sector: Engineering Of course, it is relatively easy for an owned, I was absolutely flabbergasted by owner to be flexible about changing how de-motivated the people were. All Market: Czech Republic they were doing was going to work and strategy, which means the firm can Founded: 1880, then re-established respond immediately to a situation arising they weren’t able to feel any pride in what in 2004 on the market. Logic dictates that any big they were doing. An important part of our multinational will need longer to approve success for me is that we’ve managed to Turnover: CZK 1,6 bn (EUR 64 milion) a change like that, and need a certain do something that the people who work amount of courage to do so. The second for us are proud of – they get a sense of thing you mentioned is the long-term view pride from their contacts with major and that is definitely true as well. An owner customers all over the world, on every who knows what he is about works less on continent. They share in our success. the basis of market research and surveys, That counts as motivation for any owner. and more from intuition, according to what he sees in the business.The same applies, of course, if the Conversely, managers of family firmsbusiness is handed down to a successor, need to understand and appreciate thebut the potential for conflict can be very different environment they aremore pronounced with an experienced going into, and adapt their workingmanager with strong ideas that may style accordingly. For example,well differ from the owner’s. Family anecdotal evidence suggests thatbusinesses that bring in senior employees continue to consider thatexecutives to run their firms need to they work for a ‘family firm’ long afterlearn how to ‘manage their managers’ the members of that family have ceasedto get the most out of them, and a key to be actively involved. This can be apart of this involves understanding source of competitive advantage inwhen interference will be a hindrance, terms of loyalty and commitment,and when it can be beneficial, or even but it can also create tensions andvital. This might include, for example, unrealistic expectations, which needbringing their influence to bear to careful management.ensure that the culture and values ofthe firm are protected. Family business survey 13
  • 13. “[The risk is you have] a narrow vision in terms of experience, and need to inject new blood to get a different perspective. You can get complacent with a stable mind-set and it would be better to be open or receptive to change” (UK) “[We need to] bring outsiders onto the board of the company, and learn how to deal with that. Also the organization of internal processes to streamline our operations. In other words, the professionalization of management” (Brazil) “A family business can be hampered by an insistence on continuing with a low- performing line of business. Emotions can dominate, and founders can become obsessive about control” (Turkey) “In the event that someone is not pulling their weight, it is much more difficult to make a business decision that you should make – there can be a conflict between the head and the heart” (Ireland) “Family businesses do not place enough importance on proper procedures and governance” (Middle East) Hiring independent non-executive Own, manage, or sell? The majority of the remaining 34% of directors can be one way to inject 41% of our respondents intend to our respondents had either not yet valuable experience and expertise, but pass on both the ownership and decided what to do with their business it is often hard to find the right people, management of their business to when they retire (12%), or were and if a family business takes this route the next generation, though it was planning to sell or float it (17%). Those it’s vital that the NEDs are given the noticeable that more than half of them in the latter category had come to this scope they need to be both constructive still remained unsure whether the next conclusion either because the next and objective, and that the family is generation would have the skills and generation did not want to take the prepared to take that input on board. enthusiasm to do this successfully. business on, were too young, or did not have the necessary skills. Flotation will Tipping point 3: Succession 25% intend to pass on their shares but probably not be an option for most The very essence of the family business bring in professional managers, citing family businesses, which leaves is, of course, that it has been passed the next generation’s lack of skills as acquisition by a larger public company from one generation to the next, but the main reason for this decision. or a private equity firm as a far more the moment of transition – and the The numbers were – understandably likely outcome. Family businesses that years leading up to it – can make or – slightly higher for those looking to are considering taking this route have break the firm’s future success. start exporting for the first time. to consider carefully what this would mean in practice, and what they might need to do to configure or restructure their operations to make them an attractive prospect for a commercial Fewer than half of family businesses plan to pass the business buyer or private equity investor. Those fully (ownership and management) to the next generation who value the personal nature of their Future plans business and the strength of its values need to accept that both of these are likely to be diluted – if not eliminated Pass on management 41% – if the firm is acquired by a third party. to next generation Pass on ownership but bring Regardless of the form it takes, 25% the moment of transition is rarely professional management in Sell to private equity investors: 8% completely straightforward, and is Sell/float 17% Sell to other company: 8% one of the most common sources of Sell to management team: 3% Flotation / IPO: 5% conflict within both the family and Multiple options allowed the business. Dont know 12% Other 5% Source: PwC Family Business Survey 201214 Family firm
