Resilient mindset of family business helped sail through pandemic
The unique structure of family business has empowered them to respond to the impact of Covid-19 and has led to the revival of the global economy, according to the latest report by the Successful Transgenerational Entrepreneurship Practices (STEP) Project Global Consortium and KPMG Private Enterprise.
Hyderabad: The unique structure of family business has empowered them to respond to the impact of Covid-19 and has led to the revival of the global economy, according to the latest report by the Successful Transgenerational Entrepreneurship Practices (STEP) Project Global Consortium and KPMG Private Enterprise.
The study found that the involvement of the family and their long-term mindset has enabled them to demonstrate resilience in the face of the pandemic, which has placed them in a key role to lead the economic recovery.
The study report, titled - 'Mastering a comeback: How family businesses are triumphing over Covid-19', gives insights from nearly 2,500 family businesses and more than 500 non-family businesses, across 75 countries.
Thomas Schmidheiny Centre for Family Enterprise -- Indian School of Business (ISB), Hyderabad, being the only member from India conducted the survey in India.
Giving details of the report, in the Indian context, Dr Nupur Pavan Bang, Associate Director, Thomas Schmidheiny Centre for Family Enterprise, said, "Lower percent of companies in India (29 percent) took actions to reduce or eliminate labour costs when compared to the global average of 36 percent. Emphasis on cost reduction through cutting operating costs, cut down on investments, restructuring, deferring payments and expenses, and reducing the top management teams' compensation was more in India compared to family firms globally."
The report uncovers three core strategies used by family businesses to address the immediate impact of Covid-19.
Firstly, under social responsibility, the family business took steps to address the impact of the pandemic not only on their family and business, but on the welfare of society as a whole, and the needs of all their stakeholders, including employees, customers, suppliers and local communities.
Secondly, as part of the business transformation, family businesses were found to be 42 per cent more likely to implement business transformation strategies when compared to non-family businesses. Family businesses with multiple generations in the firm were 45 per cent more likely to implement a business transformation strategy when compared to single-generation family firms.
Third, exercising patience is what the family businesses are focused on protecting their succession plans and long-term future for the next generation. This long-term mindset has enabled them to leverage their patient capital to understand the full impact of Covid-19 on their business and others in their industry. They have a view for adopting plans for the long term, rather than just mitigating the short-term impact of the pandemic. The report suggested that greater family involvement led to greater social responsibility.
Further, the report identifies two key factors that influenced families' strategy decisions: whether the business is led by a family or non-family CEO, and whether the ownership is distributed amongst a small or large number of family members. Businesses led by a family-CEO and with high family involvement were more likely to adopt a social responsibility strategy as one of their choices to focus on the welfare of employees and the communities where the family lives and operates.
The study reveals the pivotal role that multiple generations of the family have played in their response to Covid-19. Crucially, families were able to draw on support from multiple generations, leveraging the past experiences of older generations to help manage critical challenges and utilizing the insights of younger members to drive modernisation.
Patience and long-term thinking is another factor to reckon. The size, scale and age of the business also contributed to how businesses chose to respond to Covid-19. The report concludes that because older business families have been so committed to sustaining entrepreneurship across the generations, a deeply resilient instinct has been embedded in their DNA which led them to act carefully and focus on longer-term solutions.