The fourth annual Family Business Survey, launched by KPMG, Family Business Australia and Deakin University today reveals that family businesses believe they have an edge over their competitors due to their strong relationships with employees, suppliers and customers. However, many have insular leadership processes and management that may be restricting their profitability and growth.
“The number one business concern continues to be growing profitability. Unsurprisingly, this year the second biggest concern is economic uncertainty (48 percent),“ Mr Matthews said.
“Family businesses may appear to be better placed to handle the volatile economic climate through their competitive edge and adaptability, however misalignment of business and family goals, lack of governance structures and failure to plan adequately for the future may mean family businesses aren’t as well equipped to handle a downturn as they might think,” he went on to explain.
Dr Linda Glassop of Deakin University highlighted the need for strategic plans, aligned goals and a strong business structure – including the need for a Board or governing body – to ride out the turbulent times. Only 37 percent of the respondents have embraced the use of Boards but those that have will benefit from strengthening the Boards’ role in these uncertain economic times.
The results of the survey indicate that a typical Board is comprised of four members, 75 percent of which work in the business. Eighty-two percent of chairpersons are family members, of which 55 percent are also the business’s CEO. Seventy-five percent of the Boards surveyed are not formally assessed. There is an opportunity for these Boards to be augmented by separating the roles of Chairperson and CEO and introducing Board members who do not work in the business to help ensure the Board can keep management more accountable in the way strategy is implemented and the business’s/family’s risk is managed.
“Most family businesses are operating around broad, unwritten family goals under leadership from the first generation founder. This is not always the most profitable way of operating and can lead to problems down the track around leadership succession,” Dr Glassop said.
The typical CEO has been in the job for more than 20 years and in over half of family businesses (55 percent) the CEO performs the role of Chairperson as well. The role of the Chairperson and its Board is to monitor the business and its performance and hold the management accountable for the success or otherwise of the business. When the CEO also performs the role of chairperson, it is less likely for the board to perform its role impartially and objectively.
Consistent with the findings from previous years’ surveys, family businesses still aren’t planning for the future as well as they might. Eighty-three percent of family businesses do not have a succession plan even though 34 percent of CEOs are likely to step down within 5 years. Results from the survey show that management in family businesses is heavily male dominated – 97 percent of Chairperson and 94 percent of CEOs are male.
Philippa Taylor, CEO of Family Business Australia says there is a real opportunity for women to take on more responsibility in the family business.
“It is unclear why there is a lack of women in leadership positions in these businesses – whether it is because they are raising families or have pursued other opportunities – but introducing female family members to management positions may bring about a fresh perspective for the business and shake things up a bit,” Ms Taylor said.
2008 survey highlights:
- 83 percent of respondents work more than 40 hours per week
- 97 percent have a male chairperson
- 94 percent have a male Chief Executive Officer
- 16 percent have a formal Shareholder/Assembly meeting, 5 percent have a formal family council and 4 percent have a formal Constitution
- 9 percent have performance reviews for family members
- 6 percent invest in training and development of family members and 5 percent invest in management development of family members
- Manufacturing and Retail trade are the most popular industries, followed by Construction and Wholesale Trade
- Growing profitability, followed by economic stability were the major business concerns, while balancing different interests and family-management issues ranked as the lowest major business concerns
- 63 percent of businesses have no board or governing body
The KPMG and Family Business Australia Survey of Family Businesses 2008 is based on the responses of 1080 family businesses to a questionnaire sent out by Deakin University in May 2008. The survey was conducted under the auspices of FBA by Linda Glassop, Pauline Hagel and Dianne Waddell from the School of Management and Marketing, Deakin University with financial support from KPMG. The survey aimed to identify issues and trends that are considered important by family businesses in Australia. The survey is fully endorsed and supported by Family Business Australia.