  • 14. Where does the business go next? I want to double the business in the next three to five years. I think the international opportunities are huge for us. We’re looking at my first retail site in the US, and if that’s successful we’ll quite quicklyOn the crest of a wave: roll out a few stores over there. We just opened up our first international store inSeafolly Singapore which has been very successful, so we’re looking for a second site there. We’re also expanding the Seafolly brand beyond swimwear – about 25% of our business is now coming from non swimwear categoriesName: Anthony Halas, CEO, SeafollyAnthony Halas runs the highly successful What’s your biggest challenge now?swimwear brand that was set up by his Currency fluctuations are a big risk atfather over 30 years ago. current levels – at the moment we’reSector: Swimwear trying to maintain prices but that means we’re taking a hit in margins. A big part ofMarket: Australia our business is the stock, and holding stock of swimwear is a risky business,Founded: 1975 because it’s so weather-dependent. SoTurnover: A$95m, with exports to the as the business grows, your stockholdingUK, the US, Canada, Germany and is growing and your risk is growing. Soelsewhere in Europe. that’s something that we really have to control. The whole international manufacturing issues is a challenge to –How did the Seafolly business change at the moment we manufacture in China,when it passed from your father to you? but that’s a market that’s changing fastMy father was an incredible trader – he – it’s not easy to predict what will happenknew how to pick good product and buy to wages and labour availability there,. Soit at a good price and he was an amazing we have to remain flexible and keep othersalesperson. But obviously now the options open.business is this size, you can’t get asinvolved in the day-to-day, it becomes a What’s the advantage of being aquestion of about managing teams and family firm?employing the best people to do the joband being more strategic. So a very Definitely the ability to be able to makedifferent management style is needed good decisions and react quickly – notnow, compared to when he was running being bound by outside investors whothe company. are purely looking at the bottom line. I think what a family business can do is really invest in the future. In the early days we would forgoing profit for investing in the brand and up till about six or seven years ago up the money was going into investing in marketing, I don’t know if you could have done that if you were a public company or had private investors. It’s all about long-term vision. Family business survey 15
  • 15. “It would be the succession to the next generation that a family company will face, and the ability to survive the succession. It is often here it goes wrong” (Denmark) “Family politics [is an issue], specifically people being hampered by family members. In our culture, for example, the grandsons do not tell the grandfathers what to do, but that’s not necessarily the case in a normal business” (South Africa) Coping with conflict latter may suggest that that particular “Corporate governance standards Conflict can arise from any number of business has experienced conflicts are an issue – if we want to grow different causes, from professional to in the past. 32% have also instituted then our standards will need to be personal. These might range from formal measures for assessing up to speed with international best disagreements about future strategy performance, which can be the result practice – in India the majority are and direction, to the personal of bringing in professional managers not up to speed” (India) performance and remuneration of who would need such appraisal, or individual family members. The evidence of the need for an objective “Mentoring and developing the consequences can be temporary and process to manage underperforming next generation family members is minimal, or so disruptive as to family members out of the firm. crucial to the success of the family overwhelm what might otherwise have business” (Middle East) been a perfectly healthy business. In Across our respondents as a whole, the Middle East, for example, some 79% had some sort of mechanism family disputes have ended up in the like this in place, which rises to courts, and the assets of the entire firm 84% for second + generation have been frozen until the case could businesses, though it is possible that be resolved. many of these mechanisms are very rudimentary, and there is no way of A good number of our respondents knowing how effective they are likely had put measures in place designed to be should an actual conflict arise. to deal with potential conflict, ranging Indeed, we suspect that some family from shareholders’ agreements (49%), businesses are seriously entry and exit provisions (28%), and underestimating the degree of conflict provision for a third party mediator that the next transition point will (24%) – though the presence of the generate, and would benefit from a greater understanding of the best practice governance measures they might take now to mitigate it.16 Family firm
