It is no longer enough for family businesses to rely on values and legacy
PricewaterhouseCoopers (PwC) launched the 10th Global Family Business Survey across the world on February. This is a landmark report that studies key decision-makers in family businesses within several PwC key territories. The goal of the survey is to get an understanding of what family businesses are thinking on the key issues of the day.
Family businesses form the backbone of economies worldwide — generating more employment and economic output than any other type of commercial organization. Their unique vision, value, and legacy are evident in their deeply rooted value systems, practices, agile decision-making, and track record of legacy building. Their long-term values help them invest in strong, durable relationships with people and business partners — giving them a competitive edge.
This year’s report surveyed 2,801 interviewees across 87 territories, including Bangladesh.
A total of 54 leading family businesses from Bangladesh with a total turnover of $10 billion, participated in this year’s survey. This was the second time Bangladesh family businesses were covered under the global survey conducted during October-December 2020.
Some of the findings of the Bangladesh survey are given below.
The findings show that pre-Covid-19 growth in Bangladesh is similar to the global average, however Bangladesh family businesses are more optimistic than the global average in terms of future growth aims in 2021 and 2022. 74% of Bangladesh family businesses expect to see growth in 2021 (compared with 65% globally) and 93% expect to see growth in 2022 (compared with 86% globally).
Bangladesh family businesses have seen mixed performance over the last financial year (pre-Covid-19), with 52% experiencing growth and 17% seeing a sales reduction. This compares with 84% experiencing growth and only 3% reduction when asked the same question in 2018. The Bangladesh situation is like the global picture. Globally, 55% of family businesses grew while 19% shrunk.
Traditional forms of finance (operational cashflow and bank lending) will be preferred to help drive growth. 31% of Bangladesh family businesses expect Covid-19 to lead to a reduction in sales, somewhat more positive than the global picture where 46% expect such a reduction.
The key priorities facing Bangladesh family businesses over the next two years are improving digital capabilities, expanding into new markets/client segments, introducing new products/services, increasing use of new technologies and protecting the core business — covering costs/survival. 35% of businesses are focussing on protecting their core business/survival.
Issues related to sustainability are lower down the priority order for Bangladesh family businesses. Bangladesh family businesses are slightly less likely to have at least one issue related to sustainability or the local community as a key priority compared with the global average.
Most Bangladesh family businesses are positive about the clarity of roles and strength of leadership within the business. In addition, most family businesses feel that they embrace rather than resist change.
Digital transformation and innovation are key to the long-term success of businesses. And family businesses too must keep pace with digital technology or risk being blindsided by other game-changers. Transformation can deliver a wide array of benefits to family businesses — including helping them strengthen their competencies, optimize internal processes, become more customer-centric, improve decision-making, and achieve durable competitive advantage. In an increasingly complex and competitive world, achieving these outcomes is now more critical than ever.
However, only 39% feel they have strong digital capabilities. This is similar to the global average where 38% feel they have strong digital capabilities.
Governance and trust
This encompasses governance both business and also of family matters. For your family business to flourish and grow sustainably, you need both to be right. To manage risk and maintain visibility and control over their activities, leading family businesses apply professional corporate governance processes and standards for many years. Globally, companies are moving towards implementing functioning family governance structures as well.
Levels of trust are felt to be quite high. But only half say there is family alignment on company direction and levels of communication and transparency could be improved.
Over 60% of Bangladesh Family Businesses feel they have a clear sense of company and/or family values and these values have helped a clear majority during the Covid-19 pandemic. However, fewer than two in five family businesses have their values and company mission down in written form.
Succession is one of the most critical factors in sustaining the success and continuity of any family business. This means it isn’t simply an event, but a process that must be planned carefully. An effective business continuity/succession process must focus on areas ranging from leadership and ownership to values and purpose to wealth management and stewardship.
Environment and social
Sustainable growth is fundamental to the longevity and continuity of all family businesses. Achieving the right level of sustainable growth is an especially complex undertaking for family businesses because of the need to consider not just the business’s goals but also those of the family.
Over 90% of Bangladesh family businesses engage in some form of social responsibility activities. In the main this tends to involve contribution to the local community or traditional forms of philanthropy. 44% of family businesses feel they have a responsibility to fight climate change and its related consequences. The same proportion (44%) ensure sustainability is at the heart of everything they do (vs 49% globally). Only 37% of Bangladesh family businesses have a developed and communicated sustainability strategy.
Future intentions are more encouraging though with 67% of Bangladesh family businesses saying there is an opportunity for family businesses like ours to lead the way in sustainable business practices (vs 55% globally).
Family businesses have been faced with extraordinary situations and challenges in the past year. While most have shown significant resilience in the face of the crisis, the rapidly changing world, or the new normal, has rung alarm bells for family businesses worldwide.
PwC findings show that it’s no longer enough to rely on values and legacy to propel the business forward. Tomorrow’s family business require a new approach for lasting success — one based on accelerated digital transformation, prioritization of sustainability goals, and professional family governance.
Mamun Rashid is a Partner, and Sarah Karim is the Markets Lead with PwC Bangladesh. This article is an excerpt of the relevant global report.