When the term “family business” pops in a conversation, we tend to conjure an image of a small- or mid-sized business that has been handed down from one generation to another, much like an inheritance. Although some of these family-owned firms fit this description, such notion is not broad enough to encompass the major role of family businesses in boosting growth in the global economy.
Statistics show that the proliferation of family businesses makes them a driving force in the world economy. In Southeast Asia alone, 65 percent of total listed companies in the region are family-owned while family businesses make up two-thirds of firms across the globe. In a survey conducted by Credit Suisse in 2020, which polled a database of 1,000 publicly listed family companies and used basis points to describe percentage changes, family-owned businesses in Europe and Asia outshined non-family-owned firms by 470 basis points (4.7 percent) and more than 500 basis points (5 percent) per annum, respectively.
While the pandemic stirred volatility in global financial markets, it was found that family businesses were more able to ward off negative effects of market uncertainty. The same report also showed that the reason why family-owned firms continue to outperform non-family-owned counterparts is that since 2006, the former’s revenue growth were at least 200 basis points higher than that of the latter.
In another survey by Credit Suisse, it was disclosed that 80 percent of 145 family businesses polled said that their business have been negatively affected by the pandemic and they considered this as one of the hardest challenges to face, second to the need to innovate and retain employees.
Despite the adverse impacts of the pandemic, family businesses in the Philippines seem to have slowly mastered the art of resiliency amid these tough times. Since the health outbreak, family-owned malls boosted their omni-channel retail initiatives and launched curb-side pickup, delivery, and personal shopper services to cater to the demand of consumers. They have also partnered with online delivery service providers to ensure that shopping will be more convenient. On the other hand, contactless payment services are now currently practiced by some family-led supermarkets. Meanwhile, financial institutions and banks strengthened their mobile banking payments and their offers for remote transactions in the new normal.
The unique structure of family businesses is one of the reasons that give it an edge against other traditional companies. However, it is not this structure alone that differentiates it from the rest. Managing a family business entails imbibing similar values essential in keeping a family intact. The core values of teamwork, passion and unity are crucial in fortifying not just family ties but also in enhancing business strategies. Through shared visions, values and goals, family-owned businesses can thrive in a highly competitive business atmosphere. The main strength of such companies lies in their collective action and values which, in turn, help them make sound policies and practices needed to increase productivity and foster business growth. Because family businesses are driven by strong ambitions to grow, these companies look for their future leaders early on and invest on them. These include not just family members but also outsiders who manifest potential to lead the firm.
Family businesses, like all companies across the globe, are not immune to challenges. When the pandemic set in, these companies began to face challenges brought by government-imposed safety and travel restrictions. Newer family businesses found it harder to thrive in a business climate made more competitive by the effects of the health crisis.
Proactive leadership, company changes
In the face of adopting safety measures in the workplace and new operational strategies to mitigate the effects of the pandemic, family businesses must keep the spirit of unity alive in leadership strategies. This means ensuring that every employee is in the loop about changes in operations and work arrangements and getting all of them involved in the rollout of new measures. In enforcing Zoom meetings instead of physical collaborations, changing work operations for employee safety, and re-aligning business goals, management can show employees that although a family business tends to have centralized and more rigid work processes, it is nevertheless open to changes. This can further increase employee morale and in the process, boost productivity.
Improving response plans and resiliency measures
The first step to mitigate impacts of the pandemic is to acknowledge that the pandemic does not just affect management. It is also impacting employees as much as it affects the company, its clients, and its investors. In this vein, family-owned companies must improve their existing contingency measures and let go of a narrow-minded approach in adopting effective response plans. It also helps to include response plans about how to give back to the community in these trying times. In so doing, family business owners can utilize some of their resources better and improve their firms’ public image as well.
Values evolve and they change over time. Conventional family businesses must find room for change and periodically assess their business structure to meet changing circumstances. It is at this time that plans to accelerate digital transformation must come into fruition. While there can be uncertainty and reluctance in rolling out digital transformation initiatives, family businesses must not see innovation as a clashing element with traditional operations. It must be seen not as a deterrent but an active force that can ensure stability and sustainability in the near future. In fact, family businesses are seen to have a bigger potential for innovation than other types of firms. This is because family businesses do not need to have internal political dynamics just to be able to adopt innovative processes. The trick is for these businesses to implement a digital transformation plan that is still in line with existing company core values and goals.
If there’s a thing or two that company owners can learn from family businesses, these would include aligning business goals with core company values and banking on unity as a safeguard against challenges. But while family-owned firms have their own strengths, it wouldn’t hurt for them to go beyond the traditional, and to innovate and embrace change more so in the new normal. For in the end, the only thing constant in this world is change.
As published in The Manila Times, dated 19 May 2021