  • 16. The benefits of listing: Henry Tan, CEO, Luen Thai Holdings “I’m very proud that we made thea Hong Kong perspective decision in 2004 to turn the family business into a public listed company.One interesting finding from our survey Not only does this bring in the additionalwas the fact that many more family capital we need for the business, it alsobusinesses are listed in Asia, in demands a specific governancecomparison with firms of a comparable framework which supports better familysize elsewhere in the world. So we asked governance as well. I would encourage allthree prominent family businesses in family businesses to get a public listingHong Kong about their experience of the whenever they can. It helps ensure alisting process, and what benefits it can proper structure between thebring to the governance and shareholders, the management, and themanagement of a family firm. business and makes each of these roles clearer.”Tom Tang, Managing Director, AsiaPacific Region, TTM Technologies Cheung Kit, Chairman, EVA Precision“The transition to a listed company is Industrial Holdings Limitedquite dramatic. As a private company, “The process of preparing for a listingeverything is quite easy. You can change can help you achieve greater claritydirection, you can invest in products about management responsibilities withinthat have a much longer time horizon the business, which can also preventand in much more riskier projects. potential conflict. In my company, my twoAfter you become a public company, brothers and I agreed on the allocation ofthese decisions have to be justified shares in the period leading up to ourbecause you will be asked questions IPO. We also mapped out a clear set ofabout their returns by the fund managers. roles and responsibilities and the processBeing a public company helps us for making collective decisions.”because most of our customers arelarge companies which would not buyfrom a private company. Some actuallyrequire US listing because they needtheir suppliers to be Sarbanes-Oxleyand Dodd-Frank-compliant. And being a public company gives you otheroptions. You can issue shares andbonds, neither of which are reallyavailable to a privately-held company.It does give you more flexibility.” Family business survey 17
  • 17. A unique social contract: Are governments supporting family firms? Family firms feel under-valued Some of the world’s largest corporations began life as and overlooked family businesses, and in the years since Rémy Martin Our results suggest that regardless bottled his first brandy or William Procter founded his of their size, sector or market, soap and candle firm, the relationship between family firms are proud of the economic governments and firms like this has changed radically. contribution they make, and yet many As part of our survey we asked family businesses feel this is overlooked or underrated whether they feel valued by their governments, and what by their own governments. Firms in markets like Turkey, Switzerland, more they think should be done to support them. Mexico, India, Malta and Singapore generally agree that their government values their sector, but this positive sentiment was outweighed overall by the number of respondents whoFamily businesses feel negatively about government’s role in helping considered that theirs does not – Souththem in the current climate. Again, differences by market Africa, the UK, France, Russia, Italy,Net agreement that your government is doing what it can to help businesses survive Romania, and Greece were the mostand develop their activities in the current economic climate* negative here. Singapore 34% Malta 19% Turkey 8% Real support –Middle East 3% or benign neglect? Canada -14% Feelings run even higher when itSwitzerland -19%South Korea -24% comes to the action governments are Hong Kong -26% taking – or not taking – to support Mexico -32% family firms. Only three markets Austria -36% (Singapore, Turkey, and Malta) India -38% agree that their government is Sweden -38% Germany -39% doing everything it can to help Ireland -42% them, and there was overwhelming Taiwan -47% dissatisfaction from countries Belgium -49% such as Australia, Denmark, UK -54% France, Romania, the USA, Italy, Brazil -56% Finland -58% South Africa, Russia, and Greece. Australia -62% NET agreement Denmark -62% France -66% Western Europe: -37% Romania -71% Eastern Europe: -75% USA -71% North America: -46% Italy -72% Latin America: -48%South Africa -77% Middle East/Africa: -45% Asia Pacific: -26% Russia -78% BRIC: -51% Greece -97% *NET agreement = proportion of those agreeing and subtracting the proportion of those disagreeing Source: PwC Family Business Survey 201218 Family firm
