Successful family businesses have common characteristics that drive their performance and continuity from one generation to the next, finds a new report by KPMG Enterprise and the STEP Project Global Consortium. According to the report, three key characteristics help to sustain their success: a strong entrepreneurial orientation across the generations; family connection and attachment to the business; and ambitious next-generation leadership.
The Global Family Business Report, titled "The regenerative power of family businesses: Transgenerational entrepreneurship" analyzes survey data and insights from 2,439 CEOs and other leaders from top family businesses across 70 countries and territories worldwide, including Canada.
"We wanted to explore how family businesses are able to reinvent themselves, stay competitive and achieve multi-generational success, particularly coming out of a global pandemic," says Mary Jo Fedy, Partner, National Enterprise Leader, KPMG in Canada. "The study revealed how family business performance is tied to both financial and non-financial measures of success and that high performers give equal importance to family and business results, while keeping the founder's entrepreneurial spirit alive and well in successive generations."
The report identified four types of family businesses:
- Peak Performers: At the top are entrepreneurial families constantly looking for new opportunities with a deep family connection and identification with the business.
- Business-first families: These families are entrepreneurial but without the same level of family connectedness. Their businesses are often high financial performers, but with lower family control and influence.
- Family-first businesses: Although having high family control and influence on the business, declining entrepreneurship most often undermines financial performance.
- Underperforming businesses: These businesses have low family involvement and low entrepreneurship, leading to weakened financial performance.
Family business 'assets' drive performance
The report assesses overall entrepreneurial orientation based on three main elements: innovativeness, proactiveness and risk-taking. In evaluating family business performance, the report also identified a second asset defined as 'socio-emotional wealth', which refers to the non-financial value and benefits family members derive from the business.
"We know that a continuous entrepreneurial mindset is a key asset that enables family business leaders to be more innovative and take calculated risks to drive future growth. However, entrepreneurial leadership alone isn't enough to ensure peak performance from generation to generation," says Yannick Archambault, Partner, National Leader, Family Office, KPMG in Canada. "The emotional value gained from the connections between the family and the business is a significant driver of longevity and performance, and a unique asset which non-family businesses can't replicate."
Canadian "Next Gen" leaders bigger risk takers, value family control
Notably, Canadian family businesses ranked high overall in terms of entrepreneurial orientation at 54 per cent, compared to several other regions surveyed. In Canada, a predominant entrepreneurial leadership style steered towards a proactive, risk-taking mindset, although innovativeness ranked relatively lower.
Key insights from Canadian family business leaders surveyed include:
- More than half of Canadian family businesses are highly entrepreneurial (54 per cent), compared to Europe (27 per cent), Asia Pacific (37 per cent), the Americas, the Middle East and Africa (47 per cent).
- 54 per cent of Canadian family businesses identified a high level of risk-taking, outpacing Europe (25 per cent), Asia Pacific (37 per cent) and the Americas (40 per cent).
- 40 per cent ranked their innovativeness as low, 41 per cent ranking as medium and only 19 per cent as highly innovative.
- In terms of overall family impact, 53 per cent stated maintaining the family's control and influence in decision-making and business strategy is the most predominant factor affecting performance versus 37 per cent who cited identification with the family business and 16 per cent indicating the family's emotional attachment drives performance.
"Entrepreneurial risk-taking is typically more prevalent among younger Canadian CEOs, since they tend to be less risk averse and will pursue aggressive growth strategies in their quest to outperform the competition," says Daniel Trimarchi, Director and National Leader, Family Dynamics & Governance, KPMG in Canada. "These leaders are more likely to adopt disruptive technologies and respond rapidly to industry changes or changes to the family's needs."
Practical actions to improve performance
"There are a number of immediate steps that a family business can take to improve performance," says Mr. Trimarchi. "This could involve adopting the fresh ideas and digital know-how of 'next gen' entrepreneurs and strengthening the bonds between the family and the business -- often by leveraging family capabilities. Putting a strong family governance framework in place can help manage family conflicts going forward. These and other practical actions can really strengthen overall competitiveness and future-proof the family business in an ever-changing economy. "
About the Global family business report
KPMG Private Enterprise and the Successful Transgenerational Entrepreneurship Practices (STEP) Project Global Consortium joined forces to conduct a confidential global survey of family business leaders to capture the insights and lessons learned in guiding their businesses. This year's responses reflected 2,439 family business leaders, 70 countries and territories, and five macro-regions (Europe, The Americas, Asia Pacific, and the Middle East & Africa) who reveal the secret to their staying power, how they stay a step ahead of their competition and how they continue to nurture and grow their businesses from decade to decade and from generation to generation.
Learn more by accessing the Canadian benchmarking report and read more below.
About KPMG in Canada
KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.
The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca.
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Viewpoints from KPMG’s leaders and subject matter experts. | Points de vue des leaders et professionnels de KPMG.
Viewpoints from KPMG’s leaders. | Points de vue des leaders de KPMG.