PwC: The Main Goals for Family Businesses in 2023 are Survival and Protection of Core Business

According to PwC’s eleventh Global Family Business Survey, family businesses whose purpose is aligned with the United Nations Sustainable Development Goals achieve better results than their competitors in certain financial and social indicators.

The report Transform to Build Trust, which surveyed over 2,000 family businesses in 82 countries from October 2022 to January 2023, indicates a double-digit sales growth in 43 percent of family businesses worldwide in the last financial year compared to 21 percent in 2021, the statement said.

Additionally, the research showed that nearly three-quarters (73 percent) of family businesses that recorded double-digit growth in the last financial year are those with clearly articulated family values and a defined business purpose.

This year’s survey also reveals an upward trend in the share of family businesses that want to lead in sustainable business practices, with half (50 percent) of the surveyed businesses whose purpose is related to the UN’s Sustainable Development Goals recording double-digit growth during the same period.

Family businesses have recovered after the COVID-19 pandemic, and despite positive commercial prospects in 2023, data indicates a disparity between leaders’ priorities and areas of particular interest that are usually associated with higher growth levels. In 2023, successful family businesses could boast employee incentives (53 percent), management committed to diversity (52 percent), and developed digital competencies (47 percent).

Only 36 percent focused on attracting specialists

As challenging macroeconomic trends impact business globally, family businesses in 2023 are largely focused on protecting core business, covering costs, and survival, which are all areas rising on the priority list in 2023, rather than refining digital competencies and introducing new products and services.

Just over a third (36 percent) of family businesses say they are focused on attracting and retaining specialists, despite being aware that employee trust is crucial for business success.

It has been clearly shown that the more advanced a company is in establishing and clearly presenting its ESG strategy, the more successful it is and exhibits other positive characteristics. As reported, half of the respondents who are very advanced in this regard recorded double-digit growth.

Given the unique challenges in managing family businesses, it is clear that those companies with a meaningful business purpose generally enjoy greater mutual trust among family members (59 percent). According to the Edelman Trust Barometer for 2023, clients expect companies to engage with significant social issues more than ever before, which is evident in the increasing number of family businesses that achieved double-digit growth last year (52 percent), as determined by PwC’s research.

Moreover, more companies (10 percent) that persistently work on building internal trust recorded significant growth during the same period. However, only a minority of family businesses take routine steps to ensure effective monitoring of their business purpose, with 46 percent of respondents publishing those results online, and 36 percent actively reporting them to family members.

It is important to note that despite the connection between meeting ESG goals (62 percent), diversity, and customer trust, only 22 percent of family businesses globally are currently focused on this. Since nearly all respondents consider customers their most important stakeholder group (95 percent), and more companies that have made progress in diversity, equity, and inclusion (10 percent) and ESG strategies (8 percent) record double-digit growth, there is an opportunity for family businesses to gain a competitive advantage in facing radical disruptions and a changing economic landscape.

– Family businesses demonstrate that they can grow if they embrace change and build trust through digital communication and diversity in management composition, even in a challenging environment. To continue on this path, companies will need to change direction and focus on delivering value not only to customers but to society at large, stated Peter Englisch, PwC’s global leader for family business services in the EMEA region.

42 percent have strong digital competencies

– One of the main goals of family companies is to protect the business, as the most important family asset, and to keep the company within the family. Although this is not a highlighted part of this research, it is evident in Croatia that if generational change within the company is not feasible, the company is most often sold, either to a strategic or financial investor, to ensure the continued successful operation of the company, added Darija Hikec, director in the transaction department of PwC Croatia.

Given that digital competencies are crucial for supporting management structures and for managing real-time information on which decisions are made, nearly 10 percent more family businesses with strong digital competencies recorded double-digit growth last year. These competencies also facilitate the processes of collecting feedback from customers and employees, so family businesses in which these stakeholders have a lot of trust are usually also digitally more advanced.

However, only two out of five companies (42 percent) believe they have strong digital competencies, and the share of companies for which improvement in this area has been a top priority has been decreasing since 2021, with 52 percent listing digital competencies among the top five priorities for the next two years.

Legacy and succession planning are the main priorities for family businesses in 2023, with younger employees and those who are not family members often cited as advocates for change and progress. For example, those who embrace digital transformation usually have a more diverse management composition (49 percent).

This year’s report showed that double-digit growth is closely linked to the fact that companies that achieved it have more than two management members who are not family members. Additionally, such companies are often more advanced in areas such as developing solutions that contribute to society and the environment, as well as diversity, equity, and inclusion, which are also areas of interest that have been linked to better financial results.

However, among a third of all respondents, the management consists only of family members, a quarter have no one with experience from another sector, and only nine percent have a diverse management composition. Family businesses with diverse management compositions have a slight advantage over those that do not, in terms of achieving double-digit growth this year.