  • 18. Indeed, a number observed that theirgovernment takes unfair advantage “Private companies must grow and increase their impact on theof one of characteristics of the family economic and political environment. They must be betterfirm that governments always claim to represented within the institutions that define Russia’s economicvalue: other corporations can threaten strategy and political views” (Russia)to re-locate if they aren’t given taxbreaks or other incentives, but there’s “I think family businesses are critical to the Irish economy. Weno need for governments to make have seen time and time again where multinationals havethe same effort for family businesses, pulled out of Ireland and moved to Asia or wherever, and that isbecause their strong local ties mean a decision that’s made on the basis of bottom line. Traditionallythat they are highly unlikely to move family businesses can’t make that decision” (Ireland)to a more advantageous jurisdiction.So what are family businesseslooking for?This divides into general measures,and specific demands. Family businesses– like all businesses – want to see areduction in red tape, a more stableeconomic environment, low interestrates, a more flexible labour market,further incentives for employment andtraining, a more consistent tax andregulatory framework, and investmentin infrastructure. Family business survey 19
  • 19. Family businesses also want to see more targeted support for their sector Attitude to government and how much they value family businesses and measures specifically designed to varies hugely by country help firms like theirs evolve and grow. Net agreement that government recognises the importance of family businesses* First among these, unsurprisingly, is Middle East 34% tax. Family businesses are broadly Malta 31% united in their desire for a simpler and Switzerland 25% Singapore 24% more supportive tax regime, especially Mexico 22% when it comes to capital gains and Turkey 21% inheritance tax – they want Canada 16% governments to make it easier and less Austria 10% costly to pass their business to the next India 8% Hong Kong 4% generation. All too often the value Sweden 3% added by one generation is all but Germany -7% wiped out by the tax that has to be paid Belgium -13% by the next. This is why the German Taiwan -13% government, for example, has amended Brazil -18% South Korea -19% the inheritance tax payable on the Ireland -21% transfer of a business so that the Denmark -22% amount due reduces significantly, or Australia -26% can even be eliminated altogether if Finland -26% NET agreement the assets remain in the family for five USA -31% Italy -40% years, and certain wage bill criteria are Western Europe: -9% South Africa -42% Eastern Europe: -53% met. On the other hand, there are some UK -42% North America: -11% market observers who argue that tax Russia -43% Latin America: -5% breaks of this kind can allow family France -48% Middle East/Africa: -12% Asia Pacific: -4% firms to be insulated from outside Romania -68% BRIC: -13% Greece -70% input, and that in some cases the need to raise extra capital to pay inheritance *NET agreement = proportion of those agreeing and subtracting the proportion of those disagreeing Source: PwC Family Business Survey 2012 tax would force under-performing firms to bring in new investors and new skills, which might result in a better balance on the management team. Family businesses are also concerned to see more financial incentives and tax reliefs for start-ups, additional grants “[We would like to see] consultation and training in succession and incentives to support R&D and planning, tax incentives and ownership incentives, improved investment in new technology, improved tax laws, so as to make it easier to pass the business on without access to long-term finance, and more capital gains tax – we have capital gains tax here which can be training and support tailored to the pretty shocking” (Australia) needs of the family firm, which includes mentoring and networking, and help with “Family businesses in Germany pay the lion’s share of duties succession planning, conflict resolution, and taxes whereas the big corporations relocate to other and international expansion. The latter countries” (Germany) need to focus in particular on helping family businesses understand the different cultural, commercial and regulatory environments they will face in specific markets overseas.20 Family firm
  • 20. “In the future family businesses will operate more like multinationalcorporations. Although the decision-making will still be in the hands of thefamily, a family business will have to behave more like a global corporatecompany. I am already following this model. Family and global businesseswill converge going forward and this will be a big change” (Middle East)In Singapore, for example, Likewise family businesses can dothe government has a number of much more to lobby on the policy A checklist forhigh-profile initiatives designed issues that affect them and campaign government actionto help entrepreneurs and small more collectively for greater support. • Is your tax regime asbusinesses, one of which focuses on Again, this is already happening in supportive as it could be forsupporting them to make the transition some markets – notably in Germany, family firms?from domestic to international. This Scandinavia, Spain and Italy.includes helping them identify the There is an enormous untapped • Are there grants and incentivesissues they may need to address, and opportunity for international co- designed to meet their specificgiving them expert advice in making operation between networks like needs, whether in innovation,the first steps. In fact, there are so this to share best practice and learn R&D, or new technology?many incentives in Singapore that from proven good ideas. For example, • Is there more you could do tofamily businesses are turning to firms the Family Business Network is now help them obtain long-termlike PwC to help them identify those running a very promising new scheme finance for expansion?which are the most suitable for their which allows younger family members • What are you doing to helpown circumstances – a manufacturer, from one business to take short-term them access export markets?for example, might be eligible for over internships at another family firm,90 separate schemes. often in a different region or business • What support do you offer on sector. There are already examples training and skills?In other markets there is almost no of such Next Generation internships • Do you have agencies thathelp for family businesses, and in spanning markets as diverse as facilitate networking,some cases support systems exist, Brazil and the US, and Finland and mentoring and partnershipsbut are under-used, or inadequately Switzerland. with multinationals?publicised. An obvious conclusion todraw here is that family firms need to • Is there a national strategy fortake responsibility for ensuring that supporting and developingthey do their own homework, and make family businesses to growthe maximum use of all the resources domestically and internationally?that are available. An example would • And finally, is the support yoube Enter the Panda, which is an offer adequately publicised?Anglo-Irish company based in Beijing,which helps small firms start doingbusiness in China and Asia Pacific. Family business survey 21
  • 21. Conclusion “I think that family companies will experience a renaissance. I think that it will be modern again to be a family company” (Denmark) “It’s the only sustainable business model” (Italy) We believe family businesses and other If there’s one single message from this In the title of this report we call the corporates have much to learn from year’s survey it’s this: family firms are a family business a resilient model one another and, indeed, the lines vibrant and vital part of the global for the 21st century, and the results between them are already starting to economy and can make an even more of this year’s survey bear that out. blur. We need to create more substantial contribution to growth and constructive and positive environments recovery if they’re given the right However, the picture is not black in which businesses can collaborate, support, at the right time. and white, and our research suggests network and innovate, and that the distinctive strengths of the governments could do more to help family firm could be further facilitate this. Governments could also enhanced by accessing new skills do much more to ensure both economic and international experience. and fiscal policy and domestic banking systems support family firms. It is worth noting that the EU is already focusing on three of the key areas we have identified through our survey, namely access to finance, eliminating bureaucracy and reducing the tax burden when businesses like these are passed from one generation to the next.22 Family firm
  • 22. Key ContactsEric Andrew Acknowledgements We would also like to thank:Global Network Middle Market Leader We would like to thanks the following Chris McCormick – LL BeanTel: +1 604 806 7500 people for their contribution to this report.Email: eric.s.andrew@ca.pwc.com Anthony Halas – Seafolly Eric Andrew – CanadaOriana Pound Lino Casapinta – Malta Paul Drechsler – WatesGlobal Middle Market Director Sharon Chow – China/Hong Kong James Wates – WatesTel: +44 (0) 20 7804 8611 Sharon Duguid – Canada Piers Wates – WatesEmail: oriana.d.pound@uk.pwc.com Clare Geldart – UK Paul Hennessy – Ireland Martin Wichterle – WikovAxel Dorenkamp Zina Janabi – Middle EastGlobal Middle Market Director Alina Lavrentieva – RussiaTel: +49 541 3304 585 Jan-Olof Lindberg – SwedenEmail: axel.dorenkamp@de.pwc.com Delphine Mattiussi – France Joanna Moore – AustraliaMike Davies Jillian Murphy – UKHead of Global Media Relations Amin Nasser – Middle EastTel: +44 (0) 20 7804 2378 Siew Quan Ng – SingaporeEmail: mike.davies@pwc.com Alfred Peguero – US Oriana Pound – UK Sian Steele – UK Marcel Widrig – Switzerland David Wills – Australia And the teams from: Jigsaw Research, Kudos Research, The UK Studio, Tracy Fulham – Global Web Team and Lynn Shepherd. Definitions For the purposes of this survey, a ‘family business’ is defined as a business where 1. The majority of votes are held by the person who established or acquired the firm (or their spouses, parents, child, or child’s direct heirs); 2.  least one representative of the family is involved in the management or administration of the firm; At 3.  the case of a listed company, the person who established or acquired the firm (or their families) possess 25% of the right to vote In through their share capital and there is at least one family member on the board of the company. Survey methodology 1,952 semi-structured telephone interviews were conducted via Kudos Research in London with key decision makers in family businesses across 28 countries worldwide between 7th June and 18th September 2012. The interviews were conducted in the local language by native speakers and tended to average between 20 and 35 minutes. The results were then analysed by Jigsaw Research. Family business survey 23
  • 23. www.pwc.com/fambizsurveyThis publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in thispublication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in thispublication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refrainingto act, in reliance on the information contained in this publication or for any decision based on it.© 2012 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure forfurther details.Design 21293 (10/12)